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Freedonia Focus Reports
Online Grocery
Shopping: United
States
May
2023
Table of Contents
1. Highlights 3
2. Market Overview 4
Market Size 4
Historical Online Grocery Market 5
The Future of Grocery Delivery 6
Online Grocery Shopping Driven by Convenience 6
Expansion of Online Grocery Shopping Led by Third-Party Player Instacart 6
COVID-19 & Beyond 7
Share of the Market by Fulfillment Type 7
Share of the Market by Retailer Category 9
Share of the Market by Product Category 11
Opportunities for Growth 13
Online Grocery Shopping Can Solve Problems Faced by Older Consumers 13
Appealing to Customers Trying to Resist Impulse Buys 14
Further Acceptance of the Outsourcing of Individual Item Selection 14
Label Readers Can Get Additional Product Information Online 15
AI-Powered Voice Technology for Increased Convenience 15
VR & AR Shopping Experiences 15
Key Consumer Trends 16
Packaging Trends 18
The Balance Between Effective, Sustainable, & Low-Cost Packaging 18
Targeting Excessive Packaging for Reduction & Elimination 18
Protective Packaging Is Important For Product Integrity 19
A Shift from Expensive Set-Up Boxes to Other Paper Packaging 19
Reusable Packaging 20
Opportunities for Biodegradable & Compostable Packaging 20
Consumer Insights on Recycling, Household Waste, & Packaging 20
3. Industry Structure 21
Market Share 21
Instacart 21
Walmart 22
Amazon 22
4. About This Report 24

Scope 24
Sources 25
Industry Codes 26
Resources 27
Online Grocery Shopping: United States 1

©2023 The Freedonia Group. All rights reserved.
List of Tables & Figures
Figure 1 | Key Trends in US Total & Online Grocery Shopping Retail Sales, 2022 – 2027 3
Figure 2 | US Online Grocery Shopping Retail Sales, 2017 – 2027 (US$ bil) 4
Table 1 | US Total & Online Grocery Shopping Retail Sales, 2017 – 2027 (US$ bil) 4
Figure 3 | US Online Grocery Shopping Market by Fulfillment Type, 2022 (%) 9
Figure 4 | US Online Grocery Shopping Market by Retailer Category, 2022 (%) 11
Figure 5 | US Online Grocery Shopping Market by Product Category, 2022 (%) 12
Figure 6 | US Online Grocery Shopping Market Share by Company, 2022 (%) 21
Table 2 | NAICS & SIC Codes Related to Online Grocery Shopping 26

Highlights
1. Highlights
• Packaged Facts projects that retail sales from online grocery shopping will
expand 12.0% annually through 2027 to $220 billion. After the fast growth
seen due to pandemic trends from 2020 to 2022, online grocery sales are
projected to decelerate through 2027, though double digit growth is
expected to continue.
• Online grocery sales nearly tripled in 2020 due to pandemic-fueled changes

and expectations for contactless transactions. Sales were also strong in 2021
and 2022 as many consumers continued pandemic-era habits and desired
convenient ordering.
• Delivery options accounted for the majority (53%) of online grocery sales in
2022 due to increased convenience compared to pickup options. Combined,
third-party delivery and direct delivery accounted for about 38% of online
grocery sales, while shipments accounted for just 15% of sales.
• The online grocery market consists of many players, with Instacart coming
out on top. In 2022, the top three online grocery companies – Instacart,
Walmart, and Amazon – together accounted for a 62% market share.
Figure 1 | Key Trends in US Total & Online Grocery Shopping Retail Sales, 2022 – 2027
Source: Packaged Facts

Market Overview
Market Size
2. Market Overview
Market Size
Figure 2 | US Online Grocery Shopping Retail Sales, 2017 – 2027 (US$ bil)
Table 1 | US Total & Online Grocery Shopping Retail Sales, 2017 – 2027 (US$ bil)
AAGR CAGR
Item 2017 2018 2019 2020 2021 2022 2023P 2024P 2025P 2026P 2027P 17-22 22-27
Online Grocery Sales 15.5 24.0 35.0 95.0 104.0 125.0 138.0 156.0 176.0 197.0 220.0 45.2 % 12.0 %
% change 49.0 % 54.8 % 45.8 % 171.4 % 9.5 % 20.2 % 10.4 % 13.0 % 12.8 % 11.9 % 11.7 % – –
All Grocery Sales 959.9 999.6 1025.1 1151.5 1201.5 1295.0 1335.0 1385.0 1430.0 1480.0 1530.0 6.2 % 3.4 %
% change 2.8 % 4.1 % 2.6 % 12.3 % 4.3 % 7.8 % 3.1 % 3.7 % 3.2 % 3.5 % 3.4 % – –
% of sales online 1.6 % 2.4 % 3.4 % 8.3 % 8.7 % 9.7 % 10.3 % 11.3 % 12.3 % 13.3 % 14.4 % – –
Note: P = Projected
Packaged Facts projects that retail sales from online grocery shopping will expand 12.0%
annually through 2027 to $220 billion. After the fast growth seen due to pandemic trends
from 2020 to 2022, online grocery sales are projected to decelerate through 2027, though

