Daily Briefing (Insiders Only): Why Is Online Grocery Growing? Maybe Talk To TikTok.
Among the highs and lows of the Gartner Hype Cycle, it seems online grocery shopping may be nearing its “Slope of Enlightenment.”
Online grocery sales boomed at the onset of the COVID-19 pandemic, but by the end of 2023, it looked like that rush was receding as DTC-native brands flocked to retail (via Target and others) and online grocery sales dropped 1.2% (or about $2 billion) year-over-year.
Momentum has since picked back up (in December 2024, eGrocery sales rose 18.7%). We need not remind you why online grocery shopping spiked that first time around, and since those factors are thankfully removed from the success we are now seeing – what is shifting shopping habits?
The Food Industry Association (FMI), in partnership with NielsenIQ (NIQ), found that 90% of shoppers are buying both in-store and online. So, the ability to buy anything, anywhere appears to remove friction from the checkout experience, but there’s another new concept on the block – pre-shopping – which the report said is playing a prominent role in purchasing behavior.
Nearly 55% of consumers said they make food or household purchases from social media or live shopping platforms. That means in addition to serving as a discovery space, social media is in fact getting consumers to checkout – whether that be on the site-of-first-discovery, or later at a physical cash register.
These trends are largely being driven by Gen Z (who are gaining more purchasing power by the minute) as well as Millennials – two consumer demographics that value innovation and often vote with their wallets.
- Online sales growth for both food and non-food categories has surpassed growth in-store, but don’t pull your products from shelves just yet: in-store still holds a significant lead in terms of total share.
The potential scale of an ecommerce food company presents a massive opportunity, the report claims, “given that online share in food lags that of nonfoods, a focus on food will be a natural way to grow online baskets.”
All of this is to say that developing a robust omnichannel strategy is essential to any brand’s growth roadmap, but particularly those of innovative independents.
Just this week Reuters published a report pointing to Big CPG’s shift away from food. It notes that Unilever’s food brand budgets are being gradually “pruned and trimmed” (with the exception of only two top performers: Knorr’s stock cubes and Hellman’s mayonnaise). Instead, the CPG giant is placing bets on beauty and wellness brands. Similar efforts are underway at Nestle, Danone, Kraft Heinz and others where the emphasis has fallen on focus and tight portfolios at the expense of innovation.
That leaves a large opportunity to build innovative brands and businesses in an omnichannel environment that favors novelty and supports “eschewing traditional channel roles,” the report asserts.
