The virus made eGrocery a necessity
The COVID-19 pandemic is proving to be a transformative moment in history. Long after the virus is behind us there will be far-reaching changes at every level of retail, and one of the greatest transformations that will stay with us is the accelerated adoption of grocery deliveries, according to global real estate services firm Cushman & Wakefield.
Global real estate services firm Cushman & Wakefield expects the growth rate for eGrocery to double in 2020 and account for at least 6% of all grocery sales in the United States, with a similar pattern expected in Canada.
Growth in eGrocery
For the past four years, eGrocery has grown by an average of 20% annually in the United States, but still only accounted for 2.3% of all grocery sales as of last year, according to Statista. In 2019, eGrocery in the United States accounted for $28.6 billion in total sales.
This is all about to change.
At the beginning of the pandemic, in March 2020, 31% of American consumers (roughly 40 million) used online grocery delivery services, according to industry trade magazine Grocery Dive. That number is roughly double from the previous survey in August 2019.
Among the findings of the most recent Grocery Dive survey:
· Total monthly order volume among users surged 193%
· Monthly order rates were up 19%
· 26% of users said they used a service for the first time
· 39% of users 60 years or older reported using a service for the first time
Cushman & Wakefield expects the growth rate for eGrocery to double in 2020 and account for at least 6% of all grocery sales in the United States, with a similar pattern expected in Canada.
eGrocery Logistics
As an eCommerce category, grocery has lagged most other retail sectors for many reasons, some of which are purely logistical, according to Cushman & Wakefield. The real estate model for grocery delivery is the exact opposite of mass market eCommerce because huge distribution centers on the outskirts of metropolitan areas don’t make sense. Grocery delivery requires maximum proximity to the consumer to keep delivery costs down and, more important, because delivering warm prepared foods, fragile items (eggs/produce), refrigerated, and frozen foods is challenging. Also, grocery deliveries are generally done one at a time, which means there aren’t the same delivery cost efficiencies of a typical delivery route that may deliver hundreds of packages in a day.
Grocery has the narrowest margin of any retail category, which means there’s less flexibility to pass on delivery costs in the price of the product itself. That makes making consumer expectations of free delivery a challenge for the sector. For many consumers, the additional cost of delivery has historically been a hurdle, relegating eGroceries to a costly convenience in the minds of many. However, more volume in deliveries, as well as the growing trend of grocers looking to take on this role directly, as opposed to relying on third-party providers, will mean greater cost efficiencies in the future.
Though consumers will eventually resume shopping in physical stores, a substantial portion of the market share gains that eGrocery experiences won’t be surrendered post-pandemic.
Read more about grocery stores and grocery industry trends at Cushman & Wakefield
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