In 2020, the relationship with grocery shoppers and food retailers changed dramatically, causing a surge in online orders nobody expected.
Suddenly, grocers with omnichannel capabilities found their delivery and curbside pickup capabilities temporarily overwhelmed. One reason was fear of contracting the virus that causes COVID-19. While grocery stores remained open during the coronavirus-related lockdowns, many consumers were wary of in-person shopping.
According to a May 2020 survey of 952 online shoppers from Digital Commerce 360 and Bizrate Insights, 84.5% said they are at least somewhat concerned about contracting coronavirus during in-store grocery shopping.
Based on its August 2019 survey data, grocery consulting firm Brick Meets Click (BMC) estimated 13.1 million U.S. households were active online grocery customers, meaning they had purchased groceries online over the preceding 30 days. A similar BMC survey in March 2020 estimated 39.5 million households were active online grocery customers. By May 2020, that number rose to 43.0 million.
The good news for retailers is that shoppers generally like buying groceries online. In the May 2020 survey, about 65.0% of online grocery buyers rated their buying experiences an eight or higher (on a 10-point scale). Only 16% gave these companies a six or below rating.
The evolution of the grocery market continues. Led by a surge in online grocery orders, U.S. ecommerce sales for Walmart Inc. (No. 3 in the 2020 Digital Commerce 360 Top 1000) grew 97.0% in the second quarter of fiscal 2021, which ended July 31. Walmart is the world’s largest retailer and the biggest grocer in the United States. During the quarter, online grocery orders for home delivery or pickup at stores continued to experience all-time high sales volumes, Walmart reported, without providing exact figures.
Walmart, which had already spent years building its omnichannel capabilities for grocery shoppers, expanded store pickup and delivery slots by nearly 30% since February and permanently increased its ship-from-store capabilities, the company reported. The retailer currently offers about 3,450 pickup locations for online orders at its stores and offers same-day delivery from roughly 2,730 stores.
Walmart’s food-selling competitors have also responded to an increase in online demand. During the coronavirus crisis, Amazon.com Inc. (No. 1) and Kroger Co. (No. 17) also expanded the number of time slots available in the U.S. for pickup and delivery services. During the first quarter of 2020, Kroger also began testing a grocery pickup-only location in Cincinnati.
How online grocery sales fared in 2019
U.S. consumers were discovering the convenience of online food shopping before the coronavirus pandemic hit the United States. Even before 2020’s coronavirus crisis, ecommerce was a bright spot in the otherwise slow-growing U.S. grocery market.
The U.S. grocery market is enormous. Digital Commerce 360 estimates combined grocery sales through all channels hit $1.25 trillion in 2019, up only 3.3% from 2018’s $1.21 trillion. U.S. online grocery sales hit $54.07 billion in 2019 up 30.7% from $41.37 billion in 2018. Digital Commerce 360 estimates ecommerce represented 4.3% of the total grocery market, up from 3.4% in 2018.
Some 2019 food-related highlights for Walmart and Amazon include:
- In October 2019, Walmart launched a service called Delivery Unlimited that gives customers the option of paying $98 per year or a monthly $12.95 fee to receive unlimited Walmart grocery deliveries. Walmart later expanded the program to 1,600 stores.
- Other Walmart experiments include a deal with robotics company Nuro Inc. to test making food deliveries using driverless vehicles. Late in the year, Walmart began testing the deliveries from one Walmart Neighborhood Market using autonomous Toyota Prius cars outfitted with Nuro’s proprietary self-driving software and hardware.
- In April and May 2019, Amazon and Whole Foods Market launched delivery of products from Whole Foods Market through Amazon’s Prime Now same-day delivery service to 22 additional metropolitan areas.
- In October 2019, Amazon made grocery delivery through its Amazon Fresh two-hour grocery service a free benefit to members of Amazon’s Prime loyalty program. Previously, the service cost an additional $14.99 a month. Amazon says the service was available in more than 2,000 U.S. cities and towns as of January 2020.
The prospects for the online grocery market have never been more promising. COVID-19 accelerated consumer awareness and adoption like nothing else has. But the big question is: What happens when the pandemic ends? Many observers think grocery consumers will use omnichannel options more often—now that so many new consumers have figured it out.
However, it’s a good bet that in-store food shopping will not fade away any time soon. But the rapid omnichannel expansion by grocery chains and (of course) the growing influence of Amazon, mean the proliferation of ecommerce in the vast U.S. grocery market is not going away, either.
The just-released 2020 Online Food Report reveals new insights into grocery ecommerce, while examining the changing—and complicated—coronavirus landscape of food sales. The report includes:
- An overview of the online grocery market including total sales and growth.
- Detailed analysis of the leading online food retailers and subcategory analysis including market share and demographics.
- Exclusive consumer insights into online grocery behavior and expectations.
- Breakout sections on omnichannel changes, Amazon and Walmart.
- A look at the impact of COVID-19 on online grocery so far.
View the table of contents for full details on what’s included in the report.
This article is based on analysis from the Digital Commerce 360’s 2020 Online Food Report. This 51-page report offers an overview of the online grocery market, including total sales and growth and detailed analysis of the leading online grocery retailers. Also included are breakout sections on the online grocery operations of Amazon and Walmart and exclusive consumer insights into online grocery behavior and expectations. You can learn how to purchase the 2020 Online Food Report here.