Market Overview
Market Size
double-digit growth is expected to continue. While growth will be at a slower rate than
during the pandemic period when sales were growing from a small base, this change
represents continued gains. Sales will be about 60% greater in 2027 compared to 2023.
Sales are expected to grow the slowest in 2023 because consumers continue to worry about
food prices and seek less expensive options. Some consumers are cutting back on or
stopping online orders in favor of in-store purchases, placing more focus on cost compared
to convenience. As inflation woes are expected to ease somewhat in 2024, sales are
anticipated to jump slightly. Afterward, sales are forecast to slowly decelerate through
2027, for an overall compound annual growth rate of 12.0% annually.
Historical Online Grocery Market

Before the COVID-19 pandemic began in the US in 2020, online grocery sales were
experiencing strong growth as consumer adoption expanded. Additionally, availability of
local pickup and delivery options increased in areas where it had not been available
(particularly through Walmart, which serves many rural areas across the US, and Instacart,
which has partnerships with many grocery chains).
The pandemic changed consumer behavior in unprecedented ways, and online grocery
sales nearly tripled in 2020 as consumers looked for more convenient and safer shopping
options such as home delivery and curbside pickup. This year was a watershed for
increased consumer adoption, as well as more shopping trips for those who already bought
food and beverage products online. Additionally, average order values increased since many
people were trying to avoid shopping in stores and would buy more of their usual grocery
basket online.
Sales continued to grow in 2021 and 2022, though at a slower pace after the large gains
seen in 2020. Sales growth in 2022 was primarily inflation-driven as prices for food and
beverage products rose across the board.
Online continued to account for a small portion of overall grocery sales at just 9.7% of the
market in 2022.

Market Overview
Market Size
The Future of Grocery Delivery

The future of grocery shopping is increasingly digital. Consumers are looking for
convenience in how they get and prepare their foods, and online grocery shopping options
facilitate:
• ordering on one’s own time (even outside of store business hours)

• home delivery or appointments for curbside pickup
• access to foods not available locally, including specialty types or foods to suit
particular eating habits or allergy limitations
• assistance with meal planning, as platforms suggest combinations and
recipes
• assistance with meal preparation, as some formats supply precooked,
premeasured, or otherwise semi-prepared meal elements
Online Grocery Shopping Driven by Convenience

Online shopping – including grocery shopping – is generally driven by convenience. Even
during the COVID-19 pandemic, convenience was the number-one reason that online
grocery shoppers cite for their use of such services. The pandemic has receded as the
primary driver of daily habits, so convenience will continue to be the factor that makes
online grocery shopping a “sticky” habit.
Online grocery shopping is a convenient alternative to in-store shopping because it allows

customers to create their lists even after store hours and set a pickup or delivery
appointment at a preferred time. Filling a shopping cart online can be done more efficiently
by searching for specific items, making a shopping list and buying from it, and using
shopping history to quickly put commonly purchased items back in the shopping cart.
Consumers who have mobility issues or lack reliable transportation tend to find the home
delivery aspect especially convenient, since they do not need to leave their homes to shop.
Expansion of Online Grocery Shopping Led by Third-Party Player Instacart

Third-party grocery delivery service Instacart has become the online grocery market leader
by expanding its services across the nation, allowing users to order from local stores via a
mobile application (pickup and delivery options are generally both available). Large

Market Overview
Market Size
retailers such as Kroger and Walmart have also rapidly grown their e-commerce
capabilities to greatly expand online grocery sales via direct delivery or pickup.
Third-party apps have some advantages that have helped to greatly expand participation in
the online grocery market:
• Third-party apps are convenient for consumers because they allow

customers to order from a variety of venues using one application.
• Smaller businesses that lack the capital to fund in-house development of
apps or expand delivery and/or pickup services can participate in the
market with relative ease by using third parties for order fulfillment.
However, many of the companies that have used third-party delivery entities are now
dropping these services in favor of investing more in infrastructure for in-house order
fulfillment. Direct order fulfillment cuts costs in the long run and makes the online
shopping experience easier to control from start to finish.
COVID-19 & Beyond

Online grocery sales nearly tripled in 2020 due to pandemic-fueled changes and
expectations for contactless transactions. Sales were also strong in 2021 and 2022 as many
consumers continued pandemic-era habits and desired convenient ordering.
While the pandemic is receding as a primary driver of habits (as of 2023) and consumers
are resuming pre-pandemic activities, online grocery ordering is sticking around. Remote
work, both full- and part-time, will continue for the sizable segment of the population that
started or expanded the practice during the pandemic. Consumers who used to make
purchases during their daily commutes have established new habits – like online ordering –
since leaving the home to shop has become less convenient.
Share of the Market by Fulfillment Type

Delivery options accounted for the majority (53%) of online grocery sales in 2022 due to
increased convenience compared to pickup options. Combined, third-party delivery and
direct delivery accounted for about 38% of online grocery sales, while shipments accounted
for just 15% of sales.

