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Grocery apps on the upswing

Usage to soar as retailers make strides with online grocery

Have that grocery app yet? It’s a good chance that most of your family and friends already do.

Digital marketing and consumer behavior specialist eMarketer said grocery mobile apps are some of the nation’s fastest-growing apps. In 2018, 18 million U.S. adults will use a grocery app at least monthly, up 49.6% versus last year, according to the New York-based firm’s latest app usage forecast.

By next year, eMarketer projects, more than one in five adult smartphone shoppers (22.6 million) will use a grocery app to order food, representing 25.6% year-over-year growth. The number of adult grocery smartphone app users is expected to reach 25.2 million in 2020, 27.9 million in 2021 and 30.4 million in 2022.

For its forecast, eMarketer defined “grocery app” as a mobile app whose main function enables users to order fresh produce and perishables on demand, such as apps from AmazonFresh, FreshDirect, Peapod and Walmart Grocery. That also includes meal kit subscription services like Blue Apron, HelloFresh, Plated and Sun Basket.

“Shoppers are becoming more comfortable with ordering online in general, and grocery is a part of that,” eMarketer Senior Analyst Patricia Orsini explained. “A key hurdle, traditionally, for ordering fresh produce and other perishable items online has been delivery time and the desire to hand-select produce and meat. Retailers have been able to transcend these barriers with click-and-collect models of delivery: order online, pick up in-store.”

Grocery retailers also have taken pains to provide e-commerce customers with a high level of product quality and service, Orsini noted.

“If the shopper is ordering from their regular grocery store, familiarity helps them trust that the products will be of the quality they expect,” she said. “A bad experience, however, could turn consumers off for good, so retailers need to ensure they provide a good experience from day one.”

EMarketer said the strong uptake for grocery apps is being driven by Amazon and Whole Foods Market, which have now integrated Amazon Prime benefits at all Whole Foods stores, and by Walmart, which is expanding online grocery delivery from six cities to 100 by the end of the year. The Kroger Co. also is ramping up its online grocery service and building a broad e-commerce infrastructure.

“When Amazon acquired Whole Foods last year, Kroger and Walmart — along with other regional chains — stepped up their online grocery efforts,” according to Orsini. “Kroger is investing in a number of initiatives around delivery, including partnering with British company Ocado to build high-tech warehouses where grocery orders will be selected and packed by machines. As retailers figure out how to be more efficient with fulfillment, costs for consumers will come down, and another barrier to entry will fall.”

Still, online sales of food and beverages (including nonperishables) remains one of the most underpenetrated categories in the U.S. e-commerce market, eMarketer said. Though food and beverage e-commerce sales are forecast to rise 18.5% to $14.94 billion in 2018, the category will account for just 2.8% of all U.S. ecommerce sales — the same as in 2017.

For the period of 2017 to 2022, e-commerce sales of food and beverages stand to grow from $12.61 billion to $28.09 billion, with average annual growth of 17.5%, according to eMarketer’s data. Yet food and beverage’s percentage of overall U.S. e-commerce sales will hover at just under 3%.

“While the percentage of online grocery sales remains small, it is one of the fastest-growing online categories,” Orsini said. “While no one expects the number of brick-and-mortar grocery stores to seriously decline, the options consumers will have to purchase groceries will increase. Retailers recognize this. They are improving their online offerings in order to retain market share.”

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