Online Grocery US Market Trends

Delivered March 13th, 2018. Contributors: Annie S., Deborah R., Sarah M., Megan J., Lu J. and

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Online Grocery - Historic and Projected Market Size

We provide the market size of the U.S. online grocery industry from 2013 to 2023. We also calculate the size of the click & collect segment and the home delivery segment for each year except of 2013 and 2014, as we found no data or a base line for a successful triangulation. For these years, we provide the overall market size of the U.S. online grocery industry. Find all the data provided in the attached spreadsheet, and our full triangulation process below.
TRIANGULATION Statista's report for US online grocery market size reports the following numbers:
 $6.9 billion in 2013
 $8.4 billion in 2014
 $10.1 billion in 2015
 $12 billion in 2016
 $14.2 billion in 2017
 $17.5 billion in 2018
 $22 billion in 2019
 $26 billion in 2020
 $29.7 billion in 2021

As the report doesn't list years 2022 and 2023, and we found no other reports that weren't behind a paywall to provide these projections, we use the growth rate between the years 2017 and 2021 to provide the most accurate growth rate (based on five years, instead of just two).

The growth rate for the period 2017-2021 is: 
$29.7 billion — $14.2 billion = $15.5 billion 

The growth rate for just one year is:
$15.5 billion / 5 years = $3.1 billion

Using this triangulation we apply the growth rate to years 2022 and 2023:
$29.7 billion + $3.1 billion = $32.8 billion
Market size for year 2022 is projected to be $32.8 billion.

$32.8 billion + $3.1 billion = $35.9 billion
Market size for year 2022 is projected to be $35.9 billion.

Furthermore, we find a report specifying that click-and-collect market size grew from 15% in 2015 to 23% in 2016 compared to the overall online grocery market in the US. This means each year, the size over the click-and collect market grows 8%. While Nielsen's report is applicable for the global market, we use it to confirm that the click-and-collect market grows at a rapid constant rate as stated above, and is projected to dominate the online grocery segment by 2025. Therefore, we use the annual growth rate of 8% to calculate market share, and then market size of the click-and-collect market.

We know the click-and-collect market was 15% in 2015, and 23% in 2016. We can triangulate the rest using the 8% annual growth rate:
15% market share of click-and-collect market in 2015
23% market share of click-and-collect market in 2016
31% market share of click-and-collect market in 2017
39% market share of click-and-collect market in 2018
47% market share of click-and-collect market in 2019
55% market share of click-and-collect market in 2020
63% market share of click-and-collect market in 2021
71% market share of click-and-collect market in 2022
79% market share of click-and-collect market in 2023

We do not apply the annual growth rate backwards for years 2013 and 2014 as it would lead to a negative market share of -1% in 2013. We were also unable to source sufficient data to say just how popular the click-and-collect segment was in those years. Numerous reports exist for the UK and European markets, however reports that list segmented statistics are behind paywalls for the US.

We use above triangulated market shares to calculate market size of the click-and-collect segment from the total market size:
0.15 x $10.1 billion = $1.52 billion in 2015
0.23 x $12 billion = $2.76 billion in 2016
0.31 x $14.2 billion = $4.4 billion in 2017
0.39 x $17.5 billion = $6.8 billion in 2018
0.47 x $22 billion = $10.34 billion in 2019
0.55 x $26 billion = $14.3 billion in 2020
0.63 x $29.7 billion = $18.7 billion in 2021
0.71 x $32.8 billion = $23.29 billion in 2022
0.78 x $35.9 billion = $28 billion in 2023

The last step is calculating the home delivery market size by deducting the market size of the click-and-collect segment from the total market size:
2015: $10.1 billion — $1.52 billion = $8.58 billion
2016: $12 billion — $2.76 billion = $9.24 billion
2017: $14.2 billion — $4.4 billion = $9.8 billion
2018: $17.5 billion — $6.8 billion = $10.7 billion
2019: $22 billion — $10.34 billion = $11.66 billion
2020: $26 billion — $14.3 billion = $11.7 billion
2021: $29.7 billion — $18.7 billion = $11 billion
2022: $32.8 billion — $23.29 billion = $9.51 billion
2023: $35.9 billion — $28 billion = $7.9 billion

We compiled all data in the attached spreadsheet. 

