Digital grocery sales are becoming an increasingly larger part of total grocery sales, making up 13.7% of the $1.601 trillion in total US grocery sales in 2024, according to eMarketer’s November 2023 forecast. By 2025, digital grocery will be a $253.89 billion market in the US.
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What is digital grocery?
Digital grocery refers to the various online platforms that digital grocery buyers use. Digital grocery is now a necessity for consumer packaged goods (CPG) brands and retailers to reach customers and meet business goals; it also gives advertisers another revenue stream.
Types of digital grocery business models
The digital grocery sector operates mainly through two business models: delivery and click and collect. While each model charges some type of delivery fee, service fee, or subscription fee (especially for same-day delivery), consumers are often willing to pay for the convenience.
Grocery delivery involves sending commonly purchased products—such as food, beverages, pet supplies, cleaning products, and personal care items—from grocery stores directly to customers’ homes.
In this model, retailers manage their own deliveries using their online platforms, such as Walmart+ or Amazon Fresh. This allows them to have full control over the customer experience, better access to customer data, more customization options, and a stronger brand identity. However, it demands significant investments in technology and personnel and may not reach as many consumers as third-party platforms.
In this approach, grocers partner with third-party companies like Uber Eats or Instacart for order processing and last-mile delivery. Customers can either order through an intermediary’s app or website or through the food retailer’s app or website, which is then linked to the third-party intermediary. This model can help retailers who don’t have the money or infrastructure to build out their delivery program. However, it can also come with downsides, like high customer fees, less control over the customer experience, limited access to data, and the risk of diluting their brand.
Click and collect is a digital grocery method where a customer shops online and picks up the order at a store, be it curbside, in-store, or from a locker or pickup hub. Major retailers like Walmart, Target, The Kroger Co., and Albertsons Companies use this approach. In the US, click-and-collect grocery buying is growing, with 98.9 million buyers (34.8% of the population) expected to use the service in 2024, contributing to $86.08 billion in sales, according to a January 2024 eMarketer forecast.
A subset of click and collect, curbside pickup involves pre-ordering items and collecting them at designated curbside locations at scheduled times. This grocery pickup service provides a quicker, convenient alternative to in-store pickup.
Buy online, pickup in-store
This click-and-collect method merges online and offline shopping, offering both the ease of ordering online and the convenience of picking up in-person. This method also allows customers to shop for additional items in-store that they might have forgotten to add to their digital carts.
Key players in digital grocery
In the US digital grocery sector, Walmart Inc. (including Sam’s Club) is the leader, expected to capture $58.92 billion in US grocery ecommerce sales in 2024, or 26.9% of the market, per a November 2023 eMarketer forecast. Walmart stands out due to its competitive pricing and convenient pickup and delivery services. Its extensive network of over 4,600 US stores ensures that 90% of the US population lives within 10 miles of a Walmart store.
Amazon ranks second in the US digital grocery sector with an anticipated $40.50 billion in US grocery ecommerce sales in 2024 (or 18.5% of the market), per a November 2023 eMarketer forecast. Despite its efforts to improve, Amazon hasn’t achieved dominance in digital grocery. However, the retailer is working on revitalizing its strategies, focusing on convincing more Prime members to use Amazon Fresh.
Instacart is not far behind Amazon, as it is expected to earn $39.07 billion in US grocery ecommerce sales in 2024 (or 17.8% of the market), according to eMarketer’s November 2023 forecast. The company is also responsible for a majority (69.9%) of US digital grocery sales among third-party grocery delivery companies, though its share is diminishing.
Kroger holds the fourth spot at $15.22 billion in US grocery ecommerce sales in 2024 (or 7.0% of the market), according to a November 2023 eMarketer forecast. The retailer not only got a head start by being an early investor in the digital space, but it maintains a competitive edge by embracing innovation through AI-powered fulfillment centers.
Other players to watch
Target, poised for 3.7% of US grocery ecommerce sales in 2024, and Albertsons (2.7%), though smaller players, exhibit significant growth potential. And despite Instacart’s dominance among third-party players, DoorDash (3.2%) and Uber (1.6%) are catching up by expanding retailer partnerships and diversifying into non-food categories.
