Egrocery growth to slow over next 5 years

The growth of egrocery sales is expected to slow down in the years after the pandemic, according to a new forecast.

Key findings from a new report from Brick Meets Click and Mercatus:

• U.S. egrocery sales are projected to post a compound annual growth rate of 11.7% over the next five years.
• Egrocery share of overall sales will rise from 11.2% in 2022 to 13.6% in 2027.
• Inflation is expected to grow at a five-year CAGR of 4.8%.

What’s the takeaway? Egrocery sales are still expected to grow faster than overall grocery retail, which will have a five-year CAGR of 2.5%. However, the growth will slow down from the rapid expansion during the pandemic years.

What’s driving the growth? Alongside inflation, factors in the growth include concerns about illnesses such as COVID, RSV, and the flu, as well as increased online adoption.

Key quote from Brick Meets Click Partner David Bishop: “Now more than ever, grocers need a grounded view of the future market while simultaneously strengthening the customer experience to protect their base business and improving the profitability of this higher cost-to-serve mode of shopping.”

US grocery sales (Via Brick Meets Click)

More findings:

Rise of pickup: Grocery pickup is expected to grow 13.6%, compared to 10.8% for delivery and 8% for ship-to-home. With this, pickup will rise to a share of 45.4% in 2022 to 50.3% during 2027. This is due to a pair of interlocking trends: Many grocers are still expanding pickup capabilities. Meanwhile, delivery is growing saturated, as customers have a choice from many different options.

Average order values are expected to grow between 4.2% and 6.4%, inclusive of inflation.

Order frequency is expected to increase from 1.9% to 3.3%.

The bottom line: Egrocery remains a sticky category from the pandemic years. Yet the data indicates that it will return to being a slow buildup rather than the fast rise that occurred in recent years. Expect grocers to get more serious about the profitability of their egrocery programs. After getting capabilities up and running over the last two years, they will want to ensure that these programs make business sense.

“When it comes to achieving online channel profitability, my advice to grocery retailers is to work smarter, not harder, and focus on the fundamentals,” said Sylvain Perrier, president and CEO, Mercatus. “Know who your customers are and the value you provide them. Use that insight to deliver a more personalized brand experience that is consistent and frictionless. Take steps to improve margins using simple tactics like offering lower cost Pickup services, engaging with multiple third-party delivery providers, and leveraging first-party retail media to offset the cost to serve online customers.”