How big is the food delivery industry

The growth of the food delivery industry and the main challenges that exist

Gone are the days when consumers frequently went to a supermarket or farmer's market to get their weekly supply of groceries. Online grocery shopping is rapidly catching up with global consumers thanks to its convenience and great deals. Based on the latest findings from Orian Research, the online grocery market is expected to grow 23.7% CAGR over the next five years. The pandemic has further pushed the preference for online grocery shopping over traditional means. Customers find it safer and easier to browse through the range of eCommerce groceries and place their orders to have them delivered to their home - completely contactlessly.

The future of eCommerce grocery retail will largely depend on how well vendors are able to cope with increasing demands without compromising quality, price and delivery promises. Because as soon as the pandemic subsides, consumers should be able to rely on these parameters and stick with their online grocery purchases.

The online grocery delivery market is growing rapidly around the globe

Every dark cloud has a silver lining, and so the COVID19 pandemic has been a boon to the global online food market. According to Kantar, the e-commerce share of the grocery market in China, France, Spain and the UK was 12.4% cumulatively at the end of April 2020, compared to 8.8% at the end of 2019. According to the survey by online grocery advisor Brick Meets Click (BMC) US online grocery delivery and collection sales hit a record $ 7.2 billion in June 2020, a 9% increase from May, beating the previous record of $ 6.6 billion.

The online grocery market in the Nordic countries has also seen a quantum leap lately as customers turn to online grocery delivery services. According to the Ken Research report, the food segment in Denmark is expected to grow to $ 742 million by 2022, with an estimated market penetration of 15.6%. Deloitte also reported a 10% increase in online grocery sales in Denmark in March 2020.

However, the high level of internet usage in Norway is driving the eCommerce of groceries. Approximately 3.2 out of 4.95 million Norwegians prefer to shop online and that number continues to grow, helping to create a bright future for online grocery stores. Even Sweden, with 87.8% internet penetration, has seen rapid growth in online grocery stores. According to a report published by Strategy, almost 29% of Swedish consumers bought food online for the first time since the pandemic broke out.

Meanwhile, the Choueiri Group research report finds that 55% of Saudi Arabian consumers bought groceries online in April 2020, compared with just 6% before the pandemic, indicating a clear shift in consumer preference towards eCommerce groceries. Carrefour UAE recorded a 59% increase in new customers online during the COVID19 period.

The pandemic outbreak has also accelerated China's online food sector. In the period from January to February 2020, Alibabas Freshippo saw a surge in demand and an increased number of new users. It is estimated that the Chinese online grocery market will be worth $ 219 billion by the end of 2026. Bain & Company partnered with Facebook to conduct a survey of Southeast Asian countries that shows tremendous accelerated growth in the online grocery shopping trend. Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam are projected to reach 310 million digital consumers by 2025.

India's online grocery market is valued at $ 14.46 billion by 2023, according to Netscribes. Increasing investment in the sector, high smartphone and internet penetration and continuous innovation are the main factors contributing to this increase in India. The COVID19 outbreak and lockdown periods in India have further shifted consumer shopping habits, boosting online sales.

Although far behind its European and Asian counterparts, a significant change is also noted in the Latin American countries. MercadoLibre observed that 1.7 million new customers signed up on its platform during the bans. According to Statista data, there was a weekly increase of nearly 15% in online grocery store visitors in Mexico during the month of the pandemic outbreak.

How does grocery delivery work in a world dominated by online shopping?

Shopping for groceries online has been on the rise for quite some time, and COVID19 has accelerated that trend across all ages and across all regions. That said, there is no better time than now to invest in improving your eCommerce skills.

The assessment of the availability of resources and the choice of a suitable business model determine the success of online grocery delivery. The most important of these are the following.

  • Online Grocery Store: In this model, an entrepreneur starts his online grocery store through either a web portal or an app and delivers groceries to customers from a warehouse or offline store where the items are in stock.
  • Online Grocery Marketplace Business: In this particular model, an online grocery marketplace is created by partnering up with some local food manufacturers / retailers who would eventually use the platform to sell their products on the marketplace.

Once the business model is decided, online grocery retailing can begin by focusing on a few key functions that are essential for this form of business.