Benefits of digital grocery for brands and advertisers
Digital grocery offers numerous opportunities for strengthening customer relationships, boosting sales, and staying competitive. Let’s examine the primary advantages this sector offers advertisers and brands.
Digital grocery sales
US ecommerce sales saw strong YoY growth in 2023 (9.3%), due in no small part to digital grocery, which made up 16.4%, according to a November 2023 eMarketer forecast. The sector is poised to remain a major growth factor in the next five years. To connect with younger consumers, brands should focus on digital strategies, as Gen Z prefers to discover new products through online searches rather than in-store shopping, according to a May 2023 eMarketer survey.
Foster customer loyalty
Customer loyalty program memberships in the US are increasing, with an annual growth rate of 12.3% and over $27.5 billion in sales in 2023, per ResearchAndMarkets.com’s report, highlighting the clear advantage for retailers.
Offer personalized recommendations
A 2023 Airship survey conducted by Sapio Research found that consumers worldwide find recommendations based on their past actions, their preferences shared with the brand, and location-based offers to be the most useful. On the flip side, consumers find predictive suggestions, which use everything the brand knows about them, to be the least useful.
This shows that while consumers like when brands tailor content to their interests and past behavior, they don’t want brands to know so much about them that it borders on being intrusive. Therefore, brands should focus on helpful and transparent personalization to give value without crossing privacy lines.
Meet customer expectations for convenience
Online grocery shopping is incredibly convenient. Consumers can easily browse and buy a wide range of products with just a few clicks. It saves consumers from the hassles of going to a physical store, waiting in long lines, and dealing with crowded aisles. This convenience is especially beneficial for busy individuals and families who want to shop whenever and wherever they want.
Gain high-quality first-party customer data
Privacy laws are gaining prominence, prompting tech giants like Google to phase out identifiers in 2024 to safeguard user data and comply with new guidelines. This shift will push advertisers to seek first-party data—gathered in part by retail media networks—to guide their marketing efforts. By directly owning this first-party data, retailers can gain a competitive edge, generating revenues through partnerships and design-specific campaigns, to bolster engagement and secure future prospects.
Examples of digital grocery trends
Digital grocery shopping is undergoing significant changes, with emerging trends reshaping consumer behavior and opening new opportunities for growth and online engagement. Let’s take a closer look at the most influential trends—from the increase in frequent online shoppers to the focus on sustainability—that are impacting the future of digital grocery shopping.
The population of frequent grocery shoppers is on the rise
As roughly 30% of US shoppers buy groceries online multiple times a month, this group is crucial for future digital grocery sales expansion, per eMarketer’s Digital Grocery Buyers 2023 report. This trend could also impact brick-and-mortar shopping habits, as the in-store purchases of certain product categories will decline as consumers shop online more frequently.
The popularity of in-store pickup is rising
While curbside pickup surged in 2020 as a result of the COVID-19 pandemic, its growth has since slowed. Some retailers have shifted away from this option, opting for in-store pickup instead. The preference for in-store pickup is expected to continue growing, reaching 67.0% among US click-and-collect buyers by 2027, surpassing curbside at 45.3%, according to a January 2024 eMarketer forecast.
Using data analytics, online grocery platforms can offer personalized recommendations, discounts, and advertisements to individual users based on their shopping habits.
As online grocery shopping increases, there’s been a heightened focus on sustainable packaging and reduced waste. Many consumers expect recyclable or minimal packaging for their delivered goods.
Some brands, especially newer or niche ones, are bypassing traditional retail channels and selling directly to consumers online.
The future of grocery
“The future of grocery buying is increasingly omnichannel. In-store is still the dominant channel, but the rise of digital is influencing shopping trends in several major product categories,” eMarketer senior analyst Blake Droesch said in the Digital Grocery Buyers 2023 report.
One of those trends is that perishables are driving digital grocery growth, according to the report. Fresh produce and perishables are increasingly popular in online grocery carts, with many online shoppers now buying perishables weekly. Getting shoppers to buy perishables online can convert them into regular digital buyers, boosting sales of both perishables and other popular nonperishable products.