Market Overview
Market Size
A historical pattern of shipments of food and beverages via websites such as Amazon and
FreshDirect, which sold groceries online before many brick-and-mortar stores, helped to
shape the market. Online-only grocers such as Thrive Market and Hungryroot only ship to
consumers, while some food manufacturers and brands sell products direct-to-consumer
(DTC) via shipments. For brick-and-mortar retailers such as Walmart, Costco, and Target,
shipments open up additional sales avenues when items that consumers want may not be
available for delivery from their local grocery store.
Being able to have grocery products delivered fast is now expected by consumers who
order groceries via third-party delivery companies such as Instacart or directly from the
retailer (e.g., Walmart.com for local delivery). Third-party delivery accounts for a larger
share of delivery sales than direct delivery, as many retail stores offer delivery by
partnering with Instacart. Many grocery stores that did not yet offer pickup or delivery at
the beginning of the pandemic in 2020 quickly paired with Instacart to stay competitive
when some consumers were suddenly unwilling to shop inside stores for fears of getting
sick from strangers in crowded areas.
Local delivery accounts for a small but growing share of grocery delivery sales. Although
many companies do not have their own delivery service, companies such as Walmart and
Kroger are investing heavily in offering direct delivery to have full control of the online
shopping experience. Third-party delivery is less expensive to retailers in the short term
since they do not have to make investments in technology or a larger workforce, but in the
longer term, having in-house delivery services is more efficient. Orders can be packed faster
in warehouses or in back areas of a store without needing a personal shopper to browse
aisles like a regular customer. Direct delivery is also more ideal since any problems with an
order can be solved by the retailer rather than a third party. Better access to stocking
information can also greatly help in preventing customers from ordering out-of-stock items.
Many stores have also implemented pickup options (e.g., pickup in store, curbside pickup,
pickup lockers) to allow customers to order food and beverage items without needing to
shop in the store. Pickup options are also helpful for retailers to boost in-store sales, as

Market Overview
Market Size
some consumers who order groceries online for pickup may forget items or want to browse
the store for deals when they are present for the pickup. Instacart also may allow users to
pick up their groceries that have been selected by personal shoppers rather than hiring a
delivery driver, and these sales are included in the pickup category. At 47%, pickup is the
largest discrete category of sales.
Figure 3 | US Online Grocery Shopping Market by Fulfillment Type, 2022 (%)
Share of the Market by Retailer Category

Third-party pack and delivery companies accounted for the largest online grocery retailer
category, at 30% of sales in 2022. This is largely due to Instacart sales, as it is the online
grocery market leader. Other third-party delivery companies that deliver goods from retail
stores include Shipt and Drizly.
Third-party delivery companies allow customers to order from stores via an app. These
services function like a “personal shopping service”, with contracted shoppers collecting
items from the store aisles and delivery people driving the orders to a customer’s home.
Some store partnerships with third-party delivery services have store employees pick the
groceries, while the delivery service’s contract drivers make the deliveries. For instance,

Market Overview
Market Size
Instacart revealed in January 2021 that it would phase out shopper positions at Kroger,
which uses its own workers to assemble Instacart orders.
Grocery stores and supermarkets are the second largest category of sales, at 28% of the
online grocery market. These retailers include stores such as Albertsons, ALDI, Kroger,
Publix, and H-E-B. Grocery stores and supermarkets may fulfill online orders using in-
house delivery services, pickup, or shipment. Additionally, many of these retailers fulfill
orders from third parties such as Instacart, though such sales are included in third-party
services.
Mass merchandisers and warehouse clubs such as Walmart, Target, Meijer, Costco, Sam’s
Club, and BJ’s account for 27% of online grocery sales through direct delivery, pickup, or
shipment.
A full 13% of sales are from online-only retailers (or retailers that primarily operate online)
that ship or deliver directly to consumers. Online-only retailers include FreshDirect, Thrive
Market, Misfits Market, and food/beverage brands that sell their products online (e.g.,
Snacks.com, which is a direct-to-consumer marketplace operated by PepsiCo to ship snack
products such as Cheetos, Doritos, Lay’s, and Quaker granola bars directly to consumers).
Note that online sales made at Whole Foods (which is wholly owned by Amazon) and
Amazon brick-and-mortar stores (Amazon Go and Amazon Fresh) for pickup or local
delivery are included in the grocery stores/supermarkets category, while Amazon sales
made via the company’s website or app that are shipped are included in the online-only
retailers category, since Amazon primarily operates online.
A small portion of sales are from other retailers, such as farmer’s markets or co-ops that
sell online. These operations are typically small businesses that offer locally grown/raised
foods in a limited geographical area. Some may offer delivery, while others may offer pickup
locations.

Market Overview
Market Size
Figure 4 | US Online Grocery Shopping Market by Retailer Category, 2022 (%)
Share of the Market by Product Category

Pantry and frozen foods represent the largest product category of online grocery sales by
far. Shelf-stable foods, in particular, are easy to sell online because they can readily be
shipped, picked up, or delivered without much regard for time or temperature. Frozen and
refrigerated foods in this category are harder to ship (if shipped, they must use insulated
packaging and cooling elements such as dry ice or gel packs), but they can be picked up or
delivered within a short window if coming from a local store.
Meats and seafood represent the second largest product category. When these products are
shipped, they often come frozen with gel packs or dry ice to maintain product safety.
Several DTC sellers specialize in meat, such as Omaha Steaks, Porter Road, and ButcherBox.
Now that local grocery stores are participating in the online grocery market through
delivery or pickup options, many meat and seafood products are sold via these channels
since it is easier to keep fresh or frozen meats at a safe temperature for a short amount of
time as opposed to a shipment that can take days to arrive.
Fresh produce accounts for 11% of online grocery sales. Although consumers have
sometimes been wary of buying produce online since they cannot select it themselves,