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Online Grocery Key Players - KROGER & WALMART

After a comprehensive review of pre-existing information sourced from credible news media reports (Forbes, NASDAQ, Business Insider, etc.) and industry trade publications, our research team was successful in finding direct answers to your questions about Walmart's online grocery market share, competitive advantages, customer profile, and future plans. However, in the case of Kroger, much of the company information regarding its online grocery sales are not publicly available. So we took selected pieces of information that are publicly available for Kroger and triangulated this data in order to estimate figures for total online grocery sales and percentage of market share. The attached spreadsheet includes information for each of the markets. 

Walmart is one of the largest players in the US online grocery sales market.  Its most recently reported annual earnings from online grocery sales comes to $1 Billion (Fiscal year ending January 28, 2018). Based on these earnings, Walmart's share of the US online grocery market is 9%.  Walmart has two competitive advantages — size (more stores in more US locations than any other major retail grocer) and cheap retail prices. Walmart's profile for its average shopper is a 51-year-old Caucasian female with an annual household income of $56,482.  This profile was culled from all Walmart shoppers, both in-store and online. A more targeted profile of Walmart's average online shopper is yet to be determined.  Walmart's recent acquisition of Jet (targeting younger, higher income individuals who likely shop online more frequently) may provide better data on these online shoppers so that a new and more targeted profile can be developed. Walmart has announced plans to add 1,000 pick-up locations at selected stores across the US by the end of its fiscal year 2019.  This is part of Walmart's strategy to maintain its dominance of the online grocery market going forward.

Kroger is by far a much smaller player in the US online grocery market.  We estimated the company's most recent annual earnings from online grocery sales to be about $100 Million.  Based on these estimated earnings, Kroger's share of the US online grocery market is less than 1% (estimated to be .9%). Kroger's competitive advantages are its recent partnerships with several vendors for same-day home grocery delivery service and its clear understanding of its customers from research data analytics.  Kroger claims to have more than 25 million digital customer accounts through its online service ClickList.  Kroger is currently experimenting with various vendors for same-day home delivery of online-purchased grocery items in an effort to grow online grocery sales and market share.

We provide a breakdown of Walmart's and Kroger's online grocery earnings, market share, competitive advantages, customer demographics, and future plans below and in the attached spreadsheets.
Findings
WALMARTAccording to a recent trade journal report, Walmart's share of the US online grocery market is 9% with annual earnings from these online grocery sales at about $1 Billion. This is exactly half of the market share of rival Amazon (reported to be 18%) due to Amazon's earnings of $2 Billion in online grocery sales in 2017.

Walmart's competitive advantages against its competitors are two: size and cheaper prices. With almost 4,600 stores, Walmart has more locations across the US than any other retailer, and it continually reminds shoppers about "low, low prices."

With regard to online shopper demographics, Walmart does not provide specific descriptions or analytics.  However, Walmart has publicly identified its typical "average" shopper to be a 51-year-old Caucasian female with an annual household income of $56,482.  This profile was drawn from data that includes both in-store and online shoppers.

Walmart has acquired an e-commerce site called Jet.com and has launched its own line of groceries Uniquely J, which includes household products including laundry detergent, staples, and coffee.

In the future, Walmart intends to expand the number of stores where pick-up of online-ordered groceries is available to an additional 1,000 locations.  It has also recently partnered with Google to make shopping available through Google's voice technology.  Finally, Walmart has submitted a patent request to the US government to create floating warehouses similar to the ones Amazon has in order to offer drone-powered home delivery service to Walmart's online grocery shoppers.

KROGERThis grocery retailer has a presence in 35 states with a total of 2,796 stores in the USA. Of these stores, more than 640 have the capability to fulfill online grocery orders. Kroger generates these sales through its Express Lane and ClickList online services.  ClickList is available at 1,000 Kroger stores.

Kroger does not break out its online sales, but it did report a total grocery sales figure (which includes both in-store and online purchases) of $27.6 billion for fiscal Q4 (which ended January 28, 2018).

Kroger has several competitive advantages.  First, it has more than 25 million digital customer accounts.  Second, its digital customer accounts are personalized per account.  Third, it offers home delivery of online-made purchases via several outside vendor partners in limited locations as part of a larger roll-out of such services.

Part of Kroger's strategy to step up its earnings and share of the online grocery market in the future is to provide more same-day home delivery services to its online customers by partnering with outside vendors.  According to CNBC, Kroger is currently testing such home delivery services in 300 locations with such third-party vendors as Uber and Shipt.  The company also recently announced a new partnership with Instacart for certain store locations in southern California.

Regarding Kroger's online customer demographics, there is very limited data available. However, they do report having more than 25 million online customer accounts across all digital platforms (desktop computers, laptops, tablets, smartphones, etc.). The company also said it sent more than 3 billion personalized messages (such as special promotions, recipes) to its online customers over the past year. 

