As grocery shopping enters a new digital transformation era, FMI—The Food Industry Association and NielsenIQ (NIQ) released their new report, Digital Engagement Transforms Grocery Shopping, which premiered at FMI’s Midwinter Executive Conference. The report finds that today, more than 90% of shoppers participate in both online and in-store shopping.
In 2017, FMI and NIQ predicted that by 2025, digitally engaged grocery shopper spending would reach $100 billion or 20% market penetration. This year’s report reveals that online grocery sales met and exceeded those projections. The latest FMI/NIQ report projects total U.S. online grocery sales to reach $388 billion by 2027, representing nearly 25% market penetration. It underscores the growing influence of digital tools – from e-commerce platforms and retailer apps to social media and AI-powered personalization – on the modern-day grocery shopping experience and illustrates how the COVID-19 pandemic contributed to the rapid adoption of omnichannel shopping.
“Consumers are seamlessly blending in-store and online experiences to meet their needs,” said Chief Collaboration Officer and Senior Vice President of Industry Relations for FMI, Mark Baum. “Our research underscores the urgency for food retailers and manufacturers to adapt to this omnichannel reality and leverage digital technologies to enhance convenience, personalization and trust. Trading partners need to meet consumers where and how they want to be met.”
“Digital engagement is no longer a complementary strategy, it’s essential to growth,” said Kim Cox, managing director, Omnicommerce at NielsenIQ “With online food sales projected to reach $388 billion by 2027, retailers and manufacturers must prioritize ecommerce and social commerce strategies to meet the expectations of digitally connected consumers.”
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Other key findings include:
Online Sales Growth
Online sales growth exceeds in-store for food and nonfood categories, while in-store leads in total share. The online share represents about a fifth (19%) of total omni sales, which are growing faster than in-store (12% vs. 0.1%). Online-reliant grocery shoppers tend to be Millennials, parents, and urban residents, suggesting that online reliance pairs well with busy urban lifestyles, according to FMI’s U.S. Grocery Shopper Trends (Trends). However, unlike earlier, the shoppers most reliant on online options today are less concentrated among high-income households. Food represents a 10% online share, and the sharp rise in online food buying, at 18%, suggests a growing acceptance of food shopping online, especially for convenience items. Beverages, meat, prepared foods, salty snacks and produce all show stronger online than in-store growth. For example, in the beverage category, the online growth is 20% while in-store is only about 2%. This is the case even as in-store share for the beverage category remains much higher than the online share (92% vs. 8%). Food remains a top growth opportunity due to its scale. Given that online share in food lags behind nonfoods, focusing on food will be a natural way to grow online baskets.
Youth Purchasing Power
Gen-Z begins its shopping journeys online and is heavily influenced by social media. Meanwhile, the millennials index is the highest for online purchasing.
Social Media E-commerce
Fifty-five percent of respondents now purchase grocery and household items directly from social media or live-stream platforms.
Technology Prioritization
Ninety-two percent of retailers are using technology, including AI, to personalize or customize shopping or marketing experiences, both online and in-store.
Curbside Pickup
Curbside pickup is used more often by shoppers at 31% of respondents, overtaking same-day home delivery, which has dropped to 29%. NIQ data shows that click-and-collect plays a more significant role in food (42% share of delivery methods) versus nonfood (22%) purchases.
The findings highlight both the challenges and opportunities facing food retailers and manufacturers to prioritize their connected commerce strategies. Embracing channel fluidity, which allows shoppers to move effortlessly between e-commerce, in-store, and social channels, is essential for future success.