Market Overview
Market Size
people are becoming more comfortable with ordering produce online from grocery stores
or online-only retailers. Community supported agriculture programs (CSAs) and farmers’
markets often sell mostly high-quality fresh produce known for freshness, and many of
these local organizations allow customers to order online for pickup or delivery. Specialty
online produce sellers also sell produce delivered directly to consumers, such as Hungry
Harvest and Farmbox Direct. Additionally, some consumers have found the advent of
“imperfect” or “ugly” produce appealing to save money and possibly reduce food waste at
the farm level. DTC companies selling fresh produce with cosmetic imperfections online
include Misfits Market and Imperfect Foods (which was acquired by Misfits Market in
2022).
Other product categories make up a smaller share of online grocery sales, with beverages,
dairy and eggs, and bakery items often being sold from local stores or general online-only
grocers. Prepared meals and other foods account for just 4% of online grocery sales.
Interest in meal delivery services and buying prepared meals from grocery stores is
expanding as consumers look for more convenient meal options that save time and effort
for shopping, meal planning, and cooking.
Figure 5 | US Online Grocery Shopping Market by Product Category, 2022 (%)

Market Overview
Opportunities for Growth

As online grocery sales continue to grow and competition tightens, retailers are looking for
opportunities to expand availability and to make grocery delivery and pickup more efficient
and less costly. The future of online grocery will feature new technologies like drone and
autonomous vehicle delivery, automated warehouses, intelligent voice ordering, virtual
reality shopping environments, and better monitoring of product quality and stock.
Many big companies, such as Walmart and Kroger, are investing in technology and
infrastructure to offer more items for pickup or delivery and to fulfill online orders faster
and for a lower cost. For instance, Kroger has been working with Ocado to develop
automated warehouses. The company opened its first new online fulfillment center – which
uses artificial intelligence, robots, and automation to make pickup and delivery faster and
more efficient – in April 2021.
Similarly, Walmart has invested in drone and autonomous vehicle startups to develop
better and less expensive last-mile delivery. Automation is necessary to increase speed of
order fulfillment; reduce costs; and expand services to more customers, more areas, and
more available products.
Worker shortages and rising labor costs have challenged grocers, thereby making online
grocery services more expensive for marketers in the short-term. Labor challenges require
innovation to overcome and will likely drive prices up (in both the short- and long-term)
and might affect options available to shoppers. For instance, home delivery may become
less favored as prices rise; consumers could increase their use of pickup options to save
money or if delivery becomes unavailable at some stores.
Online Grocery Shopping Can Solve Problems Faced by Older Consumers

Perhaps the biggest opportunity for online grocery marketers is older demographics, as
online grocery shopping is heavily underutilized by older consumers who could receive
much benefit from these services. The obvious barrier for marketers to overcome is the

Market Overview
lower internet use among older people, who have a harder time adapting to technologies
that were not available when they grew up.
Many older consumers are less active and do not get out of the house as much as they did
when they were younger, with age-related health issues and conditions such as arthritis
holding them back. As such, it is more difficult for older people to do their own grocery
shopping. Some older people with mobility issues have meals or groceries delivered by
their adult children, but because younger people are busy, this can place an unnecessary
strain on family.
By marketing online grocery shopping as a solution to this problem, grocers can reach older
people who use the internet, as well as younger family members who act as caregivers.
Millennials and Generation X can order groceries for their older family members that they
can pick up and deliver, or they can have groceries delivered directly to their parents.
Because the older population is a large cohort, is living longer than previous generations,
and prefers to live at home rather than in assisted living facilities, its importance to the
online grocery market cannot be understated.
Appealing to Customers Trying to Resist Impulse Buys

The advent of automated ordering available through many online grocery shopping
interfaces allows customers to make routine purchases without having to select items every
time they want to approve an order. Some people may be wary of the internet’s ability to
influence impulse buys and try not to make many online purchases for this reason.
However, automated ordering services can be marketed to people on a strict budget as a
budget enforcer. Automated ordering can help these customers cut back on buying things
they do not need by removing the element of choice.
Further Acceptance of the Outsourcing of Individual Item Selection

As consumers continue to shop for groceries online and become more comfortable doing so
regularly, they will also come to accept the outsourcing of individual item selection. Many
consumers have been hesitant to do their regular grocery shopping online because they
want to select their own fresh produce, meat, poultry, and seafood. However, as time goes

Market Overview
on, more people will have used online grocery shopping platforms and will come to accept
convenience as a tradeoff for the power of selection. Additionally, better technology and
customized shopping options will increasingly allow shoppers to add notes to aid pickers in
the selection process (e.g., leaving a note that avocados will be used in two days and should
be ripe, or that the customer wants as close to two pounds of steaks as possible).
Label Readers Can Get Additional Product Information Online

Many grocery shoppers identify as “label readers” and want to know as much as they can
about a food or beverage product and its ingredients before making a purchase. Some of
these consumers may not like the idea of shopping online because they think they cannot
view product labels. However, many outlets offer this information in product descriptions
or include photos of the labels on products. If availability of these features becomes well-
known, choosy shoppers may be more inclined to try online grocery shopping.
AI-Powered Voice Technology for Increased Convenience

Voice ordering, despite very much being a nascent technology, is becoming more popular
among tech-savvy consumers. Smart home devices such as the Alexa-enabled Amazon Echo
and Google Home allow users to access the internet through voice. Shopping with smart
speakers that do not have a screen can be a challenge for items that users want to see
before ordering, such as clothing. However, consumers are familiar with the groceries they
normally purchase and may be more comfortable ordering these items through voice
assistants.
VR & AR Shopping Experiences

Walmart and Amazon are currently leading the charge for VR (virtual reality) and AR
(augmented reality) shopping. For instance, Amazon introduced the Amazon AR View
feature on its app in 2018 and then heavily promoted it for Prime Day deals. The feature
allows users to “try out” items by using their phone camera to scope out their home and
place virtual products in their space to test out how they fit and look. Although this is not
practical for food and beverage items, Amazon’s continued development of the technology
could be applied to those categories as the company expands further into groceries.

