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What is the USA market-size (TAM) for the Online Grocery Ordering industry?
After holding steady around 1% of the total grocery market for several years, the online grocery market in the US is starting to see rapid growth. Conservative estimates put the current market size at around $10 billion, set to grow to around $34 billion within five years. More enthusiastic predictions see online grocery capturing up to 20% of the total US grocery market, or $100 billion. Read on for my full rundown of these and other predictions for the US online grocery industry.
CURRENT MARKET SIZE
According to Moody's and the Institute of Grocery Distribution (IGD), online grocery accounts for approximately 1% of the total $1 trillion US grocery market. By these estimates, the current TAM for online grocery is approximately $10 billion. However, another source puts online grocery sales over $20 billion as of 2016 -- it's possible that IGD's estimation methods under-count some online grocery sales.
MARKET PREDICTIONS
IGD projects an 18.1% CAGR for online grocery for the next five years. At a current value of $10 billion, the US online grocery market will be worth nearly $14 billion in two years and $23 billion in five years.
However, based on IGD's estimates for market share and total grocery market, estimates change somewhat. IGD predicts online grocery will capture 2% of the total grocery market in 2022, which they estimate will be worth $1.7 trillion. If online sales do account for 2% of the grocery market, online grocery will have a TAM closer to $34 billion.
IGD seems to have the most conservative estimate of online grocery's future performance. A more enthusiastic report from Nielsen and Food Marketing Institute says that online grocery sales will account for 20% of the US grocery market by 2025, for a $100 billion TAM.
Beyond these hard figures, industry trends point to continued growth for online grocery. While only 19% of US shoppers bought any groceries online in 2014, 25% did in 2016. According to some figures, that number increased to 1 in 3 shoppers in 2017, and is expected to rise to 70% within 10 years. These trends are driven partially by millennials' willingness to shop for groceries online -- as work and other activities increase demand on millennials' time, they'll likely spend more of their grocery budgets online. The introduction of newer, more capable technologies also has an impact on these trends and may even cause faster-than-predicted growth.
CONCLUSION
The current online grocery market in the US is worth between $10 and $20 billion. Driven by increasing adoption and improving technological capabilities, that market is expected to grow to anywhere between $34 billion and $100 billion within the next 5-7 years.