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Can Rural Grocery Stores Keep Up With Online Retailers?

Online grocery shopping is estimated to reach $100 billion by 2025 making online platforms nearly 20% of all grocery sales, but what does this mean for the rural grocery store?

From innovations in the check-out aisle to Amazon’s purchase of Whole Foods, the way consumers get their groceries has changed dramatically in the last few decades. Editors Joe Fassler and Claire Brown with The New Food Economy described the future of these innovations at a recent lecture on Iowa State University’s campus.

The Rise of the Internet

“In the late 1960s, about 70% of meals were cooked at home and virtually all of the food cooked in those meals came from regional grocery stores,” says Fassler. “These grocery stores were incredibly powerful in the rural communities they existed in.”

As reported by the Center for Rural Affairs, 803 counties across rural America are classified as food deserts, where county residents are at least 10 miles from a grocery store. The Midwest and the Great Plains have the highest concentration of food desert counties at 418.

According to Fassler, in 1990, the state of California did not have a Walmart. Fast forward almost 30 years later, and Walmart is the biggest seller of groceries in the U.S., by far, with 16% to 17% market share.

“These big-box retailers are able to do things the regional grocery stores aren’t able to, such as maintain their low prices,” says Fassler. This shift has caused rural grocery stores a huge amount of loss in market share.

“Today, consumers buy food on online platforms that weren’t even a glimmer in their eye 10 years ago,” says Brown. “Over 30% of millennials are ordering online, and the proportion of people willing to do so is even greater.” Blue Apron, Brandless, and now Amazon are websites that make it are hard to compete for regional grocery stores (outside of the big-box stores).

“When you think about the grocery industry and what this means for them, virtually all online activity is coming out of their bottom line,” says Fassler. “None of these platforms existed 30 years ago, and suddenly they have this huge competitor they didn’t imagine having.” Rural grocery stores are struggling to contend with this growing market.

The Future of Rural Grocers

2017 was a major shift for the food industry overall, when Amazon famously purchased Whole Foods, Blue Apron was the first meal kit company to go public, and millennials purchased more prepared food than any other generation.

In the 1960s, Americans spent 20% of their income on food whereas today’s American spends 10% of their income on weekly groceries. Consumers are also cooking less than ever, only investing half the time preparing meals that Americans did in the 1960s.

Today, it’s a 50/50 split between Americans eating prepared meals at home vs. eating outside the home. Both Fassler and Brown say the share of purchasing groceries vs. eating out doesn’t look to change much. With consumers wanting food quickly and effortlessly, ordering groceries online or eating outside the home has become the new norm.

For the rural grocery stores, lowering prices and keeping up with trends is what will keep them alive. However, with less resources available compared to big-box retailers, that is easier said than done.

The New Food Economy is an award-winning nonprofit newsroom based out of New York, New York. The organization uses independent, deep, and unbiased reporting to investigate the forces shaping how and what Americans eat.  

 

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