Despite the pandemic’s acceleration of omnichannel shopping, ecommerce sales for specialty foods are slowing down: in 2022 it moderated to a year-over-year change of 15 percent, down from 2021’s 28 percent growth, according to SFA’s The State of the Specialty Food Industry and 10-Year Category Tracking and Forecasts, 2023-2024 Edition.
Ecommerce growth will continue to slow over the next few years, according to the report, which forecasts 13 percent year-over-year growth in 2023, and 12 percent in 2024. Moreover, when compared to total online grocery sales, specialty continues to grow at a depressed rate.
"Today’s [specialty food consumers] remain tactile food and beverage shoppers who want to shop in stores, discover new products, and connect with their communities,” according to the research. “Additionally, many smaller specialty producers don’t enjoy convenient availability online across the most popular retailer sites, relying on less enticing larger pack sizes and minimum orders to ship direct-to-consumer.”
Ecommerce strategist Betsy McGinn told SFA News Daily that a few economic forces are also likely at play.
“The perception that prices are higher than at the actual retail store (whether real or perceived) has helped move the dynamic back to physical stores,” said McGinn. She added that the cost of delivery also creates a barrier to online shopping.
Additionally, certain categories, like produce and other perishables, lend themselves to an in-store experience. “This is one area where consumers are particularly sensitive since no one can select a better peach than [one] choosing it themselves,” she said.
Industry data from Mercatus found that specialty ecommerce accounted for about 10 percent of all online grocery sales in 2022. In July, a survey found that the online grocery market in general posted $7.2 billion in sales in the U.S., down seven percent from last year.
The biggest winners for grocery and specialty ecommerce continue to be the market leaders who have invested in their digital strategies, including Amazon, Walmart, and Kroger. Recent data from Kroger and Albertsons found that their digital sales have increased.
Kroger, for example, was able to engage with 13 percent more households in the first quarter of this year compared to 2022, according to its latest earnings report. This, in addition to building more fulfillment centers and improving the Kroger Boost delivery solution, helped to increase its delivery sales by 30 percent compared to last year.
Albertsons similarly focused on its digital operations to increase its sales by 22 percent in the first quarter of 2023.
"As we look ahead to the balance of the year, we remain focused on driving operational excellence in our stores and continued growth in our digital and pharmacy operations,” said Albertsons CEO Vivek Sankaran in its latest earnings report.
On the other hand, Target, which has also demonstrated investments in expanding its online and pickup services, experienced a 10.5 percent dip in digital comparable sales in the second quarter of this year. To solve this, the company shared that it is on track to invest between $4 and $5 billion in store remodels, supply chain, and digital capabilities.
McGinn shared that the varying success of grocery ecommerce is expected.
“Ecommerce is an entirely different business model, requiring technology, a different workflow, an additional layer of employees and their corresponding skill sets, and even c-suite expertise to manage this unique channel,” she said. “I have seen the ebb and flow of this over the years where the focus is heightened and then later reconsidered in favor of an alternative important retail initiative.”
For businesses, the bleak economic outlook has pushed many to dial back on their digital strategy and double down on their physical store experience.
“When the bottom line is challenged,” as with inflation rates and the labor shortage, “attention is often diverted from ecommerce back to the core business of retail stores,” she said.
Related: Online Sales Down 7 Percent; Report: Despite Challenges, Independents Reveal Strong Year