Online grocery sales growth is slowing but expected to be significant by 2028

In 2020, as the Covid-19 pandemic was just beginning its global upheaval, the U.S. food industry changed seemingly overnight. Suddenly, masses of consumers who had never previously bought groceries online began to forego store visits in favor of curbside pickup or home delivery.

Retailers struggled to keep up with demand, often building out click-and-collect and delivery infrastructure on the fly.

At the time, many analysts predicted that large numbers of shoppers would remain engaged in grocery e-commerce long after the pandemic ended. They theorized that consumers who experienced the easy and time-saving nature of online ordering would have little incentive to resume in-store shopping.

This reasoning has fueled some bold predictions for e-grocery’s continued growth and future market share. In September 2020, digital commerce solutions provider Mercatus for the food industry predicted that by 2025 Online grocery sales will account for 21.5%. total grocery sales in the U.S. That estimate would be $250 billion, or about 60% higher than pre-pandemic 2025 sales projections.

Well, we are already halfway through 2024, and e-grocery sales do not exceed $250 billion. They also do not account for the expected one-fifth of total grocery sales. Instead, online grocery sales account for about 11% of the market, Brick Meets Click reports.

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According to a recently published report by Brick Meets Click, e-commerce grocery sales are expected to reach an estimated $120 billion in even four years. US e-grocery sales forecast: 2024–2028, sponsored by Mercatus. This gives a 12.7% share in the entire market of grocery products available online. And if you subtract home-ship sales (Amazon Fresh, etc.) and look only at grocery store pickup and delivery revenues, then online sales only account for 10.7% of the total grocery market.

Apparently, buyers have not abandoned stationary sales.

E-commerce continues to drive growth

While e-grocery may no longer be the behemoth that many thought, it is still an important and growing sector that all retailers should pay attention to. This includes independent natural product retailers, whether they currently offer click and collect, home delivery or contract delivery through Instacart or another third party.

Total grocery sales – both in-store and e-commerce – are expected to grow at a compound annual growth rate (CAGR) of 1.6% through 2028, according to Brick Meets Click. This is a significant decline compared to the 5.6% growth recorded between 2019 and 2023.

Like the larger grocery market, grocery e-commerce is also expected to grow much slower through 2028 than through 2023, which makes sense given the impact of inflation and the maturation of the online grocery market. For the e-commerce food sector, Brick Meets Click forecasts a CAGR of 4.5% over the next four years.

The point is that while the 4.5% growth is a significant decline from the double-digit expansion of online grocery stores during the pandemic, it is more than three times the growth expected for in-store sales through 2028 of 1.3%.

This is valuable information for brick-and-mortar stores because it suggests that curbside pickup and delivery services will drive significantly more revenue growth than in-store sales in the coming years. In other words, according to Brick Meets Click’s calculations, e-commerce solutions for grocery stores will be their best growth engine.

Pick up sticks

Of the three e-commerce categories tracked by Brick Meets Click – pickup, delivery and ship-to-home – pickup emerges as shoppers’ preferred service. Many discovered this convenience during the pandemic and did not turn back; other consumers have started using it recently.

Brick Meets Click predicts that over the next four years, pickup sales will grow by 5.4%, while delivery is expected to grow by 4.4% and home shipping by just 2.8%. By the end of 2028, collection should account for almost 47% of all emails – grocery sales trade.

According to Brick Meets Click, one of the factors driving this growth will be the ever-increasing availability of curbside pickup services. Currently, many brick-and-mortar stores offer delivery through contracted third-party delivery services such as Instacart, Door Dash and Uber Eats, but they do not provide click-and-collect service – or if they do, it is very limited. As demand for curbside pickup grows, more grocery stores are expected to launch or expand these services to meet market needs.

Other notable findings

As the online grocery sector matures, expanding its active user base has become increasingly difficult, according to Brick Meets Click. Therefore, increasing order frequency among existing users will be the most important factor driving e-commerce grocery sales by 2028.

Additionally, since repeat customers typically spend more money per store than new customers, attracting more repeat customers should help retailers generate higher average order values, or larger basket sizes.

Brick Meets Click also predicts that slower growth of the online market will force more stationary grocery stores to introduce or develop their own e-commerce solutions. By handling deliveries themselves or click and collect, rather than outsourcing to a third party, retailers can better control operational costs and the customer experience.

They also often save buyers money. The report found that a basket of groceries purchased on a first-party platform is on average 9% cheaper than comparable groceries purchased on a third-party platform, excluding fees, commissions and tips.