Why online grocery is a $20B opportunity

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Why online grocery is a $20B opportunity

By Gina Acosta - 10/11/2017

Online grocery will be the fastest growing channel in the United States over the next five years, with an annual growth rate of 18%.

According to grocery research firm IGD, the U.S. grocery market is forecast to be worth $1.7 billion by 2022, with strong growth expected in both the online and discount channels.

Other key findings from IGD include:

  • The U.S. grocery market will have a compound annual growth rate (CAGR) of 3.6%, for the 2017-2022 period.
  • Online will be the fastest growing channel in the U.S. over the next five years, with a CAGR of 18.1%, representing a $20 billion opportunity.
  • The discount grocery channel is also expected to generate growth, driven by dollar stores and hard discount operators.
  • The market share of mass markets and supermarkets is forecast to slip back over this period as retailers continue to rationalize their store networks, but investment will continue as retailers focus on ensuring they stay relevant.

“The online channel is developing at pace in the U.S. and although many leading retailers have operated online for over 20 years, it is only in the last three years where we have seen an acceleration of investment and activity. In the next five years, the online grocery channel will grow by $20 billion, significantly contributing to growth in the U.S. grocery market,” said Stewart Samuel, IGD’s North America Program Director.

“A key area for retailers to focus on is to make online shopping as convenient as possible, with a particular emphasis on making it easier to order frequently purchased products. New technologies also have an important role to play in this space, with voice-based ordering set to revolutionize how products are ordered. Technology is not just important for ordering products, but also has a big impact in other online fundamentals like fulfillment and delivery. For example, the use of robots to make deliveries and pick orders in store and the advent of drones making small deliveries by air are examples of how new technologies can improve the economics of the online grocery market, although it may be many years before they are deployed at scale in the US market.”

Stewart highlights some further key trends for the U.S. grocery market.

“The discount channel is also gaining traction across the US,” he continues. “Dollar store chains continue to expand at pace, opening several hundred new stores each year. Discounters are also increasingly expanding their fresh food offers and with Aldi aiming to have a store network of 2,500 by the end of 2022 and Lidl entering the market, the discount channel is becoming much more mainstream in the US.