During the COVID-19 pandemic, online shopping grew rapidly as a way for consumers to get necessary food and beverage items but still avoid crowds at grocery stores. Interest held up even as concerns about COVID infections waned. Consumer use of grocery pickup and delivery services is fundamentally driven by convenience.
That convenience comes at a cost, and inflation has made more consumers hesitate to pay for convenience on top of already high grocery prices. This has led to struggling for some startups in the online grocery space. For instance,
e-commerce grocer Boxed just filed for Chapter 11 bankruptcy on Sunday. Near the end of last year, Boxed reported declining sales and growing losses. Thus, it is clear that Boxed was under pressure before the collapse of its primary bank (
Silicon Valley Bank) in March.
Other grocery startups in the pickup-only or delivery-only segment have also been reacting to slowdowns in their business and challenges in obtaining needed venture capital funding.
Though such news signifies looming concerns in the online grocery space, the overall market is continuing to grow.
- Large brick-and-mortar grocers such as Walmart and Kroger continue to expand their delivery options with new infrastructure to reach more customers as part of the hybrid “bricks and clicks” model.
- Many online-only outlets that provide additional features – such as online grocer Hungryroot, which also provides meal planning services – are also growing, with some companies seeing record gains.
- Though Instacart has delayed its IPO, the company reported large gains in revenues and gross profits in Q4 2022, revealing that its third-party delivery services and company strategy have seen continued success.
Packaged Facts’ March 2023 National Online Consumer Survey found that 65% of consumers have ordered food and beverage groceries, meal kits, or prepared meals for pickup or delivery in the last 12 months. Of these, 41% use such services at least once per week.
Despite slowdowns in growth after a pandemic boom of online grocery sales, Packaged Facts forecasts that gains in the online grocery market are expected to continue, with many consumers reporting increasing use of online services compared to a year ago.
As online grocery sales continue to grow and competition tightens, retailers are looking for opportunities to expand availability and to make grocery delivery and pickup more efficient and less costly.
Profitability and increased convenience will likely be enabled by new technologies like drone and autonomous vehicle delivery, automated warehouses, intelligent voice ordering, and virtual reality shopping environments, as well as those that allow for better monitoring of product quality and stock.
For more information, see Packaged Facts’ report
The Future of Grocery: Online Grocery, Meal Kits, & Direct-to-Consumer Food. An updated edition will be published in May 2023.