Just as online sales growth has outpaced brick-and-mortar gains by a ratio of roughly five to one since 2010, a similar trend has been playing out in the world of groceries.
Independent research firm IBISWorld recently published an in-depth analysis of this emerging sector and found that e-groceries averaged an annual growth rate of 15.7 percent from 2010 through 2015, and they project this marketplace to continue to grow at a pace of roughly 13.3 percent annually from 2015 through 2020. While there has been substantial growth in the e-grocery market, online groceries account for 3.8% of the total grocery sales in the U.S. The predicted slight decline in numbers is primarily due to the assumption of a typical cyclical economic downturn in the years to come.
While this means there is a large path open for growth, the reality is that even with the arrival of Amazon Fresh, and traditional grocery store players from Safeway to Walmart (and a dozen others) establishing a focus on their e-grocery platforms, online sales of groceries remains a tiny segment of the marketplace.
Not only is the growth not overwhelming grocery sales overall, it is also hyper-focused to a few key areas. Over 52 percent of all U.S. online grocery sales remain concentrated in just eight states: New York (13.8%), California (12.3%), Florida (5.3%), Texas (5.3%), Illinois (4.3%), New Jersey (3.9%), Pennsylvania (3.9 %) and Ohio (3.3%).
Sales in those states were overwhelmingly concentrated in the highest density urban marketplaces (New York, San Francisco, Chicago, Philadelphia, Miami, etc.). These are the markets where consumers are least likely to own a car. They are also the markets where traditional brick-and-mortar players have long offered grocery delivery as a staple service. So far, e-grocery growth has been in places where grocery delivery is nothing new, and where it already made sense for consumers.
Perhaps a more surprising statistic from the IBISWorld report has to do with who is actually buying their groceries online. Their analysis of the data indicated that consumers aged 55 or older (24.5%) were actually the top age demographic. The 25 to 34 age bracket was next (23.2%), followed by consumers aged 45 to 54 (18.4 percent). These age brackets don’t line up exactly with millennial or baby boomer definitions, but it’s fair to say that both groups are the two primary age demographics accounting for the bulk of e-grocery sales. This data challenges the assumption that e-grocery growth is a millennial phenomenon. In fact, all of the indicators suggest that so far, e-grocery growth is based on density rather than demographics.
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