The Online Grocery Landscape of the US

July 2023

Online sales, though slowing, remain the leading source of future growth for groceries in the US. Persuading consumers to spend extra money in order to save time is a hard sell in a time of high inflation but the convenience of online ordering remains appealing to many. Competition is intensifying between Amazon, with its “infinite shelf” and extensive logistics network, and Walmart, whose ubiquitous physical presence has allowed it to gain the edge on its rival in perishable and staple foods.

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This report comes in PPT.

Key findings

Online grocery is the most dynamic segment of US grocery, but it has begun to struggle

The challenges of operating in an inflationary environment have caused a short-term slowdown in the once-explosive growth of the American online grocery segment. Long-term prospects, however, remain bright given the time pressures consumers are under. The dual consumer interests of convenience and economisation will battle out in the coming years. Which one gains the upper hand will have huge ramifications for the development of online grocery.

Online shoppers are generally younger, wealthier and put a premium on their time

High-income families with young children are the most likely Americans to be using online grocery services. These tend to be Millennials at the moment, but with family formation in Gen Z picking up they will make up an ever-larger share of the consumer pool. Expansion to new demographics will be key for the segment, as declining fertility rates and income inequality will limit the number of wealthier families that will form in the future.

The categories that over- and under-perform online do not do so for unified reasons

Meal kits, coffee, baby food and processed meat are among the categories that do better online than average while bakery products, alcohol, and produce tend to do the worst. The specific reasons why these do so differently online vary but in general categories that do well are those that are non-perishable and where having huge variety is especially important, while those that struggle face either regulatory hurdles or consumer concerns about freshness.

The Amazon/Walmart rivalry will continue to intensify

Walmart and Amazon are struggling for control of the overall US grocery market and the online segment is perhaps the most hotly contested front of this battle. Amazon has the edge in some categories, but overall trails significantly behind Walmart, especially with perishable products. Both are investing in areas of strength for their rival and will continue to expand their online offerings to gain an edge over the other.

Key findings
Introduction: The US online grocery market today
Who is the American online grocery shopper?
The battle between cost and convenience is perpetual
Online grocery in the US is largely consolidated among four major players
Meals, dairy and processed meat and seafood are the leading categories
What categories are over-indexing online and which are under-indexing?
Click-and-collect experiences short-term turbulence but long-term potential is strong
The PC remains the leading way to order groceries, with mobile devices close behind
Online grocery will be the largest source of future sales growth for food and beverages
Amazon vs Walmart battle will define the coming years of online grocery
Gen Z’s family formation patterns will necessitate a pivot to new types of consumers
Tech scepticism among Gen Z will slow adoption of newer ordering methods
Meal kits have been standout performers in the past, but they are slipping
The “infinite shelf” is more important in snacks than any other food category
Online shoppers are more sceptical of fresh food than of any other category
Baked foods face the same challenge as fresh food, but processed categories do not
Walmart outgrows the dairy category overall with its private label products
The complexity of alcohol selling has made third-party services especially important
Hot drinks is the category that overperforms in online grocery more than any other
Soft drinks looks remarkably similar online and offline


Retail is the sale of new and used goods to consumers from a business for personal or household consumption from retail outlets, kiosks, market stalls, vending, direct selling and e-commerce. Retail is the aggregation of Retail Offline and Retail E-Commerce. Excludes specialist retailers of motor vehicles, motorcycles, vehicle parts. Also excludes fuel sales, foodservice sales, rental transactions, and wholesale sales (e.g. Cash and Carry). Sales value excluding or including VAT/Sales Tax. Retail also excludes the informal retail sector. Informal retailing is retail trade which is not declared to the tax authorities. Informal retailing encompasses (a) sales generated by unregistered and unlicensed retailers, i.e. retailers operating illegally, and (b) any proportion of sales generated by a registered and licensed retailer that is not declared to the tax authorities. Unregistered and unlicensed retailers operate predominantly (although not exclusively) as street hawkers or operate open market stalls, as these channels are harder for the authorities to monitor than permanent outlets. Activities in the illegal market, which is usually understood to refer to trade in illegal, counterfeit or stolen merchandise, are included within our definition of informal retailing. Activities in the “grey market”, which is usually understood to refer to trade in legal merchandise that is sold through unauthorized channels – for example cigarettes bought legally in another country, legally imported, but sold at lower prices than in authorized channels – will be included as informal retailing if no tax is paid on sale by the retailer. However if the retailer pays tax – for example on cigarettes bought legally in another country but sold at a lower price than standard – the sale is included within formal retail.

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