Market Overview
Key Consumer Trends
Key Consumer Trends

Younger consumers are of particular importance to the online grocery and meal kit market.
Those between the ages of 25 and 44 are most likely to shop for groceries online or use
meal kits. People in these groups tend to be juggling work and family demands, which can
make online grocery shopping or meal kit/prepared meal delivery services especially
convenient.
The 18-to-24 demographic largely consists of college students and consumers working
their first professional jobs. Although the price premiums associated with online grocery
shopping and meal kit/prepared meal delivery services may be prohibitive for some in this
demographic now, they are still more likely than average to use some online grocery
shopping services.
While older consumers are much less likely to order groceries online, they are a prime
group to target because they face many challenges that online grocery shopping can solve:
• Consumers aged 75 and over are particularly concerned with mobility

limitations and/or conditions that hamper manual dexterity (such as
arthritis). These individuals can receive groceries, meal kits, or meals that
are ready-to-eat or ready-to-heat without needing to leave their homes or
cars. In cases where the ordering process is too complicated for them,
younger relatives do so on their behalf.
• Consumers aged 65 to 74 (particularly those at the younger end of that
range) may still be working; however, much of this cohort is retired or about
to retire, and they are adjusting to new lifestyles. The increased convenience
of online ordering may appeal to these consumers as they change their
habits (e.g., ending of a work commute), and the services can help those who
are tiring of their usual meal options. Some in this age group may also face
issues of limited mobility or dexterity and benefit from grocery delivery or
simple-to-prepare meal options.
• Consumers aged 55 to 64 are likely to still be working, and can therefore be
swayed to order groceries online or use meal kits/prepared meals mainly for
convenience. Reducing the time that they spend in stores and getting meals

Market Overview
Key Consumer Trends
on the table faster (just like their younger working counterparts) is a

primary motivator for this group.
The higher-income demographic values convenience and quality, and they are willing to pay
more for products and services. Thus, online grocery shopping has been the domain of
those consumers for some time due to the associated higher prices, delivery fees, and tips.
However, this is changing. Consumers have started to expect affordability in online

shopping; middle-income consumers are progressively seeing the value of online grocery
shopping and are increasingly willing to pay fees and higher prices for the convenience, but
they also expect cost benefits for frequent online shopping (e.g., subscriptions that remove
delivery fees for each order). Despite this, inflationary pressures are causing many of these
consumers to cut back on online ordering in 2023.
Additionally, many grocers now accept SNAP (Supplemental Nutrition Assistance Program)
for online food and beverage product purchases, allowing recipients to buy groceries online
– although it should be noted that SNAP emergency allotments ended in March 2023.
Consequently, there are now fewer people who qualify and benefit payments have been
reduced for those who do, so lower-income consumers are economizing now more than
they might have been from 2020 through 2022.

Market Overview
Packaging Trends
Packaging Trends
The Balance Between Effective, Sustainable, & Low-Cost Packaging
As with other consumer product markets, effective, low-cost packaging is critical to success
in the food and beverage market, particularly for goods sold online that consumers cannot
see until they are received. Packaging presents challenges in fulfilling four key (and
sometimes contradictory) needs:
• preventing damage (especially when items are shipped directly to

consumers)
• being cost effective
• addressing sustainability concerns and consumer expectations
• having a premium or attractive appearance
Packaging producers and food producers must look at the entire packaging and supply
chain to successfully deliver on these key qualities. A package that uses environmentally
friendly materials or is low cost but that fails to protect the integrity of the contents is bad
for business. Excessive packaging remains a top concern for consumers, environmentalists,
and packaging producers alike.
Targeting Excessive Packaging for Reduction & Elimination

Excessive packaging is often seen as a problem in the e-commerce market, as consumers
getting products delivered to their homes may receive products in more packaging than
they are used to getting when buying products at a store. For instance, many products have
primary packaging, and when shipped via e-commerce, they are put inside further
secondary packaging, such as a shipping box with air pillows.
The protective functions of secondary packaging sometimes conflict with consumer

concerns about packaging disposal and waste. Consumer frustrations with “excessive
packaging” have caused e-commerce companies to target secondary packaging for
elimination and reduction. For example, Amazon has long worked to be an innovator in e-
commerce packaging through finding cost-effective solutions. The company’s Certified
Frustration-Free Packaging Program aims to:

Market Overview
Packaging Trends
• reduce packaging waste through rightsizing for products being shipped

• effectively protect items and minimize damage during shipment
• reduce consumer responsibilities for disposal and improve environmental
footprint by using 100% curbside recyclable packaging
• enhance consumer experience by making packaging easy to open, with no
plastic clamshells or wire ties
Packaging that qualifies for Frustration-Free certification is “e-commerce ready” because it

is ready-to-ship without additional packaging such as an exterior corrugated box or mailer.
This improves supply chain efficiency and reduces packaging and shipping costs.
Protective Packaging Is Important For Product Integrity

Although packaging design is important to create a positive experience when opening food
and beverage products, protective packaging is just as important during transit. Protective
packaging for food and beverage products shipped to consumers encompasses many
products such as:
• gel packs, insulating liners, and insulated containers

• packaging such as air pillows, bubble packaging, and paper fill
• box dividers and partitions
• plastic and paper bags that keep items separate from one another
Protective packaging needs differ based on the method of purchase, as e-commerce

represents unique challenges for any product. Food ordered online for shipment will
typically contain additional protective packaging compared to similar foods purchased in a
store due to all the bumps and bangs that occur to a package during shipment and last-mile
delivery.
A Shift from Expensive Set-Up Boxes to Other Paper Packaging

When food subscription boxes started to become popular, set-up boxes (also known as rigid
boxes) were the type of premium packaging most utilized in shipments due to their high
quality and ability to be customized with graphics.

