Digital grocery sales will reach $150B by 2025, accounting for 14% of overall sales; however, online grocery ordering today is largely unprofitable
New York, NY – Sept. 13, 2019 — Digital grocery sales will double over the next two years, and the number of grocers offering click & collect and third-party delivery will grow 150% by 2021, according to a new research report from Incisiv, a research firm focused on digital disruption. “Online Ordering in Grocery: State of the Industry Benchmark” focuses on the business case for digital grocery and the process and technology improvements that grocers must adopt in order to succeed.
Key findings of the report include:
· Grocers see 15.8% incremental growth with online ordering. This number is nearly double what retailers expected prior to launching online ordering. Most of this growth is net-new revenue, too, as 82% of retailers reported that digital sales did not cannibalize in-store sales. Digital sales are expected to grow to $150B by 2025, accounting for 14% of overall sales.
· Online grocery ordering today is largely unprofitable. While online ordering drives topline growth, it typically comes at the expense of profitability. Other than shipping from distribution centers or drop-shipping by vendors, all other forms of online order fulfillment (third-party delivery, click & collect and curbside) negatively impact profit margins.
· Lack of real-time inventory visibility and increased store operations complexity reduce digital profitability. The grocery industry loses $2.5B in revenue and $800 million in profit each year due to inaccurate inventory visibility and inefficient fulfillment processes. Grocers face both supply chain challenges, such as managing inventory levels and ensuring on-shelf product availability, as well as technology challenges, including order status accuracy and availability of real-time inventory data.
· Grocers will prioritize technology investments that increase share-of-wallet and improve profitability. 100% of grocers surveyed plan to use advanced analytics to increase basket size, and grocers will seek technology solutions that help them leverage their unique data. Analytics and data analysis will play a key role in helping retailers personalize content and offers in order to drive conversion and increase sales.
“Online ordering is driving unprecedented changes in grocery retailing at a very high rate of speed, and grocers are scrambling to find the right model for their business,” said Gaurav Pant, co-founder and chief strategy officer, Incisiv. “As we’ve seen, online ordering can be a double-edged sword that increases revenue but also puts pressure on grocers’ already-thin profit margins. Grocers must turn one-time online shoppers into loyal customers while reducing the cost of operations. This report offers pragmatic advice on how to best navigate the online ordering and delivery requirements facing the industry.”
“Online Ordering in Grocery: State of the Industry Benchmark” is available free for download here. The benchmark study was conducted in partnership with AT&T.
Incisiv is a next-generation industry insights firm that helps retailers and brands navigate digital disruption in their industry. Incisiv offers consumer industry executives responsible for digital transformation a trusted platform to share and learn in a non-competitive setting, and the tools necessary to improve digital maturity, impact and profitability. More information is available at incisiv.io.