E-Commerce Pairs Convenience with Safety

The once-a-week trip to the local grocery store is quickly becoming a relic of the past. Consumers are now shopping at several different places to satisfy their changing tastes, including online grocers, which offer variety and convenience.

Worldwide, more than one-third of online shoppers expect to buy groceries over the Internet this year, some 34 percent compared to 21 percent in 2015, a recent AlphaWise survey from Morgan Stanley Research finds. And the U.S. could see the biggest adoption rate increase for e-commerce fresh groceries, growing to 26 percent this year, up from 8 percent in 2015. Morgan Stanley estimates the total U.S. online grocery market could grow significantly in 2016 by $26 billion to total more than $42 billion. The total size of the U.S. grocery market is estimated at $675 billion.

“Overall, this spike in anticipated online grocery spending speaks to a shift in the way that consumers think about shopping for food,” Brian Nowak, lead Internet analyst for Morgan Stanley, wrote when the study was released. And with about a 2 percent U.S. market share, Nowak said he sees room for online grocery sales to grow, especially for urban markets, nonperishable products, and “click and collect” items chosen online and picked up at local stores. Groceries account for 19 percent of consumer spending, by far the largest of the e-commerce categories surveyed by Morgan Stanley.

A.T. Kearney, a global strategy and management consulting firm, also found that online grocery shopping is reaching an inflection point after years of promise but limited growth. The company’s latest study shows more than one-third of primary grocery shoppers have bought groceries online in the past 12 months, up substantially from last year. And those buying are in the attractive market segments of urban dwellers, Millennials, and those earning more than $75,000 annually.

The consultancy also found that online grocery is one of the largest sources of growth for retailers and consumer product manufacturers. Sales are growing five to six times more than conventional channels and are expected to rise 15 to 18 percent over the next decade in terms of percentage of total grocery sales.

Tyson, for example, is reportedly considering collaborating with Amazon to introduce meal kits. And The New York Times is offering readers the ability to order the ingredients of recipes appearing in the newspaper. The latter is part of a growing trend of pre-measured, packaged food that consumers are ordering to have a personalized gourmet cooking experience.

While online grocers include both Internet-only shops like AmazonFresh and brick-and-mortar grocery store-affiliated websites like Peapod, the former capture 84 percent of all online grocery trips and 59 percent of all online grocery spending, according to a recent report by Brick Meets Click of Barrington, Ill. Those so-called “basket bandit” Internet-only sites include Amazon, Blue Apron, ThriveMarket.com, Drugstore.com, Chewy.com, and the online “stores” of mass and club retailers.

And even though AmazonFresh is available in limited markets, it has a 48 percent share of all online grocery trips. Since 2013, the percentage of shoppers that have bought groceries from Amazon in the past 30 days has increased 25 percent, the Brick Meets Click report finds.

“We also found an Amazon multiplier effect,” report author Bill Bishop said when the report was released. “As online grocery trips per month increase, so does Amazon’s share of trips. They are continually working on making buying easier, and supermarkets need to respond.”

AmazonFresh launched in Seattle in 2007. But in a recent column for The Motley Fool, writer Jeremy Bowman notes, “Some headlines refer to the program as a Trojan horse or say it will one day kill the grocery industry, but nine years after its launch, Amazon’s grip on the grocery business is tenuous at best. Amazon has just 0.8 percent of the total U.S. grocery sales.” And AmazonFresh said recently it will require $299 annual membership, higher than competitors, but meant to include costly distribution fees, according to Amazon.