Image: X5 Retail Group
Before Covid-19, the grocery sector lagged behind other e-commerce categories. The pandemic has changed this seemingly overnight.
The online grocery sector has exploded in 2020, with its share of total e-commerce sales in the US expanding to reach 12 percent by the end of the year. The US online grocery sector alone is expected to surpass $100 billion in sales for the first time in 2021 following a 54% increase in sales last year, according to a recent Market Watch report. E-grocery is now on track to reach a projected $187.7 billion in 2024, Emarketer estimated.
E-grocery is also flourishing across the globe. In India, e-groceries grew by almost 75 percent in the lockdown period alone, according to a RedSheer report, as more than 100 million online shoppers adopted new grocery shopping habits. E-commerce accounted for less than 2 percent of South African retail sales in 2019, but as elsewhere, the pandemic has accelerated the shift to online shopping. A survey taken by Visa showed that more than half of South African consumers bought groceries online for the first time last year.
In Russia, a less saturated market compared with the U.S., e-grocery is expected to reach $8 billion by 2023. Online sales of the top-10 Russian retailers tripled in 2020, with food retailer X5 Retail Group leading the e-grocery transformation. In nine months of 2020, stock-up shopping and express delivery made up the bulk of the company’s online revenue, suggesting consumers are seeking to get more of a variety of goods delivered to them.
Express delivery is the fastest-growing niche in big Russian cities, according to VTB Capital. It was pioneered by delivery service Samokat and perfected by Yandex.Lavka, an express grocery delivery arm of tech giant Yandex. Comparable delivery speed is hard to come by in the UK or the U.S., but Yandex.Lavka delivers groceries in just 15 minutes (Samokat now boasts this delivery time as well). After reporting a 2 percent rise in net profit in 2020, Yandex announced that it will spend $400-$500 million on e-commerce initiatives this year, including its online marketplace Yandex.Market, Yandex.Lavka, and the grocery portion of its restaurant delivery service Yandex.Eats.
Boston Consulting Group announced in May 2020 that it pinpointed the ascendance of online channels as the primary trend for the grocery market in the coming years. A year since the outbreak of the pandemic – when shoppers around the world rushed to stock up on food essentials – it has become clear that consumer shopping habits have radically shifted to the online space.
And experts predict that the new grocery shopping habits are here to stay. As people increasingly embrace e-groceries, a McKinsey survey found that 63 percent of European consumers do not plan to go back to pre-pandemic out-of-home activities until governments fully lift all restrictions. Even then, it’s not clear that the return to brick-and-mortar stores is inevitable.
The coronavirus pandemic has not just accelerated growth in online sales in 2020, but likely permanently changed the habits of two in five consumers, according to a survey by NatWest and Retail Economics. This will continue to fuel the transition to online grocery shopping for some time to come.