Market Overview
Packaging Trends
However, set-up boxes are more expensive than other box types because they are pre-
assembled and take up more space during shipment since they are not shipped flat. They
are often imported from countries with lower labor costs due to their labor-intensive
nature, meaning companies that order them often face significant delays in receiving them.
Reusable Packaging
As more people have wanted to reduce use of single-use products such as disposable
shopping bags, utensils, and straws, reusable and higher-value options have been available
for purchase (e.g., reusable shopping totes and biodegradable cutlery and straws).
Although not commonly implemented, it is possible for food companies such as grocery
stores to use reusable takeout and delivery containers in the future. These containers can
later be picked up by the company or returned by the customer to be cleaned and reused.
Opportunities for Biodegradable & Compostable Packaging

Retailers continue to research the development of fully biodegradable or compostable
packaging in attempts to reduce or eliminate packaging (especially plastic) waste. Such
packaging can be used to eliminate plastic packaging for single-serve items.
For instance, individually wrapped chocolate bars and truffles can be wrapped in recyclable
or compostable packaging instead of foil or plastic that can only be thrown away.
Consumer Insights on Recycling, Household Waste, & Packaging

Consumers who are shifting their grocery shopping habits toward more online ordering are
more likely than average to express greater concerns about packaging waste and
sustainability. For instance, consumers who have reported using grocery delivery services
from an online-only provider in the last 12 months in Packaged Facts’ March 2023 survey
are more likely to strongly agree they think that it is important to recycle everything they
can, to minimize waste when they can, and to think it is important that others see them as
environmentally conscious.

Industry Structure
Market Share
3. Industry Structure
Market Share
The online grocery market consists of many players, with Instacart coming out on top. In
2022, the top three online grocery companies – Instacart, Walmart, and Amazon – together
accounted for a 62% market share. Other major companies included Kroger, Target, and
Ahold Delhaize.
Figure 6 | US Online Grocery Shopping Market Share by Company, 2022 (%)
Notes: *Includes sales from Whole Foods Market.

Instacart
Instacart is the online grocery market leader, accounting for 28% of sales in 2022.
Instacart’s sales figures have been buoyed by retailer’s needs to quickly expand grocery
delivery options after the pandemic began in the US in 2020. Many consumers were
suddenly uncomfortable shopping in stores, and grocers needed to adapt quickly to these
changing preferences by offering contactless pickup or delivery. For grocers that did not
previously offer any form of online ordering (or just local delivery), partnering with
Instacart became a necessity in many markets to remain competitive when consumers

Industry Structure
Market Share
began to expect safer ways to shop for groceries locally. Even as the pandemic has receded
as the primary driver of daily habits, Instacart represents a convenient option for
consumers (since they can order from multiple stores with just one platform) and retailers
(since they do not need to invest a lot to offer grocery delivery).
Walmart
Walmart is the second largest market leader in online grocery, with online grocery sales
accounting for 18% of the market in 2022. Walmart has made massive investments in
online order infrastructure for two-day shipping via Walmart.com and thousands of local
stores to operate as pickup and delivery points. This has allowed the largest grocer in the
US to serve much of the country, particularly in some rural areas where the chain operates
as the dominant grocery option.
Walmart has continued to invest in new technology and companies to expand its online
grocery offerings. For instance, in April 2021, Walmart invested an undisclosed amount of
money into Cruise, an autonomous vehicle company. Similarly, in June 2021, Walmart
invested in DroneUp, a startup in drone delivery services. Walmart’s 2022 acquisitions also
indicate that Walmart is technology focused:
• Memomi is an augmented reality optical technology company.

• Delivery Drivers is a tech company that manages contract delivery drivers.
• Volt Systems is a technology company with a platform that provides insights,
tracks products, and manages grocery vendors.
• Alert Innovation provides technology for grocery microfulfillment.
Amazon
Amazon is the third largest player in the online grocery market. Although it dominates in
the overall online shopping category, the company does not have the same influence in the
food and beverage category. Amazon’s acquisition of Whole Foods Market in 2017 has
helped it to have access to more local grocery markets for local pickup and delivery, but
Whole Foods primarily operates in higher income areas with more grocery competition.

Industry Structure
Market Share
Amazon has been phasing out some of its special grocery delivery platforms. In May 2021,
the company announced it planned to retire the Prime Now same-day delivery program
that had existed for seven years, as well as the one-year-old Go Grocery platform. This move
streamlined Amazon’s services, with Prime Now shifting to Amazon.com and the Amazon
app and Amazon Go being rebranded as Amazon Fresh stores.
As it has been cutting costs in 2022 and 2023, the company has been pausing expansion of
its Amazon Fresh stores and closing some Amazon Fresh and Amazon Go brick-and-mortar
stores.