  • Admin Functions - The system should provide multiple levels of administrative access followed by a method of supplier selection, approval and management. Product release systems should also be included in the system. Package management, tax and currency management should also be in place to improve the system. Proper reporting for every aspect should be possible.
  • Important seller functions - The seller functions should be flawless so that they can easily sell their products on your platform. A seller dashboard with the ability to cancel orders and monitor refunds helps them manage things efficiently. Sales reports should be easy and straightforward to create. Managing the wallet and delivery times makes planning easier for the seller.
  • Key Features for Buyers - Dynamic features in the system should provide buyers with a great shopping experience. Basic functions such as automatic location detection, multi-cart function, delivery planning, cancellation of individual items, order tracking, order return / cancellation, etc. should be integrated.
  • Functions for the delivery staff - Correct profile management of the delivery staff together with the definition of the delivery area contributes to a better functionality. Route navigation systems help you with precise delivery and correct time management. The management of delivery orders and push notifications are also helpful.

  • Other Essential Features - To attract more buyers to your platform, offer discount coupons for seasonal sales or holiday sales. A robust search tool should be able to find the exact product a customer is looking for. The website should also be SEO / SEM capable for better performance, and it should also be mobile compatible as many would access the URL on the cell phone.

Importance of logistics in online grocery delivery

2020 saw a paradigm shift in the way consumers buy groceries around the world. With the nationwide lockdown and social distancing norms in place, the way shoppers shop and businesses sell has changed. Online grocery shopping has gained momentum since the beginning of the pandemic. According to the annual study "US Grocery Shopper Trends" by the Food Industry Association, almost 40% of essential items are now bought online, which means that supply chains have to develop their processes to cope with the higher volumes in direct-to-consumer shipping to manage something.

In terms of delivery, 18% of online grocery shoppers choose same-day or next-day delivery, while 16% prefer roadside collection and 14% prefer in-store collection. 17% choose home delivery with standard shipping and 8% choose continuous delivery. The supply chain in the online grocery trade must become more flexible in order to meet the growing requirements, because there are numerous problems. Retail brands, online grocers and supermarkets are now turning to logistics technology to improve last mile deliveries and differentiate themselves in the dynamic and competitive marketplace.

Precise geocoding and route optimization help companies overcome the longstanding problem of inaccurate address systems in different parts of the world. Intelligent geocodes use machine learning to accurately decipher addresses and can precisely identify even the fuzzy addresses. This is how complicated addresses in Arabic are deciphered in the inner parts of MENA. Route optimization software can help plan delivery routes for multiple locations and suggest the shortest and most optimal route to avoid traffic and other local restrictions.

The automated disposition also helps to reduce the lead time. Manual planning is often a time-consuming and complicated process that can take hours and ends with some mistakes. With the help of advanced solutions, large e-deliveries can plan the daily disposition within minutes, saving time and improving logistical efficiency.

Allocating faster in the right direction is important to ensure timely food delivery and customer satisfaction. Supermarkets often have their in-house agents who deliver the items ordered. However, for 3PL delivery platforms that have hosted hundreds of companies, the driver assignment software is convenient and takes into account drivers' local preferences and knowledge of the area to assign tasks to the correct deliverers.

Real-time status visibility is essential for grocery stores and their customers today. With the help of real-time tracking tools, logistics managers can monitor delivery processes on site and take immediate action in the event of deviations from the planned schedule. This helps with faster deliveries and improves the productivity of the deliverer. At the same time, customers can also track the status of their order and know when it is expected to arrive. Greater transparency improves customer trust and loyalty.

The main challenges in the delivery of food


Although e-grocery retailing has been growing rapidly recently, there seem to be some challenges that need to be addressed in order to achieve long-term sustainability. As more customers see e-groceries as a time and cost effective alternative to shopping from the comfort of their home or office, eliminating these delivery challenges is critical. Some of the main challenges are as follows.

  • Storage and Shipping Costs - This is one of the biggest capital investments for any online grocery store. The rising costs of storage and delivery burn a bigger hole in the pockets of investors every year. The distribution and delivery of fresh items is also becoming a problem. Inventory management built into grocery delivery software can address this problem to a greater extent.
  • Competitive Market - The online grocery store is highly competitive today as there are many items and brands that need to be distributed to different groups of customers. This becomes even more difficult for startups as they have to compete with established grocery stores that are known for luring their customers with discounts and offers. In this case, food software can efficiently meet high customer expectations and provide accurate information about low-selling items and fast-selling items and plan accordingly.
  • Delivery Inefficiency - The delivery aspect of any e-wholesale store is a little tricky as it depends on the delivery people and isn't always robust. In order to deliver the product fresh within the delivery period, an efficient delivery system is required. And the right training and education is the key to motivating managers. Good performance should be duly recognized and rewarded.
  • Changed consumer behavior - In online grocery, like any other business, it's about serving the end consumer. And in this rapidly changing world, consumer behavior is unpredictable as it tends to change over time. From ordering to an app to product delivery, a small mistake can be a big cause of consumer dissatisfaction. Attracting and retaining loyal customers requires great service and a robust loyalty program.

