How Does the U.S. Compare to Grocery E-Commerce Worldwide?

There’s no denying that e-commerce is driving a lot of change in the grocery industry. This is especially true as grocery retailers realize that understanding their customers’ wants and meeting their expectations with easy and convenient options is absolutely necessary. From my perspective, Amazon’s push to be a dominant player in online grocery sales has led other grocers to expand their e-commerce offerings as well. Industry growth is qualified by FMI Research’s recent study, which predicts that grocery e-commerce will capture 20% of total grocery retail by 2025, reaching $100 billion in consumer sales.

While grocery e-commerce is growing exponentially, there are differing projections on the penetration of the U.S. market and how it compares worldwide. For grocery retailers to understand this dynamic marketplace and what they must do to remain competitive, it’s worth looking at how and why the grocery landscape is changing around the world.

The Great Debate: Is the UK Really Ahead of the U.S.? 

Industry experts have asserted for several years that the U.S. is five years behind the U.K. in grocery technology, but others now contend that the U.S. is finally catching up. Who is right?

A recent Kantar Worldpanel report shows that global grocery sales through e-commerce channels jumped 30% in the past year, and the countries leading that growth were China (up 52%), South Korea ( 41%), UK ( 8%), France ( 7%), Japan and the U.S. (both 5%). And Walmart’s recent acquisition of India’s Flipkart is sure to spur further growth in grocery e-commerce. In comparison, the United States’ share of global online grocery sales is lagging behind other countries, only getting off the ground when other markets are already well-established.

Related:Supervalu and Instacart Partner to Launch Improved E-Commerce Sites

In a sense, though, this isn’t surprising. It’s been less than a year since Amazon acquired Whole Foods Market, accelerating a flurry of interest in technology adoption, and grocers are moving quickly to roll out new options to fend off competition. They’re starting to make bold moves, too. Case in point is Kroger’s recent move to double down on automated distribution centers powered by artificial intelligence and smart fulfillment and delivery technology.

But mass-market grocers aren’t the only ones turning to technology. Regional and independent grocers are also realizing the importance of adopting digital technology to survive against the top players in the industry. For example, H-E-B, Publix, Wegmans, Weis Markets and many more regional grocers offer online purchasing and curbside pickup, which is proving a popular fulfillment model in the U.S. Based on increased technology adoption for both national and regional grocers, it wouldn’t be surprising to see U.S. digital grocery adoption increase at a faster pace in the next 18 to 24 months.

China Is Leaving Everyone Behind

If you’re looking for the real action in grocery e-commerce worldwide, look no further than China. The country is the largest digital grocery market in the world. According to a recent report from OC&C Strategy Consultants, Chinese online grocers registered a 50% sale increase last year.

China’s top digital grocery retailers, including Alibaba and JD.com, are experiencing significant growth largely due to the country’s rapidly growing, tech-savvy consumers, who are quick to adopt the conveniences of online shopping.

Because Chinese retailers started investing in e-commerce years before the U.S., they’ve already achieved a level of sophistication using innovative technologies such as robotics and store automation. Bingobox, for example, recently opened its latest cashierless convenience store, allowing consumers to buy items by scanning products at auto-checkout counters. It’s evident that China’s market presents big opportunities to disrupt the retail landscape with new ways of shopping.

Why Is This Important?

The consensus is that the boundary between offline and online retailers is fading, but there are differences in different regions. No matter where you are, grocery retailers will find that the key to success is to know your customers and give them what they want; that’s what retailers such as Alibaba, Amazon and Tesco are doing so well. It’s not only in the assortments, pricing and overall offerings, but also in how your customers prefer to shop – in-store, click-and-collect, or online.

For any grocer figuring out the best ways to compete against Walmart, Amazon and others, technology will be a critical part of the strategy. As U.S. grocers continue to adopt the innovations shoppers want, including e-commerce, the U.S. can close the gap with other countries. And most important, tech-savvy grocers, no matter what size, can understand their customers and stay ahead of competitors.

Sylvain Perrier is president and CEO of Mercatus.