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.
This report comes in PPT.
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.
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.
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.
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.
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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