A recent study conducted by Incisiv concluded that online grocery sales have settled down to a level below the high pandemic rates of 2020, but they are still well above pre-pandemic levels. Incisiv reported that total digital grocery sales reached $128 billion last year (that’s 14.4% of all grocery sales) and are expected to grow to $146 billion in 2023.
However, despite higher sales and the years grocers have spent fine-tuning their efforts, online grocery shopping is still not profitable for retailers, according to Gaurav Pant, chief insights officer for Incisiv.
Other than profits, challenges that grocers face in the online grocery business include inventory issues, which caused food retailers to leave approximately $23 billion in sales on the table last year, and the cost of fulfillment. Even when shoppers come to the store to pickup their goods purchased online, employers still need to pay for people to pick the orders from the shelves and get them to the right customers.
Some retailers have successfully cut costs by shifting their customers from third-party online grocery services to their own proprietary apps and websites. As a result, third-party apps lost a significant share of the digital grocery business in 2022.
“Grocers are trying to own more of the shopper experience, to have the customer data inside the organization, which is needed to actually build a profitable grocery business,” said Pant.