Grocery comes of age as ‘major’ online retail category

Though somewhat late to the online game, grocery has quickly grown into a “major e-commerce category,” fueled in the past two years by the COVID-19 pandemic, according to Adobe Analytics.

Grocery accounted for 8.9% of the $885 billion in U.S. online retail spending for 2021, up from 6.3% in 2019 and down slightly from 9.1% in 2020, which San Jose, Calif.-based Adobe called a “breakout year for the category” as consumer demand for online grocery shopping exploded with the onset of the pandemic.

The Adobe Digital Economy Index tracked e-grocery spending at $79.2 billion last year, up 7.2% from $73.7 billion in 2020, when the category saw sales jump 103%. Currently, consumers spend an average of $6.7 billion monthly online to buy groceries, more than double the $3.1 billion spent pre-pandemic. 

Looking ahead, Adobe expects grocery to surpass $85 billion in online spending for 2022 and become a top e-commerce category over the long term, exceeding $100 billion in annual online sales.

“E-commerce is being reshaped by grocery shopping, a category with minimal discounting compared to legacy categories like electronics and apparel,” Patrick Brown, vice president of growth marketing and insights at Adobe, said in a statement. “It highlights a shift in the digital economy, where speed and convenience are becoming just as important as cost savings.” 

Related:Regular online grocery users drive supermarket e-commerce sales

Over the first two years of the pandemic — March 2020 to February 2022 — U.S. consumers spent $1.7 trillion online, $609 billion more than the previous two years, Adobe noted. The $885 billion spent online in 2021 marked an 8.9% gain from $812.8 billion in 2020, when U.S. total e-commerce spending had surged 41.4% from $574.9 billion in 2019. This year, Adobe projects the U.S. annual online spend to top $1 trillion for the first time.

Grocery joined electronics and apparel as three categories that represented 41.8% of U.S. online spending in 2021, the Adobe Digital Economy Index showed. 

The largest e-commerce category was electronics, which drove $165 billion in online spend last year — up 8% after a 26.8% jump in 2020 — and accounted for 18.6% of overall online sales. While the COVID surge curtailed demand for apparel in 2020, modest growth in 2021 lifted the category’s online spend by 8% to $126.2 billion, a 14.3% share of total e-commerce spending. Adobe forecasts online expenditures at more than $174 billion for electronics and over $130 billion for apparel in 2022.

Higher prices drove $32 billion of the $1.7 trillion in consumer e-commerce spending over the pandemic’s first two years, Adobe reported, adding that online price inflation was first observed in June 2020 and has lingered for 21 straight months. Consumers especially felt the impact last year, when elevated prices accounted for $22 billion in online sales growth versus only $4.7 billion in 2020. 

Related:Online grocery shopping activity projected to climb

Through February 2022, $3.8 billion in e-commerce growth stemmed from inflation, Adobe estimated. Price hikes haven’t blunted demand, however, as the $138 billion in online spend through 2022’s first two months marks a 13.8% year-over-year increase.  Overall for 2022, Adobe projects that inflation could account for consumers paying as much as $27 billion more online for the same amount of goods. 

Supply chain disruptions triggered by COVID led to 60 billion out-of-stock (OOS) messages between March 2020 and February 2022, raising consumers’ odds of encountering an OOS message 235% to one in 59 pages from one in 200 pages pre-pandemic, according to Adobe. From November 2021 through February 2022, online customers saw more than 12 billion OOS messages, a trend expected to continue this year. 

Increased consumer health and safety concerns amid the pandemic boosted already strong adoption of curbside pickup, Adobe added. So far in 2022, curbside pickup represented 20% of all online orders among retailers offering the service and has become a major fulfillment method with durable demand, driven by its speed and convenience, Adobe said.

The Adobe Digital Economy Index is based on analysis through Adobe Analytics that covers over 1 trillion visits to U.S. retail sites and more than 100 million SKUs in 18 product categories.