Your neighborhood grocer might soon be a thing of the past. Like most industries, grocery shopping is going digital. Digital grocery shopping in the U.S. is expected to grow fivefold over the next decade, with a projected spend of $100 billion by 2025. It’s a similar story in the UK. Digital grocery channels are expected to be the highest area of growth for retailers over the next five years.
Digital grocery shopping offers convenience for shoppers. Shoppers can save time in a busy week at the click of a button.
There’s also the rise of digital natives like Millennials and Generation Z to consider. They have grown up with technology at their fingertips. So, everything has to be available online and grocery shopping is no exception. 30% of Millennials and 28% of Generation Z order groceries online. Just 22% of 35-49yr olds and 17% of over 50s do the same.
The top digital grocers
Peapod is the oldest, having been founded in 1989. It operates out of Chicago-based warehouses and Ahold Delhaize stores.
Shipt was founded in 2014 in Alabama and later sold to Target in 2017. Shoppers can select from a range of retailers including Target, Central Market, and Western.
Instacart is headquartered in California and was founded in 2012. It operates across the U.S. as well as Toronto and Vancouver.
AmazonFresh is an offshoot of Amazon. However, there are plans to merge the service with Amazon Prime. It sells groceries via Amazon’s website. Deliveries occur across some U.S. states, London, Tokyo, Berlin, Hamburg, and Munich. It has the largest global reach compared to the other digital grocery vendors, thanks to Amazon’s sheer scale.
Digital grocery shopping in the UK
In the UK, digital grocery shopping is a little different. It’s an online service offered by major supermarkets like Sainsbury’s and Tesco. Then there’s the online service Ocado. Unlike its competitors, Ocado operates out of warehouses and has no chain of physical stores. As previously mentioned, Amazon also runs a digital grocery service in the UK.
Challenges facing digital grocery shopping
Digital grocery shopping might be popular with shoppers (a quarter of U.S. households buy some of their groceries online) but less so with the law. Instacart has faced multiple court battles over how it pays its workers. Like Uber and Deliveroo, Instacart relies heavily on the gig economy. This means its impacted by rulings that re-classify gig workers as employees. California recently expanded its definition of gig workers and the employment rights they receive. Massachusetts and New Jersey made similar moves.
There are also concerns about how fresh groceries are. Up until its recently (when it acquired Whole Foods) Amazon was suffering from this issue. This limited its expansion and forced it to withdraw from some markets due to low consumer demand.
The future of digital grocery shopping
Despite those challenges, the future of digital grocery shopping looks bright. Millennials and Generation Z are joining the workforce. With that, comes the income to spend on more shopping. It also reduces the amount of time they have to grocery shop and could lead more of them to try out digital groceries. The generations that come after Gen Z are all going to be digital natives. Shopping online will come more naturally to them than with previous generations.
The rise of self-driving cars, drones, and automation will impact the digital grocery sector. Self-driving cars and drones could deliver goods without the need for gig workers. This alleviates a lot of the legal battles currently associated with the gig economy.
Big companies have begun to notice the digital grocery market. Target acquired Shipt, and Walmart recently announced a partnership with a number of digital grocers. Plus, there’s the Amazon/Whole Foods deal. Increasingly, global companies are likely to consider digital grocery shopping as a way to expand their market. Unfortunately, this might pose a risk to independent businesses and small retailers.
Providing extra services might also become common. Hellmann’s mayonnaise in the UK recently trialled a buy-and-cook service where customers could purchase groceries tailored to a specific recipe.
Finally, services like Farmstead are being developed. It uses artificial intelligence to track purchases and predict demand. In doing so, it hopes to reduce the number of unsold products that go to waste.
Digital groceries will become commonplace
Everything is going digital, including your weekly grocery shop. Digital grocery shopping offers a wealth of opportunities for retailer and customer alike. It lets a retailer expand their market beyond local areas and increase delivery capabilities. It helps customers cut down on the time spent visiting physical stores, and can assist housebound customers.
There are a number of challenges the sector needs to overcome. However, with developments in drone and autonomous technology, those issues will remain in the past. Digital grocery shopping is here to stay. Soon, it’ll be as commonplace as the grocery stores on the street.