Online Grocery Sales To Grow 3X Faster Than In-Store
June 17, 2024
Online grocery sales are projected to increase at a compound annual growth rate (CAGR) of 4.5% over the next five years, more than three-times faster than the 1.3% CAGR anticipated for in-store grocery sales during the same period.
Total online grocery sales—which includes delivery, pickup and ship-to-home—are projected to reach nearly $120B annual by the end of 2028, a 12.7% share of total grocery sales in the U.S., up 170 bps from the 2023 share, according to a new U.S. eGrocery Sales Forecast from Brick Meets Click.
Overall grocery sales in the U.S. are projected to grow at a CAGR of 1.6% through 2028, which is much slower than the 5.6% annual surge in sales during the five years ending in 2023, which was driven by the pandemic and then inflation.
The 4.5% CAGR forecast for online grocery sales could be pushed even higher by Amazon’s aggressive plans to expand same-day deliveries of groceries, including perishable goods. During a Q1 2024 earnings call this week, Amazon CEO Andy Jassy touted a new benefit for Prime members offering unlimited grocery deliveries.
“We just launched a Prime delivery grocery benefit that lets customers receive free unlimited grocery delivery for just $9.99 a month, which is great value and customers are responding accordingly,” Jassy said during the call.
In his annual letter to shareholders earlier this month, Jassy said Amazon will double the number of same-day fulfillment centers it has opened—from the current total of 58 to more than 100—and expand its capacity to delivery “everyday essentials,” a market segment that grew 20% in a year-over-year comparison in Q4 2023.
Jassy reported that Amazon in 2023 increased the number of items delivered same-day or overnight by nearly 70% year-over-year. The online retail giant is focused on speed—it can assemble and ship customer orders at same-day facilities in as little as 11 minutes—and increasing its share of the growing market for same-day delivery of perishable food and medicine.
A year ago, Jassy announced a coast-to-coast reorganization of the e-commerce giant’s national fulfillment network into eight interconnected regional hubs managed by AI-driven algorithms that predict what customers in the hubs will need and guide inventory placement systems.
With same-day fulfillment centers in the largest U.S. metro areas each stocking 100K SKUs, Amazon views the expansion of same-day delivery as a “core building block” for the company’s retail grocery and pharmacy business, Jassy said.
“What if we used our same-day facilities to enable customers to easily add milk, eggs, or other perishable items to any Amazon order and get same day [delivery]? It might change how people think of splitting up their weekly grocery shopping and make perishable shopping as convenient as non-perishable shopping already is,” the Amazon CEO said in his letter.
In the earnings call this week, Jassy said Amazon has launched same-day delivery of prescription medications to customers in eight cities, including Los Angeles and New York City, with plans to expand to more than a dozen cities by the end of this year.
Amazon’s pilot program for drone delivery of medication, which the company introduced at College Station, TX—it’s called Prime Air—is “making substantial progress” and will expand in the near future, Jassy said in his letter to shareholders.
“Drones will eventually allow us to deliver packages to customers in less than an hour. It won’t start off being available for all sizes of packages and in all locations, but we believe it’ll be pervasive over time,” Jassy said. “Think about how the experience of ordering perishable items changes with sub-one-hour delivery.”
Source: GlobeSt