The Flavor | Unique Insight on the Industry

How Important Is Amazon to Grocery, Really? (Part 1)

E-commerce has not, in fact, taken over the world.

It’s hard to argue with the fact that e-commerce is becoming more prevalent. 30% of digital shoppers now report spending about a quarter of their food budget online according to a study from Nielsen and the Food Marketing Institute. The same study projects that, by 2025, 60% of digital shoppers will purchase a quarter of their groceries online and grocery sales on the web could surpass $100 billion, which is about a 20% share of the $525 billion food market.

Further evidence of the shift to online grocery comes from the fact that Nielsen and IRI have started developing better tracking methods of sales for online channels. E-commerce transactions, which are not as simple to measure as in-store purchases, are increasing and hence becoming increasingly important to track.

The growth of online grocery should come as no surprise, especially given that big names like Amazon have recently ramped up investment in this segment. However, despite recent hype surrounding the Amazon-Whole Foods deal and the growing importance of digital shopping, it should be noted that the vast majority of Americans still do not shop for groceries online, according to findings from a recent Gallup poll.

The poll finds that, on average, only 9% of American grocery shoppers order groceries online at least once a month and only about 4% of Americans report their families shop online for groceries on a weekly basis. So, while Nielsen and FMI data cited earlier indicate about a third of digital shoppers now spend a notable amount of their grocery bills online, the overwhelming majority of Americans have not adopted an online grocery habit.

This fact should come as a relief for retailers and brands that feel in heated competition with e-commerce-centric companies like Amazon. Yes, Amazon is a worthy competitor. But no, Amazon and the internet have not made grocery stores anywhere close to obsolete.

One could even go so far as to argue that the Amazon-Whole Foods deal, scheduled to close this Monday, is Amazon’s concession to the continued demand for in-store shopping.

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