Over the next five years, eGrocery sales are projected to increase at a CAGR of 4.5%, more than three times faster than the 1.3% rate anticipated for the in-store segment.
Meanwhile, overall grocery sales in the U.S. are forecast to grow at a compound annual growth rate (CAGR) of 1.6% through 2028, considerably slower than the 5.6% posted over the five years ending in 2023, which were powered by the pandemic and price inflation.
The new report, U.S. eGrocery Sales Forecast: 2024-28, developed by Brick Meets Click and sponsored by Mercatus, offers a clear forecast of online grocery sales behavior over the next five years and identifies that Pickup will remain the dominant method and order frequency will be a key driver of growth.
Total eGrocery sales, which includes Delivery, Pickup, and Ship-to-Home, are projected to reach almost $120 billion annually by the end of 2028 and account for 12.7% of total grocery sales in the U.S., up 170 basis points (bps) versus 2023, the starting point for the five-year forecast.
Excluding Ship-to-Home, given that most grocers do not offer the service, Delivery, and Pickup sales combined will represent 10.7% of total grocery sales in five years.
What Drives Market Behavior
“Two factors are creating significant headwinds that impact our eGrocery forecast. First, the market is maturing. Nearly all of the people interested in online grocery shopping have used it at least once by now,” stated David Bishop, partner at Brick Meets Click.
“Second, even though inflation has recently fallen faster than expected, its cumulative effect continues to drive a flight-to-value behavior in grocery shopping, which will slow topline sales growth,” added Bishop.
For example, in the Mass format, led by Walmart, online grocery has expanded its market share by 620 basis points (bps) since 2021, ending 2023 with 45.4% of eGrocery sales. Continued share gains by Mass will create further downward pressure on the topline as a comparable basket of groceries at Walmart for instance (excluding charges, fees, and tips) costs the customer 10% to 20%+ less, depending on the rival Supermarket banner.
Also, competing in a slower-growth online market will likely motivate more grocery retailers to focus on driving demand toward their first-party (1P) services to better control operating expenses and the customer experience.
Given that third-party (3P) marketplaces for Supermarkets represented more than half of eGrocery sales on average in 2023, this shift will create additional headwinds for sales growth as a basket of comparable groceries on the 1P platform costs on average 9% less than buying from the banner on a 3P marketplace (excluding charges, fees, and tips).
Finally, it is quite likely that 3P providers will find additional ways of reducing the product price gap with 1P sites to defend their base business, adding further disinflationary pressure on the topline measure.
The Dominant Method of Online Grocery Sales
Relative to the ways that customers receive eGrocery orders, Pickup sales are expected to grow faster (5.4%) than Delivery (4.4%) or Ship-to-Home (2.8%) through 2028, and Pickup is expected to remain the dominant method, accounting for nearly 47% of all online grocery sales at the end of five years.
The availability of Pickup services continues to trail that of Delivery in today’s market because most grocery retailers have entered the online segment via Delivery and 3P marketplaces.
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The report shows that households in suburban markets have four times as many options to consider for Delivery compared to Pickup since most retailers are accessible via multiple 3P marketplaces. This distribution gap is expected to shrink significantly by 2028 as retailers expand their Pickup services.
The eGrocery forecast also identifies order frequency as the most important growth driver through 2028, as expanding the active user base will prove more challenging. In addition, building higher average order values (AOVs) will largely be the result of a customer mix that includes a higher share of repeat customers, who spend more compared to first-time customers.
“It’s clear that creating stronger connections with existing customers is essential to driving higher spending and order activity,” said Mark Fairhurst, Global Chief Growth Officer at Mercatus. “Expanding personalization efforts to include targeted offers or tailored recommendations will play a vital role in increasing repeat purchase behavior and eGrocery sales.”