ClickList is not yet available through Kroger's mobile app. The retailer claims its app developers and data analysts 

According to Kroger's CEO, They are focused on growing their digital services to make online grocery shopping more personalized, easy, and affordable.
CONCLUSION
To sum up, our findings reveal that currently, Walmart has captured about 9% of the online grocery market while Kroger's share is far less at an estimated 1%.  Walmart relies on two main competitive advantages which are its sizable presence in the US and its cheap prices.  Kroger claims three competitive advantages — its volume of digital customer accounts, the personalization of these digital customer accounts, and its home delivery services via several outside vendors in certain locations.  While Walmart's profile for its average online grocery customer in the US remains unclear, we do know that its overall average grocery customer profile (which includes both in-store and online shoppers) suggests a 51-year-old Caucasian female with an annual household income of approximately $56k.  Kroger does not share information about its typical online grocery shopper, but its recent acquisition of Jet indicates that it is seeking to attract more online shoppers described as younger and more affluent.  In the near future, Walmart plans to add 1,000 additional pick-up locations in its fiscal year 2019.  Walmart also has partnered with Google for future sales through Google's voice assistant.  Walmart has also filed a patent with the US government with the intention to create floating warehouses with drone home delivery services.  Kroger plans to increase their online shopping business by making the ClickLIst service available through its mobile app and by adding same-day home delivery options to additional stores nationwide once the data from current tests in limited locations are analyzed. The attached spreadsheet includes information on each of the markets.

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Online Grocery Key Players - ALBERTSONS & INSTACART

Albertsons annual online sales equate to $59.7 billion, but there is no information offering a breakdown of how much of this comes from sales of groceries specifically. The company is catching up with competitors, and focusing on acquisitions and hiring new e-commerce staff. Their consumers are more likely to be male, caucasian or hispanic, have an annual household income of over $80,000 and be over 45. 

Instacart hold a 14% share of the online grocery industry in the US, and generate $2 billion in annual sales. By the end of 2018, Instacart plan to expand in order to serve 80% of the US. The competitive advantage lies in the fact that it is offering a service that is different to what else is currently available, and their primary target market are the current customers at the grocery stores which they serve (such as Wholefoods). 

I have provided details on the market share, strategies/future plans, competitive advantage, customer breakdown and revenue of Albertsons and Instacart within the spreadsheet provided as well as below.

FINDINGS

ALBERTSONS

There is no pre-compiled figure available to tell us what percentage of the US online grocery market Albertsons hold. We know that the company generate an $59.7 billion annually from online sales, but there is no information offering a breakdown of how much of this comes from sales of groceries specifically. The company is private and therefore it does not release this data publicly, and after searching through online articles, databases and industry reports, I have found that there is no estimation of this figure available anywhere. Nor is there data to allow me to calculate this, such as the percentage of revenue that online grocery sales account for.

Currently, Albertsons falls behind its competitors in terms of its online grocery sales. Their plans involve catching up with competitors, part of their strategy to do this involves making smart acquisitions, such as their recent acquisition of Plated. Plated offers Albertsons a growth opportunity in that it allows the company to sell meal kits online.

Another part of Albertsons strategy is to re-vamp their e-commerce team. They recently hired a new e-commerce chief, Narayan Iyengar, who comes to the company from Disney. Iyengar plans to help the company's e-commerce sector grow, particularly through digital and social media strategies. 

Albertson's competitive advantage against its competitors is that it is already the US's second largest traditional grocer. Therefore, it already has a large customer base specifically of grocery consumers. In addition to this, a recent acquisition of Plated helps Albertsons stand apart from its competitors by giving shoppers the opportunity to buy meal kits online.

There is very limited data available on Albertson's target market or customer demographics specific to their online grocery consumers. However, we know that in general their customers are slightly more likely to be male, caucasian or hispanic, have an annual household income of over $80,000 and be over 45.

In addition to this, we know that Albertsons is planning on learning more about its online customers with its targeted marketing service. The strategy will deepen their relationship with online consumers, and understand their market in more fine grain detail.

INSTACART

Instacart's revenue is approximately $2 billion. 100% of the company's revenue comes from online grocery sales. The US online grocery market was worth $14.2 billion in 2017. Therefore, we can work out their market share to be 14%.

Instacart's plans involve a strategy that will put them in the position to be used by major grocers as they attempt to compete with Amazon, who are threatening to take revenue from the major competitors as they expand their online grocery service.

