E-grocery Growth: Density, Not Demographics
Just as online sales growth has outpaced brick-and-mortar gains by a ratio of roughly five to one since 2010, that same trend has been playing out in the world of e-groceries. Independent research firm IBISWorld recently published an in-depth analysis of this emerging sector and found that e-groceries averaged an annual growth rate of 15.7 percent from 2010 through 2015, and they project this marketplace to continue to grow at a pace of roughly 13.3 percent annually from 2015 through 2020. The slight decline in forward-looking numbers is primarily due to the forecast’s assumption of a typical cyclical economic downturn in the years ahead. Yet, it is critical to note that e-groceries still only account for 3.8 percent of total U.S. grocery sales.
Certainly this leaves an immense runway wide open for growth, but the reality is that even with the arrival of Amazon Fresh, and with traditional grocery store players from Safeway and Kroger to Walmart and a dozen others all beefing up their e-grocery platforms, online sales of groceries remains a tiny segment of the marketplace.
Over 52 percent of all U.S. e-grocery sales remain concentrated in just eight states: New York (13.8 percent), California (12.3 percent), Florida (5.3 percent), Texas (5.3 percent), Illinois (4.3 percent), New Jersey (3.9 percent), Pennsylvania (3.9 percent) and Ohio (3.3 percent). Sales in those states were overwhelmingly concentrated in the densest urban marketplaces (New York, San Francisco, Chicago, Philadelphia, Miami, etc.)
These are the markets where consumers are least likely to own an automobile. They are also the markets where traditional brick-and-mortar players have long offered grocery delivery as a staple service. For the most part, e-grocery growth so far has been in places where grocery delivery is not only nothing new – it has long made sense for consumers.
Perhaps a more surprising statistic from the IBISWorld report has to do with who is actually buying their groceries online. Their analysis of the data indicated that consumers aged 55 or older (24.5 percent) were actually the top age demographic. The 25 to 34 age bracket was next (23.2 percent), followed by consumers aged 45 to 54 (18.4 percent). These age brackets don’t entirely line up with millennial or baby boomer definitions, but it’s fair to say that both groups are, more or less, the two primary age demographics accounting for the bulk of e-grocery sales. This data challenges the very assumption that e-grocery growth is a millennial phenomenon. Indeed, all of the indicators suggest that so far, e-grocery growth has been about density, not demographics.
This is part 2 of a 3-part series, “Feeding the e-Grocery Trend.” Read part 1: The E-grocery Onslaught? Read more about the latest in CRE research in the NAIOP Research Foundation newsletter. Subscribe to Market Share so you don’t miss the next post in this series.
Garrick Brown is vice president of retail research – Americas, for Cushman & Wakefield, and a member of a group of national research directors from major commercial real estate brokerage firms whose thought leadership is applied to NAIOP Research Foundation topics.