  • Infrastructure - Infrastructure is another important aspect of online grocery business that often goes wrong. Startups in online retail pursue different business models. Depending on the business model and its requirements, a suitable infrastructure should be created to help grocery stores succeed, from order acceptance to delivery on the last mile.

  • Rising Losses - Aspects like higher operating losses, low margins, angry customers, unsuccessful deliveries, etc. can cause losses that need to be managed efficiently. Appropriate strategies and technologies can control these losses.

  • Price volatility - Price fluctuations are one of the biggest challenges both traditional and online grocery stores face. This affects the bottom line profit. Hence, using the right technology in the business can provide real-time information on pricing and sustainable management.

  • Tech-Challenged Customers - Not all customers are tech savvy, so they stick to their traditional way of buying groceries in brick-and-mortar stores. You need to use marketing and promotional campaigns to convince them to use an app or web portal to get them to shop online.

Grocery Delivery Platform Benefits

In a very demanding market with hundreds of players trying to impress their customers, only efficient delivery software can set an example and be the savior. A food delivery platform offers the following benefits that can be used by business owners.

  • Seamless integration of the food delivery platform - Instead of having multiple platforms or apps running in silos, it is beneficial to have an integrated system of existing WMS, OMS, ERPs, TMS and 3PL. This integration ensures a good visibility of the delivery processes and offers important insights into the KPIs of a service provider. This also enables data-driven decision-making.

  • Improved Productivity - The delivery operation is key to the success of any online grocer, and this can be achieved through enterprise-grade food delivery management software. Such software ensures the highest standard of excellence based on KPI benchmarks that are among the best in the industry. Route optimization software with a simple user interface (UI & UX) supports the driver in the efficient delivery of food. She takes care of delivery allocation, routing and sequencing along with real-time communication with customers.


  • Scalable delivery operation - scaling the delivery operation due to peaks in demand is necessary for today's competitive market. This can be done efficiently through the use of intelligent crowdsourcing functions for the seamless integration of delivery agents in different markets. It instantly outsources various delivery tasks based on cost, proximity, past performance, and delivery urgency.


  • Improves Margins - Robust software helps scale operations, improves visibility, intelligently assigns tasks, reduces kilometers per delivery, and strengthens the grocery business through improved margins.

  • Highly efficient route planning - By using route optimization and planning software, deliveries are made seamlessly across multiple points. This improves efficiency and delivery time, making the entire operation profitable. It also cuts fuel consumption, reduces the number of kilometers per delivery and improves delivery over the last mile.

  • Automatic scheduling and assignment of tasks - Instead of manually assigning tasks to the deliverers, profiles are entered into the system and the software does the automatic scheduling and assignment based on the experience and local knowledge of the deliverers. This helps with TAT and efficient last mile delivery.


  • Self-service delivery model - The advanced software enables the customer to choose preferred delivery windows, change location, change time and prioritize delivery. This ensures efficient delivery on the last mile and ensures satisfied customers.
  • Contactless grocery delivery - Integrated software with functions for contactless photo capture as proof of delivery and contactless delivery via OTP help online grocery stores maintain social distance and still deliver efficiently. QSR deliveries are also possible after the closure at different locations.

Top 10 Most Popular Grocery Delivery Service Providers

The COVID19 outbreak has put the spotlight back on online grocery stores. Let's take a look at the top food suppliers that exist in the Nordic countries.

  1. FreshDirect
  2. Walmart Grocery
  3. Safeway
  4. Instacart
  5. Peapod
  6. Boxed
  7. Shipt
  8. Hungryroot
  9. Amazon Fresh
  10. Thrive Market

FarEye can help you deliver the best online grocery delivery experience

With FarEye as your partner, you can increase your profitability and get satisfied customers into your checkout. We offer you a customizable platform for contactless food delivery with a crowdsourcing app for drivers, an interactive dashboard for dynamic planning and strategy, and a tool for performance management. Our platform enables your customers with maximum flexibility.

Our software suite enables you to achieve a cost-controlled, superior delivery experience. FarEye's efficient tools that use crowdsourcing and increase productivity through gamification make it easy for you to cope with fluctuations in demand. Our integrated dynamic system simplifies delivery processes and gives you a competitive advantage in the market.