Online grocery sales worldwide grew a healthy 22.0% in 2019. Then the COVID-19 crisis happened, pushing online growth to unexpected heights. What happens next depends a lot on the economic situation, but digital transformation in the grocery business is here to stay, Kantar Group says.

The coronavirus pandemic has substantially boosted the amount of food and essentials sold online, according to a report from research firm Kantar Group.

Globally, online grocery sales grew 22.0% in 2019, making ecommerce the fastest-growing grocery sales channel by a longshot, Kantar says. But grocery ecommerce grew even faster once the coronavirus moved across the world in early 2020.

By the end of April 2020, the ecommerce share of the grocery market was cumulatively 12.4% across China, France, Spain and the United Kingdom, up from 8.8% at the end of 2019, Kantar says. Sales of “pure-play” online retailers—those that operate primarily online—drove that growth, the report says. For example, the Chinese market share of Alibaba Group rose to 10.9% by the end of April. That is up from 5.7% at year-end 2019.

“COVID-19 has not only accelerated the conversion of new online shoppers, but it has convinced a large majority to continue to purchase online,” says Stéphane Roger, global shopper and retail director at Kantar.

Online grocery buying increased 30%

Since the pandemic started, Roger says, new customers have boosted the number of online grocery buyers by 30.0% globally.  He says consumers who adopted online grocery shopping during lockdowns have shown high satisfaction. For example, he cites France, where shoppers gave the sales channel an average of 7.5 out of 10 satisfaction rating. With lockdowns mostly gone, the online share of grocery sales in China remains high, at 25.1% That’s up from 18.7% at the end of 2019.

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“The most important takeaway is not what happened under lockdown but what will happen in the months to come,” Roger says. “I don’t have a crystal ball, but there are at least two likely scenarios. High unemployment will contract shopper demand and we will enter into a new price war between retailers and more private labels. Secondly, with more or less distancing, there will be greater online acceleration that will be the marker of our shopping future.”

Either way, digital transformation is no longer optional for grocery retailers, Roger says.

Online grocery sales exceed all other grocery sales growth

As a result of its new findings, Kantar raised its original forecast 2020 forecast—made in December 2019—for the online share of global grocery sales in 2020. The firm now estimates the online share to grow to between 7.5% and 8.0%, up from its original projection of 6.8%. In 2019, the online share of global grocery sales was 5.8%.

In 2019, none of the other grocery sales channels Kantar tracks grew more than one-fifth as fast as ecommerce. Following ecommerce were discounters (up 4.4%) and convenience stores (up 3.6%).

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Kantar’s data comes from a panel of 750,000 shoppers in 52 countries who provide the firm with information on their households’ shopping decisions. For this report, Information Resources Inc. (IRI) provided data for the U.S. and Intage Group was the source of the Japanese data.

In 2019, Kantar says total global grocery spending (online and offline) grew roughly 2.1% to 2.4%–mainly due to a 2.4% boost in the massive U.S. grocery market. In nearly every other region it analyzed, grocery sales growth was slower in 2019 than in 2018, Kantar says. In Japan, grocery spending declined slightly (-0.9%). Kantar says.

Coronavirus lock-down increases demands for online grocery shopping

In the U.K., online grocer Ocado Group Plc (No. 23 in the Digital Commerce 360 Europe 50o) reported a 27.0% rise in half-year retail revenue as more consumers turned to online grocery shopping in an era of social distancing. The retailer said it was boosted by unprecedented demand during the pandemic, which nearly doubled its retail profit, but investment in its faster-growing overseas licensing business caused a pretax loss of about 41 million pounds ($51.0 million).

In the hour following Prime Minister Boris Johnson’s announcement of a nationwide lockdown on March 22, as many shoppers visited Ocado’s website in that hour as the entire previous quarter, CEO Tim Steiner said. Even now, Ocado cannot meet all the demand, and the company has about 1 million names on a waiting list to become customers, showcasing future growth potential.

In the U.S., demand for online grocery sales soared to unprecedented levels during the first quarter of 2020, often straining grocery retailers’ capacity to keep up. Grocery chain operator Kroger Co. reported online sales grew 92% year over year in its fiscal first quarter 2020, which ended May 23. But while the pandemic boosted online and offline sales, it also increased costs. Kroger reported spending $830 million on pandemic-related expenses so far in 2020, including $150 million in bonuses to frontline grocery, supply chain, manufacturing, pharmacy and call center employees. Kroger ranks No. 13 in the 2020 Digital Commerce 360 Top 1000

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At Walmart Inc. (No. 3) America’s largest grocer, ecommerce sales shot up by 74% in the first quarter ended May 1 as the coronavirus outbreak drove more shoppers to buy online and pick up outside Walmart stores.

45.6 million U.S. consumers were online grocery shoppers last month, up from 43.0 million in May, according to survey data from online grocery consultant Brick Meets Click (BMC) and grocery ecommerce platform Mercatus USA Inc. According to the survey, U.S. online sales of groceries for delivery and pickup reached a record $7.2 billion in June, a 9% increase over May, which set the previous record at $6.6 billion.

Bloomberg News contributed to this report. 

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