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Supermarkets Positioned to Serve Growing Demand for Online Grocery: Report

Brick Meets Click study reveals shift in online grocery growth, Amazon’s strength in space

The share of groceries purchased online is rapidly growing, with online grocery spending reaching 5.5% of total grocery spending in the U.S., according to a new report.

The 2018 shopper research study by Brick Meets Click, which surveyed 5,000 online consumers in May, found that while Amazon dominates online grocery, supermarkets are in a strong position to serve this growing demand as online grocery shoppers’ weekly spending rose to 46% this year, up from 28% in 2017, with growth driven by existing online grocery shoppers placing larger orders.

“Until now there’s been little agreement about the national share of online grocery shopping,” Bill Bishop, chief architect for Brick Meets Click, Barrington, Ill., said in a statement. “We now know that it’s over 5% and see that online grocery’s popularity is increasing, especially among those households who’ve tried it and value the benefits. If supermarkets make the right decisions and investments to compete well in this space, they are in the leadership position to meet shoppers’ needs relative to food purchasing and consumption patterns.”

The study also found that online grocery shoppers’ average order size increased from $62 in 2017 to $69 in 2018, while household penetration and order frequency remained flat. As such, near-term growth will likely be driven by current users, which currently consist of nearly 30% of U.S. households, according to the report.

“This growth in online spending by some of a retailer’s core e-commerce customers highlights the importance of making sure these online sales are profitable,” said Barry Clogan, president of retail solutions for MyWebGrocer, Colchester, Vt., the sponsor of the study.

The shift in growth drivers also reveals the importance for retailers to focus marketing messages on the right customers. “We’ve found that building a better understanding of the economics of customer acquisition is a big opportunity in improving profits of grocery commerce,” Clogan added.

However, Amazon is increasingly challenging supermarkets by linking its grocery services to its Prime membership discounts and investing in Whole Foods to improve its credibility with perishables. By aggressively leveraging Prime with Whole Foods, the e-tailer hopes to increase its share of spending with those shoppers.

“The real danger is that Amazon is like the Trojan horse,” said Steve Bishop, managing partner of Brick Meets Click. “Overall, Amazon has 77% household penetration, but it sold groceries to just 11% of households in the last month. That’s a lot of headroom for Amazon to grow in grocery. Amazon’s smaller average transaction size compared to supermarket retailers underscores why online grocery is basically supermarket’s business to lose as online shoppers increasingly shift to full basket trips, and that supermarkets need to find ways to leverage the physical store with online services.”  

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