Who’s Winning in On-Demand Food Delivery Sales?

On-demand food delivery sales are outpacing all of e-commerce and are expected to reach $138.77 billion in the U.S. by 2025—more than double 2020 levels, finds a new report, Sizing the Delivery Intermediary Opportunity, from Edge by Ascential’s market research arm Retail Insight. From Amazon to Walmart and Instacart to Target, the report also predicts which companies will lead in the increasingly competitive food delivery space.

Demand for grocery and food delivery, accelerated by the pandemic, has surged so much so that digital foodservice and grocery sales are outpacing all of e-commerce. U.S. sales at on-demand food delivery firms, including DoorDash, Uber and Instacart, are increasing at a compound annual growth rate (CAGR) of 16.8% a year, nearly 1.7 times faster than the total e-commerce market in the U.S., which is expected to grow at 10.1% CAGR, notes Edge by Ascential.

Instacart, the largest grocery-focused on-demand delivery service in the U.S., is expected to reach $27.33 billion in gross merchandise value (GMV) sales, finds the analysts at Edge by Ascential, who further predict that Instacart (which partners with more than 30,000 retailers in the U.S.) and Uber (whose most notable retail partner is Walmart) will overtake Target’s digital business by GMV sales by 2025. Target will grow GMV sales by $24.44 billion, up from $14.87 billion in 2020, the report said. 

Target-owned Shipt is the second-largest grocery-focused intermediary in the U.S., serving Target last-mile fulfillment and partnering with other retailers, such as Costco, H-E-B, Meijer and CVS. 

Edge analysts also predict DoorDash, the largest food delivery service in the nation, will become the third largest e-commerce banner in the U.S., behind Amazon and Walmart.com by 2025. In August 2020, DoorDash announced the launch of virtual DashMart convenience stores across the U.S. The online stores, curated by DoorDash, offer thousands of convenience, grocery and restaurant items.

“DoorDash, which expanded into grocery last summer to accommodate booming demand during the pandemic and is actively partnering with retailers in other categories, will add $48.57 billion worth of GMV sales in 2025, doubling 2020 sales,” Edge by Ascential said.

As the country gradually reopens and lifts restrictions on social distancing and indoor dining, the Edge Retail Insight analysts still sees continued growth in on-demand grocery delivery, which it anticipates will expand by nearly 150% to grow GMV sales $76.27 billion by 2025. “DoorDash will account for about a third of U.S. delivery platform sales by 2025, with Uber and Instacart racing up behind, with 20% each,” Edge by Ascential analysts said.

Putting CPGs in the Picture

The Edge Retail Insight report, which not only reviews the state of the foodservice and grocery on-demand delivery intermediary market, also assesses the emerging channels’ future prospects for Edge by Ascential’s CPG clients looking to grow in e-commerce.

“E-commerce is growing and evolving rapidly. Consumer behaviors and shopping habits have been changed forever by COVID-19 and we are living now in the future of retail,” said Edge by Ascential CEO Deren Baker. “The delivery intermediary market is an exciting, fast-moving space, defined by big mergers and acquisitions, market-moving announcements and emerging rivals with new business models that are attracting the eye of cash-rich venture capital firms.”

“As more retailers cooperate with these intermediaries as a cost-effective way to scale up fulfillment capacity quickly, we see them becoming essential points of influence in a shopper’s purchase decision,” said Xian Wang, VP of Edge Retail Insight. “Brands must start treating intermediaries as customers to win visibility on these platforms. On-demand delivery will be a key sub-channel in retail in the future and CPG brands will need to work out who to partner with and develop tailored product, pricing and promotional strategies to drive conversion on these platforms."