Online grocery sales in the US are growing much more quickly than the overall grocery market and are expected to reach $59.5 billion in 2023 — up from $23.9 billion in 2018, according to data from Institute of Grocery Distribution cited by Internet Retailer.

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Amazon’s mid-2017 acquisition of Whole Foods is considered by industry observers to have been a major accelerator of the growth of online grocery, and it took an early lead among consumers in the market, according to a survey by RBC Capital Markets cited by Internet Retailer. In 2017, 74% of consumers named Amazon as their first-choice online grocer. However, that share has dropped considerably in 2018, and while Amazon retains the lead, it’s now the top choice for only 38% of consumers.

Amazon’s shrinking lead is likely due to other major grocers realizing the importance of online offerings. The “Others” category remained in second place, with its share rising from 11% in 2017 to 29% in 2018. While this could mean that regional grocers are seeing success, it’s worth noting that some major grocers, such as Kroger, Target, and Aldi, were not explicitly named in the study and could be included in this category as well.

Meanwhile, Walmart and Jet.com’s share of respondents tripled from 5% in 2017 to 15% this year, and third-party services Instacart and Peapod also saw their shares rise — Instacart’s from 3% to 8% and Peapod’s from 4% to 7%. Only Fresh Direct’s share didn’t move, holding at 3%. This growth across the board at Amazon’s expense suggests that other retailers have jumped into the market and provided solid enough offerings that they have been able to siphon customers from Amazon and prevent it from completely dominating the market to this point.

The pool of consumers adopting online grocery is also growing, meaning more opportunity for all competitors in the market. The share of consumers who have purchased groceries online rose a consistent 5 percentage points per year between 2015 and 2017, but jumped 11 percentage points from 25% to 36% between 2017 and 2018.

And consumers are shopping for groceries online more frequently: 22% said they shop online for groceries at least once a week, which is double the percentage of respondents who did so last year. With the pool of online grocery shoppers growing, taking a stronger share of the market becomes more important.

However, more shoppers also means that, for now, grocers don’t necessarily have to cannibalize one another to gain sales — they can focus on using their offerings to draw new adopters.

The current breakneck race for expansion and more attractive offerings may cause a serious spike in adoption in the future. Whether it’s Amazon bringing Whole Foods delivery via Prime Now to new markets, Kroger working on high-tech fulfillment centerswith UK grocer Ocado, or Walmart aiming to offer grocery delivery to 40% of the US by the end of the year, most major grocers seem to be scrambling to boost their coverage and capabilities.

Because grocers will be offering online grocery services to more areas, it’s reasonable to expect an even higher percentage-point spike in the portion of consumers who have purchased groceries online in upcoming years.

Source: Business Insider