About This Report
Scope
4. About This Report

Scope
This report forecasts US online grocery retail sales and total grocery retail sales in US
dollars for 2023-2027. To illustrate historical trends, online and total grocery retail sales
are provided in annual series from 2017 to 2022.
This report provides information about online retail sales of food and beverages to
consumers in the following product categories:
• shelf-stable foods and beverages in cans, bottles, or other packaging
(including alcoholic beverages)
• prepared meals
• perishables such as fresh fruits and vegetables
• dairy and egg products
• meat, poultry, and seafood
• bakery items
• frozen foods
This report includes online sales of such items from:

• store-based grocers (e.g., Kroger, Safeway, ALDI)
• mass merchandisers (e.g., Walmart, Target) and warehouse clubs (e.g.,
Costco, Sam’s Club, BJ’s)
• online-based grocers (e.g., Amazon, Thrive Market, Hungryroot)
• brands that sell their own food products via their websites, direct-to-
consumer
• third-party pack-and-deliver companies that use their own workforce to
purchase groceries at various stores and deliver them to customers (e.g.,
Instacart)
• local co-ops and farmers’ markets that arrange for subscriptions, single
orders, and pickup or delivery digitally
Online sales made via website or app – whether delivered to a customer via shipment or
local delivery, picked up in-store, or received via curbside pickup – are all included.
Excluded from the scope of this report are:

• food and beverage products that consumers physically select in a store for
purchase
• items bought by mail, fax, or phone order

About This Report
Sources
• non-food items such as household cleaning products, pet food and toys,
tobacco products, beauty products, kitchenware, and other similar products
that tend to be sold by grocers and mass merchandisers
• revenue from restaurants and other foodservice entities such as cafeterias,
bars, and caterers
Freedonia quantifies trends in various measures of growth and volatility. Growth (or
decline) expressed as an average annual growth rate (AAGR) is the least squares growth
rate, which takes into account all available datapoints over a period. Growth calculated as a
compound annual growth rate (CAGR) employs, by definition, only the first and last
datapoints over a period. The CAGR is used to describe forecast growth, defined as the
expected trend beginning in the base year and ending in the forecast year. Readers are
encouraged to consider historical volatility when assessing particular annual values along
the forecast trend, including in the forecast year.
Other various topics, including profiles of pertinent leading companies, are covered in this
report. A full outline of report items by page is available in the Table of Contents.
Sources
Online Grocery Shopping: United States (FF90054) is based on The Future of Grocery: Online
Grocery, Meal Kits, & Direct-to-Consumer Food, a comprehensive industry study published by
Packaged Facts. The analysis drew largely on three primary sources of consumer data:
• The March 2023 Packaged Facts National Online Consumer Survey, which
includes a panel of 1,500 US adults (aged 18 and older) balanced to the
national population on primary demographic measures such as age group,
gender, geographic region, marital status, race/ethnicity, presence or
absence of children in the household, and household income. The December
2022 survey (panel of 2,000 adults), November 2022 survey (panel of 2,000
adults), August 2022 survey (panel of 2,000 adults), May 2022 survey (panel
of 1,799 adults), February 2022 survey (panel of 2,000 adults), November-
December 2021 survey (panel of 1,500 adults), October-November 2021
survey (panel of 1,690 adults), August-September 2021 survey (panel of
2,000 adults), June 2021 survey (panel of 2,014 adults), February-March
2021 survey (panel of 2,046 US adults), November-December 2020 survey
(panel of 2,000 US adults), August 2020 survey (panel of 1,519 US adults),
and April-May 2020 survey (panel of 1,500 US adults) are also used.
• The Winter 2023 MRI-Simmons National Study is a booklet-based survey,
conducted across tens of thousands of respondents selected by address-
based sampling to represent a statistically accurate cross-section of the US
adult population (age 18+).
• The International Food Information Council Foundation’s 2022 Food &
Health Survey provides valuable insight into consumers’ perspectives on
food purchasing decisions along with insights on other pertinent topics.

About This Report
Industry Codes
Other primary and secondary sources consulted for this report included trade associations;
company reports; environmental and animal-welfare advocacy groups; third-party
credentialing organizations; and trade, business, and consumer publications.
Specific sources and additional resources are listed in the Resources section of this
publication for reference and to facilitate further research.
Industry Codes
Table 2 | NAICS & SIC Codes Related to Online Grocery Shopping
NAICS/SCIAN 2017 SIC

North American Industry Classification System Standard Industrial Classification
445110 Supermarkets and Other Grocery (except 4215 Courier Services, Except by Air
Convenience) Stores
454110 Electronic Shopping and Mail-Order Houses 5411 Grocery Stores
492210 Local Messengers and Local Delivery 5961 Catalog and Mail-Order Houses
Source: US Census Bureau
Copyright & Licensing

The full report is protected by copyright laws of the United States of America and
international treaties. The entire contents of the publication are copyrighted by The
Freedonia Group.

