The US Food Delivery Market: Rapid Growth and Opportunities for Startups

Market Growth Factors

• Changing consumer habits: Modern consumers increasingly prefer the convenience and speed of online shopping, including groceries. This is especially true for young people, urban residents, and families with children, who value time savings and the ability to choose from a wide range of products. According to a study conducted in 2023, 53% of Americans aged 18 to 64 have ordered groceries online at least once [HIVE_USA.pdf].
• Technological innovations: The development of mobile applications, artificial intelligence (AI), robotics, and other technologies makes grocery delivery more efficient, personalized, and accessible. AI enables the analysis of customer preferences and offers them relevant products, while robots and drones can automate delivery, reducing time and costs. For example, Starship Technologies already uses robots for grocery delivery in some US cities.
• The COVID-19 pandemic: The pandemic accelerated the shift of consumers to online shopping, including groceries, and made home delivery an integral part of many people’s lives. This led to a significant increase in demand for delivery services and created favorable conditions for market development. According to an eMarketer report, online grocery sales grew by 54% in 2020 compared to the previous year.

Key Market Players

The US grocery delivery market is dominated by several major players:

• Instacart: The market leader, offering delivery from various stores, including major supermarket chains. Instacart partners with over 750 retailers and covers more than 85% of US households. In 2022, Instacart was the most downloaded grocery delivery app in the US.
• Amazon Fresh and Whole Foods Market: Delivery services from Amazon, targeting different market segments: Amazon Fresh offers a wide range of products at affordable prices, while Whole Foods Market specializes in organic and natural products. Amazon is actively investing in the development of its delivery services, including the use of drones and autonomous vehicles.
• Walmart Grocery: A delivery service from Walmart, the largest retailer in the US, offering a wide range of products at low prices. Walmart is also experimenting with new delivery formats, such as in-car trunk delivery and robot delivery. In 2023, Walmart.com was the leader in net sales in the food and beverage category.
• DoorDash, Uber Eats, and Grubhub: Food delivery platforms that have also started delivering groceries, expanding their services and attracting new customers. These companies leverage their extensive courier network and technology platform for fast and convenient grocery delivery. DoorDash was the most downloaded app for food delivery and takeout in the US in 2023.

Target Audience

The target audience for grocery delivery services in the US is diverse and includes:

• Young people (millennials and Generation Z): This group is the most active user of digital technologies and values the convenience and speed of delivery. They are willing to pay for time savings and prefer a personalized approach. According to a Fact.MR study, millennials make up 44% of total grocery delivery service users in the US [Fact.MR report].
• Urban residents: City dwellers often face the problem of lack of time and limited access to stores, which makes grocery delivery especially attractive to them. In addition, many urban residents do not own a personal vehicle, making it difficult to buy groceries on their own. The HIVE_USA.pdf study confirms that grocery delivery service users are more likely to live in cities and suburbs than average consumers.
• Families with children: Families with children value the convenience of grocery delivery to their homes, as it saves them time and energy that they can spend on other important things. Grocery delivery can also be helpful for families with young children who find it difficult to go shopping.
• People with disabilities and the elderly: Home grocery delivery is an essential service for these population groups, who may have difficulty visiting stores.
• Busy professionals: People with busy work schedules appreciate the ability to order groceries online and have them delivered to their home or office. This allows them to save time and energy that they can spend on work or leisure.

Opportunities for Startups

Despite the dominance of major players, the US grocery delivery market remains open to new entrants, especially for innovative startups that can offer unique solutions and improve the customer experience.

Hive Group, with its focus on AI and other advanced technologies, has every chance to occupy its niche in this market. The company can use its developments for:

• Personalization: Creating personalized product recommendations, taking into account preferences, purchase history, and other customer data. This will allow offering customers exactly the products they need and are interested in, increasing the likelihood of purchase and brand loyalty. For example, AI can be used to analyze purchase and product view data to offer personalized recommendations and promotions.
• Logistics optimization: Developing algorithms to optimize delivery routes, which will reduce time and delivery costs. This can be achieved by using data on traffic, weather conditions, and other factors affecting delivery speed.
• Improving customer interaction: Creating user-friendly mobile applications and chatbots to simplify the ordering process and communication with customers. This will allow customers to easily find the products they need, place orders, and get answers to their questions at any time.
• Implementation of new technologies: Using augmented reality (AR) for product visualization, blockchain for supply chain transparency, and other innovative technologies to improve the customer experience. For example, AR can allow customers to “try on” products before buying, and blockchain can guarantee the authenticity and quality of goods.

Challenges and Risks

Along with opportunities, the US grocery delivery market faces several challenges:

• Competition: The market is highly competitive, requiring companies to continuously improve their products and services, as well as effective marketing and customer acquisition. New players need to offer something unique to stand out from the competition. For example, they can focus on a specific niche (e.g., organic products, products for people with special dietary needs) or offer unique delivery terms (e.g., free delivery for orders over a certain amount, delivery within an hour).
• Logistics: Food delivery requires complex logistics, especially for perishable goods. It is necessary to ensure fast and reliable delivery while maintaining the quality of products. This may require significant investments in infrastructure and technologies such as cold storage warehouses, specialized vehicles, and order tracking systems.
• Pricing: High delivery costs can make it unaffordable for some consumers. Companies need to find ways to reduce costs and offer competitive prices to attract a wider audience. For example, they can use dynamic pricing, offer discounts to loyal customers, or use partner programs with other companies.
• Regulation: The food delivery market may face stricter regulation, especially in the area of food safety and labeling. Companies need to be prepared to comply with all regulations and standards to avoid fines and reputational damage.