The Fastest Growing Ecommerce Segment

Even More Room for Growth

Online grocery shopping is one of the fastest growing segments of ecommerce. The number of customers buying groceries online has surged during the pandemic and there is still an enormous amount of room for growth. Recent data shows that online grocery sales will account for 4% of overall grocery sales this year, which represents a 60% year-over-year increase.

The grocery industry in the US is worth $900 billion. Analysts noted that the vast scope of the industry, and the fact that it has so much runway space for gains, could mean that there is space in the market for numerous companies to benefit from the online grocery shopping boom.

An Expanding Customer Base

As of May 2020, about half of US consumers had done some form of online grocery shopping. 43% of those people did so for the first time during the pandemic. It is expected that many of these people will grow accustomed to the convenience of online grocery shopping and will stick to habits formed during this period even after the pandemic subsides.

Before the pandemic, many analysts did not think of baby boomers and members of the silent generation as potential ecommerce customers. However, because this population is particularly vulnerable to COVID-19, 28% of them have done online grocery shopping during the pandemic, adding a new, somewhat unexpected customer base.

Companies to Watch

Companies are well aware of the huge potential for online grocery gains and are vying for customer loyalty. On September 15, Walmart (WMT) launched Walmart+, a competitor to Amazon’s (AMZN) Amazon Prime. About 55% of Walmart’s sales already come from groceries and the company hopes that its new membership service will build customer loyalty. Target (TGT) is also ramping up its ecommerce operations and added 10 million new digital customers during the first half of the year.

Some food brands are also launching direct-to-consumer platforms for people to buy their products online. For example, PepsiCo (PEP) launched, a service offering bundles of the company’s products like SunChips and Gatorade.

More traditional grocery stores like Kroger (KR) and local grocers are having an easier time offering online sales because the market for these services is growing, which brings the cost per online order down for grocers. Investors have already been closely following the online grocery boom and they will be eager to see if the industry continues its rapid growth.

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