By the end of 2018, Instacart plan to expand in order to serve 80% of the US. This will help them to earn a larger market share. It is hoping to gain a footing in new markets by offering new customers a free year of Instacart Express membership.

Instacart's competitive advantage lies in the fact that it is offering a service that is different to what else is currently available and is a market first. Instacart is an on-demand service that has workers shop for groceries on behalf of customers and deliver them to their doorstep. In addition to this, the company is gaining a lot of attention, particularly from investors. It was founded in 2012, and it already is valued at $3.4 billion, and it received an extra $400 million in investment in 2017.

Instacart have also quickly developed strong partnerships with large grocers such as Wholefoods and Cosco, this is allowing them to develop a large consumer base.

Consumers of Instacart are mostly male, and are most likely to have a college degree. In addition to this, they are most often shopping from work.

Instacart's primary target market are the current customers at the grocery stores which they serve (such as Wholefoods). However, overall Instacart are aiming to target all kinds of grocery shoppers, as they believe that in general people hate grocery shopping, and they are offering a solution to this universal problem. 

CONCLUSION

To sum up, I have found that Albertsons generate $59.7 billion in online sales but no data is available on how much comes from grocery sales. Instacart generate $2 billion in annual sales from online grocery sales, representing a 14% market share. 

Albertsons strategies and future plans involve focusing on acquisitions and hiring new e-commerce staff in order to catch up with competitors, whereas Instacart are focusing on expanding to serve more locations nationwide.

Albertsons competitive advantage is that it is already the US's second largest traditional grocer. Instacart's competitive advantage lies in the fact that it is offering a service that is different to what else is currently available.

Finally, I found that Albertsons consumers are likely to be male, caucasian or hispanic, and Instacart is focusing on targeting the consumers of the grocers that it is partnered with.

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Online Grocery Key Players - AMAZON, PEAPOD & Fresh Direct

The competitive landscape of the online grocery market has 3 key players: Amazon, Peapod, and FreshDirect. I've broken down each company's market share, strategies or future plans, competitive advantage, customer breakdown, and revenue below. This information is also provided in the attached spreadsheet.

AMAZON Amazon's online grocery market share is 18% with an estimated  revenue from online grocery sales at $2 billion. 

Amazon offers Prime Pantry to their Amazon Prime members, which, while undisclosed by Amazon, are estimated to be between 80 and 90 million. Amazon Prime members tend to be younger than the average US consumer with 39% of prime members between the ages of 18 and 34, compared to the 30% of total US consumers in that age demographic. The percentage of Prime members aged 35-54 years old mirrors the general US consumer population at 34%, while only 26% of Prime members are 55 or older. 

Amazon now allows Prime customers, with its acquisition of Whole Foods, to purchase Whole Foods products using the PrimeNow app. In select cities, 1-hour delivery is available for a $7.99 and free 2-hour delivery is available with a minimum purchase of $35 through AmazonFresh.  AmazonFresh is a service offering same-day grocery delivery and operates in Seattle, Northern California, Southern California, New York, and Philadelphia areas, although they will expand to other cities in the future. Amazon's competitive advantages include experience in online retail and their acquisition of Whole Foods, which 25% of Amazon customers surveyed said made them more likely to purchase groceries from Amazon. 

PEAPODPeapod has over 25 years of online grocery sales experience.  Their estimated revenue of $360,680,000. Since Peapod's market share was not readily available, I calculated it to be about 3.25% by taking the Amazon's market share of 18% and their estimated revenue at $2 billion, and estimating the total size of the online grocery market from those figures to be $11,111,111,111.10. Peapod's estimated revenue of $360,680,000 is 3.25% of that total estimated market size. 

Peapod uses Ahold's Stop & Shop stores as distribution centers to improve last-mile delivery efficiency at many locations across the United States. They operate in 24 markets within Connecticut, Illinois, Indiana, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Virginia, Wisconsin, and Washington D.C. and have more than 350,000 customers every year. Peapod's future plans include expanding into new area markets and expanding delivery and pickup options, including adding in-store pickup for online orders at Giant and Stop & Shop stores.

FRESHDIRECT FreshDirect is the market leader in the Northeast Region of the United States for fresh produce and meat delivery. Their revenue is $386,320,000, and they deliver to 5 states, including the New York City, Philadelphia, and Washington D.C. metro areas. They source their food from "an extensive network of farms, fisheries, and suppliers, many of which are located in the Northeast." 

