Less than half of food retailers report online sales profitability

E-commerce sales by food retailers—grocery stores, convenience stores, big box retailers and drug stores—have taken a post-pandemic hit, but the online sales trend that nearly tripled from 2019 to 2021 is still going strong, according to FMI – The Food Industry Association’s 74th annual “The Food Retailing Industry Speaks” report. 

The report, which covers a wide range of topics related to the food retail industry, shows that in 2022, the total share of e-commerce sales declined to 5.6%, as shoppers returned to brick-and-mortar locations. 

“This is still significantly above the 2.5% of sales in 2019, just before the pandemic, but down from 2021 levels of 6.5%,” according to the report. “Meanwhile, retailers are focusing on e-commerce return on investment as less than one-half (45%) of retailers categorize this business as profitable.” 

Despite their wavering profitability, four out of every five food retailers are engaged in online sales, and fresh or perimeter departments account for about 40% of the orders, according to the report.  Pre-pandemic, just 50% of grocers sold online. 

A substantial portion of today's sales are through online-only shops, which has a “considerable impact" on the business of those with brick-and-mortar locations, the report noted.  

“Retailers with online sales have evaluated whether to handle all logistics in-house, rely on third parties or pursue a combined approach,” the report said.  

Most food retailers were selling online mainly through their own platforms in 2020, the report said, but while more than three-quarters (77%) still take that approach, another 68% are partnering with third parties and 45% are using a combination. 

Nearly half of all survey respondents (47%) said they plan to change their online sales platform in the next two years.

Those with brick-and-mortar stores are largely fulfilling those orders (97%) from their in-store stock, while only 7% are using micro or automated fulfillment centers.  

The report also showed that online transactions average about 19,000 per week for online food retailers, and the average transaction size was $109. The majority of payments were made with credit cards (85%).  

Dry grocery sales took the biggest slice of the online food retail sales pie with 42%, while frozen items made up 10%. The 40% in online food retail sales captured by perimeter and fresh departments break down by 12% in both the produce and meats departments, 10% in the dairy department, 4% in the deli, and 1% each in the in-store bakery, fresh prepared/foodservice department and seafood department.