The latest grocery e-commerce forecast from Brick Meets Click and Mercatus predicts a more restrained growth in comparison to the optimistic predictions made in 2020 regarding the future of online grocery sales. While research firm Incisiv and Mercatus had earlier predicted that e-commerce would account for 21.5% of total grocery sales, worth $250 billion, by 2025, and FMI and Nielsen had forecasted that online food and beverage sales would amount to $143 billion by 2025 and represent 30% of all omnichannel food and beverage spending, the new forecast predicts a modest 2.4 percentage point growth in e-commerce over the next five years.

The report by Brick Meets Click and Mercatus highlighted that online grocery sales’ profitability continues to be a challenge for retailers, who are working to balance sales with profitability. However, ongoing health concerns from COVID-19 and other illnesses are expected to encourage online grocery shopping.

According to the forecast, overall grocery sales are expected to grow at a 2.5% compound annual growth rate (CAGR) by 2027, primarily due to an increase in household spending, followed by a gain in the number of households shopping for groceries. However, the aging U.S. population and shrinking household size are anticipated to impact grocery sales negatively.

Courtesy of Brick Meets Click/Mercatus

The forecast anticipates that pickup will account for the most growth across average order values and order frequency, followed by delivery and ship-to-home service. The fulfillment method’s favorable forecast is supported by the expectation that pickup will become more widely available across the country. In contrast, delivery usage is more sensitive to financial and health concerns than pickup, which is already saturated, with most customers having the choice of multiple home delivery options across a wide range of retail banners.

David Bishop, Partner at Brick Meets Click, emphasized the importance for grocers to figure out the profitability of grocery e-commerce going forward. He stated, “Now more than ever, grocers need a grounded view of the future market while simultaneously strengthening the customer experience to protect their base business and improving the profitability of this higher cost-to-serve mode of shopping.”

As the grocery e-commerce market continues to evolve, retailers must strive to provide customers with a seamless experience while ensuring profitability. The new forecast highlights the need for a more grounded view of the future market and emphasizes the importance of improving profitability in higher cost-to-serve modes of shopping, such as grocery e-commerce.