About This Report
Resources
Resources
Packaged Facts
Chocolate Candy: US Market Trends and Opportunities
Consumer and Corporate Food Gifting in the U.S.
Dairy & Egg Alternatives: Plant-Based & Animal-Free Products
Food Carryout and Delivery in the U.S.
Food Market Outlook 2023: Inflation, Sustainability, Convenience, & Other Food
Trends
Home Baking: U.S. Market Trends & Opportunities
The Future of Grocery: Online Grocery, Meal Kits, & Direct-to-Consumer Food
Vegan, Vegetarian, and Flexitarian Consumers
The Freedonia Group

Freedonia Industry Studies
Converted Flexible Packaging
Corrugated & Paperboard Boxes
Food Packaging
Food Packaging Consumer Insights
Foodservice Single-Use Products
Frozen Food Packaging
Global Bulk Packaging
Global Corrugated Boxes
Global Foodservice
Global Packaging Machinery
Global Pressure Sensitive Tapes
Global Foodservice Single-Use Products
Global Single-Use Plastic Packaging Regulations
Molded Pulp Packaging
Plastic Film
Protective Packaging
Stretch & Shrink Film
Sustainability in Packaging
Freedonia Focus Reports

Dairy & Substitute Products: United States
Demographics: United States
Dough, Dry Pasta, & Tortillas: United States
E-Commerce: United States

About This Report
Resources
Fast Food: United States

Food Processing: United States
Frozen Foods: United States
Grain-Based Foods: United States
Ice Cream & Frozen Desserts: United States
Labels: United States
Meat & Poultry Products: United States
Nuts & Seeds: United States
Packaging: United States
Restaurants & Foodservice: United States
Freedonia Custom Research
Trade Publications
Convenience Store News
Dairy Reporter
Ecommerce Magazine
E-Commerce Times
Food Business News
FoodNavigator-USA
Grocery Dive
Prepared Foods
Progressive Grocer
Refrigerated & Frozen Foods
Supermarket News
Agencies & Associations

American Dairy Products Institute
American Frozen Food Institute
FMI – The Food Industry Association
International Food Information Council
National Frozen & Refrigerated Foods Association
North American Meat Institute
Private Label Manufacturers Association
United States Census Bureau
United States Department of Agriculture
United States Food and Drug Administration
United States International Trade Association

THIS DOCUMENT IS PROVIDED UNDER A CORPORATE USE LICENSE
Copyright © 2016 The Freedonia Group; Cleveland, Ohio USA
This document is copyrighted by The Freedonia Group, and is protected by United States copyright laws
and international treaties. This document is provided under a Corporate Use License acquired by your
employer organization or academic institution (“Licensee”). The specific terms regarding permitted use
of this document are set forth in an agreement entered into between Licensee and The Freedonia
Group. The general provisions of the license are set forth below. Any questions regarding permitted use
of this document should be directed to Client Services of The Freedonia Group. Contact information is
provided below.
Use Limited to Members of Licensee Organization. Generally, only employees of the Licensee or full-
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Rights to Copy and Distribute. The contents of the document may be printed or otherwise reproduced,
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All information contained in this report is current as of its publication date. Information contained in this
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to change without notice.
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4. About This Report 24

Online Grocery Shopping: United States 1

Online Grocery Shopping: United States 2

• Online grocery sales nearly tripled in 2020 due to pandemic-fueled changes

Source: Packaged Facts

Online Grocery Shopping: United States 3

Source: Packaged Facts

Online Grocery Shopping: United States 4

Historical Online Grocery Market

Online Grocery Shopping: United States 5

The Future of Grocery Delivery

• ordering on one’s own time (even outside of store business hours)

Online Grocery Shopping Driven by Convenience

Online grocery shopping is a convenient alternative to in-store shopping because it allows

Expansion of Online Grocery Shopping Led by Third-Party Player Instacart

Online Grocery Shopping: United States 6

• Third-party apps are convenient for consumers because they allow

COVID-19 & Beyond

Share of the Market by Fulfillment Type

Online Grocery Shopping: United States 7

Online Grocery Shopping: United States 8

Figure 3 | US Online Grocery Shopping Market by Fulfillment Type, 2022 (%)

Source: Packaged Facts

Share of the Market by Retailer Category

Online Grocery Shopping: United States 9

Online Grocery Shopping: United States 10

Figure 4 | US Online Grocery Shopping Market by Retailer Category, 2022 (%)

Source: Packaged Facts

Share of the Market by Product Category

Online Grocery Shopping: United States 11

Figure 5 | US Online Grocery Shopping Market by Product Category, 2022 (%)

Source: Packaged Facts

Online Grocery Shopping: United States 12

Opportunities for Growth

Online Grocery Shopping Can Solve Problems Faced by Older Consumers

Online Grocery Shopping: United States 13

Appealing to Customers Trying to Resist Impulse Buys

Further Acceptance of the Outsourcing of Individual Item Selection

Online Grocery Shopping: United States 14

Label Readers Can Get Additional Product Information Online

AI-Powered Voice Technology for Increased Convenience

VR & AR Shopping Experiences

Online Grocery Shopping: United States 15

Key Consumer Trends

• Consumers aged 75 and over are particularly concerned with mobility

Online Grocery Shopping: United States 16

on the table faster (just like their younger working counterparts) is a

However, this is changing. Consumers have started to expect affordability in online

Online Grocery Shopping: United States 17

• preventing damage (especially when items are shipped directly to

Targeting Excessive Packaging for Reduction & Elimination

The protective functions of secondary packaging sometimes conflict with consumer

Online Grocery Shopping: United States 18

• reduce packaging waste through rightsizing for products being shipped

Packaging that qualifies for Frustration-Free certification is “e-commerce ready” because it

Protective Packaging Is Important For Product Integrity

• gel packs, insulating liners, and insulated containers

Protective packaging needs differ based on the method of purchase, as e-commerce

A Shift from Expensive Set-Up Boxes to Other Paper Packaging

Online Grocery Shopping: United States 19

Opportunities for Biodegradable & Compostable Packaging

Consumer Insights on Recycling, Household Waste, & Packaging