Grocers expand digitally and physically in 2021

If there’s one thing that we can all agree on, it’s that grocers, perhaps the most essential of all essential businesses, made away like bandits during the pandemic. Total grocery sales reached $803 billion last year, up nearly 16.0% from 2019, and these gains are forecasted to continue. Eager to capitalize on these gains, grocers have focused on physical store expansion and technological upgrades, in order to stay competitive in their rapidly growing industry.

Aggressive expansion is the name of the game

Datex reported a 200% increase in new grocery leases in 2021, underscoring the aggressive expansion plans of most grocery retailers. Aldi, the most active grocer in 2019 and 2020, made sure to stay on top of 2021 expansions by opening more than 2.2 million s.f. of new stores. The company opened 88 of the 100 stores they planned to open in 2021, and are primed to open an additional 150 stores by the end of 2022. Publix was the second most active grocer, adding 1.3 million s.f. of space in Florida, while Grocery Outlet opened 35 new stores on the West Coast last year, accounting for almost 900,00 s.f. of new space.

Online grocery is a definite part of our new normal

The beginning stages of the pandemic were a reckoning in many ways, but the most surprising reckoning revolved around where we all choose to shop for food. It was at that time that our society was bifurcated into two distinct groups of people: those who grocery shop in-store, and those who prefer to do so online. Online grocery sales jumped up considerably during this time, increasing by 63.9% in 2020, according to eMarketer.

US grocery e-commerce sales will continue to grow at a steady rate

This shift to grocery e-commerce normalized as vaccine distribution became more widespread and people felt more comfortable shopping in stores. Data from Placer.ai reveals that foot traffic to grocery stores has now fully recovered since the onset of the pandemic, up by 8.2% over 2019 levels. One could have assumed that this return to grocery shopping in store would cause the online grocery bubble to burst, but that has not been the case. Instead, it appears the online grocery delivery lovers remained steadfast in their penchant for prompt produce, and incorporated this option as a permanent fixture in their lives. The past year saw grocery sales increase again, growing by 12.3% over 2020 to reach $122.4 billion, a number which eMarketer forecasts will more than double by the year 2025.

Micro-fulfillment companies compete with major grocers in the battle for the last mile

Speaking of prompt produce, another major trend observed in 2021 was the rise of micro-fulfillment companies. These companies gained immense popularity during the pandemic, as increased demand for omnichannel offerings required the industry to adapt quickly. These businesses – which include brands like Gorillas, Gopuff and JOKR – operate out of dark stores and capitalize on hyperlocality to fulfill grocery delivery orders in less than fifteen minutes. With the kind of financial support they’ve been able to attract (Gorillas, for example, is currently valued at $1 billion) it’s safe to say that this sub-sector of the grocery industry will be in the game for a while.