They also have an "At the Office" service in Washington D.C., which includes "chef-prepared breakfasts, luncheon platters perfect for business meetings, catering services for events, and popular brands of snacks, beverages, and pantry items." Their customers can order next-day delivery within a 2-hour window and can pay either $7.99 per order with a minimum price of $40, or choose to pay an annual fee of $129.00 for unlimited free delivery through DeliveryPass, which also offers exclusive special offers and savings. Two-month trial offers for first-time customers are one cent. 

FreshDirect has also recently introduced FoodKick to their New York City market which delivers food in about an hour. With a mobile app, customers can view a constantly updated "dynamic editorial feed" that displays fresh produce, meal tips, food suggestions, and cold alcohol offerings, as well as providing more products for purchase. FreshDirect's market share is 3.48%, which has been calculated by taking the total market size of $11,111,111,111.10 (calculations for that total are above under PEAPOD) and FreshDirect's revenue of $386,320,000 and dividing it to find FreshDirect's market share of 3.48%.

CONCLUSIONIn conclusion, Amazon has 18% of the online grocery market share, Peapod has 3.25%, and FreshDirect has 3.48%. Amazon's popular with younger customers and has more offerings in West Coast cities like San Francisco and Seattle, Peapod has more product offerings and operates mostly in the Eastern half of the United States, and FreshDirect dominates the Northeast region. These findings are presented in the attached spreadsheet.

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Online Grocery - Consumer Preferences

The large majority of online grocery shoppers are Millennials. When it comes to gender, men are more interested in online shopping for groceries than women. Grocery shopping online is most popular with 18 to 29 year-olds.

CONSUMER PREFERENCESThe key consumer segments for online grocery market are as follows:

1. When it comes to age, 15% of the 18 to 29 age group shop online for groceries. Only 12% of 30 to 49 year-olds, 10% of 50 to 64 year-olds and 2% of those older than 65 years old do the same.

2. When it comes to geographical position, 16% of people living in the East region shop online for groceries. The same can be said for 11% of people in the West, 8% in the South region, and 5% in the Midwest.

3. 15% of online grocery shoppers live in a city, 8% live in the suburbs, and 6% live in towns and rural areas.

4. 13% of online grocery shoppers are employed, and 7% are unemployed.

5. When it comes to annual income, 13% earn less than $30,000. Moreover, 10% earn between $30,000 and $75,000, and 10% earn more than $75,000.

Overall, 9% of adults say they order groceries online for pickup or delivery on a monthly basis.

A different study researched the profile of North American consumers. This means that both Canadian and US consumers were included. However, as it is a recent study we included it to provide additional data: 

1. Men are more interested in buying groceries online. 18% of men said they are likely to purchase groceries online, compared to 15% of women.

2. GenX shoppers (aged 35 to 54) are two times more likely to purchase groceries online in the next year than Millennials. 

3. 63% of people who earn between $50,000 and $100,000 a year purchase groceries online. Only 57% of those earning more than $100,000 buy their groceries online.

4. Consumers who have children are more likely to buy online. 21% of customers with more than one child buy their groceries online, while only 11% of couples who have no children do the same. 

When it comes to preferences between home delivery and click-and-collect, Millennials are the group which prefers home deliveries the most. More than 60% of Millennials opt for home delivery, and only 26% prefer to pick up their orders in the store. 11% of respondents say they like both options.

The latest research was published in 2018 and provides some additional data:

 24% of consumers currently choose home delivery, and 22% will order online and then pick up their order at the store.

The key factor is fast and free delivery. 58% of Millennials prefer online purchasing with free delivery, and this applies to 57% of the GenX population. 49% of Baby Boomers say the same thing, and the same goes for only 39% of the senior population.

 45% of Millennials prefer online purchasing with fast delivery, and the same applies to 43% of the GenX population. 34% of Baby Boomers prefer online purchasing with fast delivery, and the same can be applied to 25% of the senior population.

Online purchasing with in-store pickup is preferred among 44% of Millennials, 43% of the GenX population, 30% of Baby Boomers, and 22% of the senior population.

From the results above, we've determined that free home delivery is the most preferred option.

CONCLUSIONAn overview of the consumer preferences for the online grocery market was provided. Only 9% of adults order groceries online either for delivery or for pick-up on a monthly basis. Men are more likely than women to order online at 18% and 15% respectively. In terms of generation, GenX customers are two times more likely to order groceries online than their Millennial counterparts. On the other hand, Millennials prefer home deliveries the most with 60% preferring this option to pick up. Those with more than one child are more likely (21%) to shop for their groceries online than consumers who do not have children (11%). The bulk of those who order groceries online (63%) annually earn between $50,000 and $100,000.