2015: THE YEAR OF ONLINE GROCERY? (PART - 1)
Ever imagined a scenario where we will be clicking online for our books, media and GROCERY together? Yes, you read it correctly. GROCERIES... ONLINE? Today, Online Grocery shopping is not only a reality, but also an industry that is accelerating, quickly enough, towards its tipping point. Amazon Fresh and few other retailers like Walmart, Safeway, Instacart, Peapod, Relay Foods and FreshDirect have been transforming the online grocery space to carve out a market share from this unclaimed territory so far.
As a part of this two blog series, we will take a peek at how the U.S Online Grocery industry is positioned for 2015 and the opportunities ahead for the U.S Grocery Retailers.
When we think of Online Grocery as a business, the first thing that comes to mind is the implosion of Webvan in early 2000s. Thus as a concept, online grocery is not something new to consumers and retailers. Webvan's emblematic failure did leave a wary glance on grocery retailers for a long enough time though. Ever mindful of the quote "Change is the only constant in life" - two vital changes in this case are: 1. the growing evolution in the way today's digitally immersive consumer expects to shop seamlessly, both between physical and digital world anywhere, anytime, 2. more viable grocery business models attracting capital savvy investors.
In 2013, US online grocery spending reached $17 billion [see Figure 1], accounting for only 3.3% of the total U.S grocery spending - a $500 billion industry - according to an article by Bloomberg BusinessWeek citing a study run by online grocer and consumer analyst Brick Meets Click. Further, by 2023, it is expected to reach 11% of the total U.S grocery spending growing nearly 3 times at 13% CAGR annually. Looking forward, in my opinion, online grocery represents a significant and exciting growth opportunity that is here to stay.
So, market side of the equation is looking great. Online Grocery Industry is gaining popularity and exhibits great potential for the years ahead. But, what about the consumer side: the Grocery Shoppers? With time, not only has the grocery market and business models changed but digital consumers' purchasing preferences have too. Especially, the way today's tech savvy digital shoppers are increasingly blurring the line between the online and offline channels.
In 2013, roughly 18% of U.S. households went online in the past three months to buy food, beverages, or groceries. Of these, 75% purchased 5% or more online and 20% purchased at least half online - according to an article by Grocery Headquarters citing a study 'The Online Grocery Shopper Report' run by The Hartman Group's. Further, the article characterizes an online grocery shopper as a high-value customer, who is willing to spend and shop more every month than the offline (at-store only) grocery customers [see Figure 2].
The confluence of societal changes (busy urban lifestyles wanting more convenience and less time-intensive ways to shop), demographical changes (more working women, multi-person high-income households, ageing population), and technological advancements (digitally connected consumer increasingly using smartphones and tablets to complete purchases) have led me to believe that the U.S Online grocery market will soon evolve from a niche segment to become a mass-market mainstream appeal.
Given the U.S Online Grocery's tremendous future market potential, the question however still remains: Who is poised to claim this unclaimed territory? Traditional retailers or the E-tailers? The race is already on. Whom do you think will win?
To know more about trends in online grocery and how you can leverage various innovative technologies to provide a seamless and truly engaging customer experience, meet our experts at Retail's Big Show 2015 (Jan 11-13, 2015). Schedule a meeting now. Visit www.infy.com/NRF15
 Article published by Bloomberg Businessweek: http://www.businessweek.com/articles/2014-01-16/why-2014-will-finally-be-the-year-of-the-online-grocer#p1
 Article published by Grocery Headquarters: http://www.groceryheadquarters.com/2013/02/online-grocery-shopping-is-driven-by-two-factors-reports-the-hartman-group/