Brick Meets Click/Mercatus estimate U.S. online grocery sales will grow at a compound annual growth rate of 11.7% through 2027 and increase their share of overall grocery spending from 11.2% to 13.6%, while impacted by the effects of “persistent price inflation” and consumer concerns regarding illnesses such as COVID, RSV and the flu.
“This forecast reflects that the projected growth of online grocery sales is slowing after the significant gains of the last two-plus years,” said David Bishop, partner at Brick Meets Click. “Now more than ever, grocers need a grounded view of the future market while simultaneously strengthening the customer experience to protect their base business and improving the profitability of this higher cost-to-serve mode of shopping.”
In store pickup of online orders gains strength
Grocers could help achieve that by shoring up online grocery sales through store pickup options.
Grocery pickup sales are projected to comprise more than half of all online grocery sales by 2027, advancing from 45.4% of the market to 50.3%, per the forecast.
Additionally, pickup sales are expected to grow at a five-year CAGR of 13.6%, while delivery (through first- or third- party providers such as Instacart or a retailer’s own employees) and ship-to-home sales (through carriers such as FedEx) are anticipated to grow 10.8% and 8%, respectively.
Pickup will expand faster than delivery or ship-to-home options due to anticipated growth of market availability, as many U.S. grocery retailers are continuing to expand pickup services through more of their stores to service the small number of households that presently lack convenient pickup service, Brick Meets Click/Mercatus said.
The firms see the delivery segment as saturated, as consumers have the option of utilizing multiple home delivery options from an expansive variety of retailers. In addition, delivery is more likely to be impacted by consumers’ financial and health concerns than pickup.
Sylvain Perrier, president and CEO of Mercatus, advises grocers to understand their customers to “deliver a more personalized brand experience that is consistent and frictionless,” and suggests they can improve margins with lower cost pickup services and working with multiple third-party delivery options.
Average online grocery order values are projected to grow at a CAGR between 4.2% and 6.4% over the coming five years (including inflation), with the highest growth coming from pickup orders and the lowest growth from ship-to-home.
Meanwhile, order frequency is estimated to increase from 1.9% to 3.3%, with growth again led by pickup orders.
Demand for online grocery partially has been driven by health concerns, which are not expected to abate soon. Per the October 2022 Brick Meets Click/Mercatus Grocery Shopping Survey, concerns regarding contracting COVID motivate approximately 10% of online grocery monthly active users.
Spending increase to propel overall sales
According to the forecast, combined in-store and online grocery sales are projected to advance at a 2.5% CAGR, including inflation through 2027, propelled by a 1.7% household spending increase and a 0.8% boost in the number of households.
However, an aging population and declining household size are weighing down those figures.
Grocery-related inflation is anticipated to taper over the coming five years, dropping from 10.9% in 2022 to 2.8% by 2027. While that inflation will drive almost three-quarters of projected in-store sales gains, it’s expected to account for less than half of online sales gains.
Brick Meets Click and Mercatus resumed their five-year forecast after pausing during the pandemic. The forecast projects anticipated changes in grocery sales through in-store and online shopping channels, and utilizes Brick Meets Click research in addition to information from government agencies.