April 24, 2024

eGrocery Sales Forecast 2024-28: What grocers need to know

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Online sales will grow 3x faster than in-store sales through 2028 with Pickup remaining the dominant method, and order frequency will be a key driver of growth according to the newly released 2024 Brick Meets Click 5-Year eGrocery Sales Forecast sponsored by Mercatus.

Topline findings

  • 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 was powered by the pandemic and price inflation.
  • While slower growth is expected for overall grocery sales, the online segment is 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 over the next five years.
  • Total eGrocery sales 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 point (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.

Headwinds slowing topline growth for eGrocery sales.

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. Second, even though inflation has recently fallen faster than expected, its cumulative effect continues to drive a flight-to-value behavior in grocery shopping and that will slow topline sales growth. 

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.

Pick up will remain the dominant method.

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. 

Availability of Pickup services continues to trail that of Delivery in today’s market because most grocery retailers entered the online segment via Delivery and 3P marketplaces. 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.

Order frequency will be a key driver of growth.

The 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.”

To realize the goal of higher order frequency, grocers and/or service providers must motivate eGrocery customers to complete more orders. Enticing those households that only complete one order per month is one area of focus, as this group represented approximately 34% of all monthly active users (MAUs) in 2023, up 510 bps since 2021. Infrequent users, those who bought online two to three months ago will be another target as improving order recency is a predicate for increasing frequency.

Want more information?

Consider purchasing the complete forecast and supporting insights available in the full report, U.S. eGrocery Sales Forecast: 2024-28, by contacting Brick Meets Click (or, if you’re a retailer, reach out to Mercatus directly to see if you qualify for a complimentary copy). 

Benefits of the Forecast report

  • Delivers a big-picture view. This report offers a national forecast. We recognize that your respective growth outlook will vary based on many factors – trade area, retail format, service configuration, and more. Use this forecast as a reference to compare where and how you believe the business will change based on your organization’s current position and strategy.
  • Zooms in on the meaningful segments. Starting with a projection for total grocery sales, the report then presents projected sales based on in-store versus online shopping. The online segment is further divided into the three ways that households can receive online orders – Pickup, Delivery, and Ship-to-Home – with an emphasis on Pickup and Delivery.
  • Provides a starting point for Conventional Grocers. Given that grocery operators may have questions and/or would like more guidance, we welcome the opportunity to have a one-on-one discussion on the topic. Offering advice or recommendations should occur within the context of a more targeted assessment of your business and market conditions. In addition, we can size and forecast custom trade areas for firms on an ad hoc basis.

Forecast Methodology

Based on a proprietary model that leverages Brick Meets Click research along with secondary sources from various government agencies, the national forecast is built following a bottom-up approach, driven by measurable inputs that we have captured over time and external factors that can also influence the way a household shops for groceries, like the use of the Internet or access to eGrocery services. These factors are explained in the full report so you can better understand the logic driving the outlook at various levels.

Photo credit: David Bishop, Brick Meets Click