Online Groceries Are Having Their Moment

March 15, 2018 -- Take note of this moment. This is a tipping point for online grocery shopping in the U.S.


Food and beverage retail is one of the largest categories of consumer spending, accounting for yearly sales of $800 billion or more in the U.S. And it has been stubbornly immune to e-commerce. Last year, Kantar Worldpanel estimated online shopping for groceries and similar goods accounted for just 1.5 percent of the U.S. market. Even Inc. hasn't bucked the trend. It has labored for more than a decade with its Fresh grocery delivery service.

But times are changing.

Walmart Inc., the country's biggest grocery retailer, said Wednesday that it was expanding drastically the number of places where shoppers can pile food into a virtual shopping cart and have their purchases delivered. Target Corp. late last year purchased delivery startup Shipt and said recently that it would offer same-day delivery of assorted groceries and other goods from the majority of Target stores this year. Supermarket chains Kroger Co. and Albertsons Cos. are teaming up with Instacart for online deliveries. Even Costco Wholesale Corp., long hesitant about e-commerce, has tiptoed into home-delivery orders.

All these events happened after June 2017, when Amazon announced it was buying Whole Foods for $14 billion. Grocery sellers weren't ignoring the internet before then, but certainly Amazon's purchase was a declaration that the Seattle superpower was serious about food and eager to find new approaches to blur the lines between online and physical shopping. The rest of the grocery industry had no choice but to respond quickly, and embracing food delivery has been the most obvious of their reactions.

This was a change of tune for many traditional grocers. Walmart, Kroger and other big chains have tested home-delivery options, but they have been bigger proponents of "click-and-collect" shopping, which lets customers order groceries ahead of time, pull up curbside at the store and have an employee place the shopping bags in the trunk.

As recently as Walmart's 2016 shareholder meeting, the company said the U.S. was a much trickier place to manage grocery deliveries compared with the United Kingdom, where Walmart's Asda unit has a home delivery grocery service that covers nearly the whole country. The U.S. is larger, of course, and logistics are thorny.

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