As of June, only about 1.4 percent of groceries in the roughly $800 billion grocery market were purchased online in the U.S., according to Kantar data. Fung Global expects that number to reach 2 percent or more in 2017.
"Consumers are starting to get more exposure to produce that's selected by a third party — and there's more trust," said Erik Thoresen, a principal at Technomic. "I think this will be an important year for us to kind of get a sense of what consumer usage and adoption will be moving forward."
Thoresen calls Amazon a "game changer" in terms of knowing what's possible when it comes to buying groceries and getting them delivered the same day. The e-commerce company offers grocery delivery services under several programs, including AmazonFresh, Prime Now and Prime Fresh.
While Amazon's grocery delivery services are not available in all markets, the Seattle-based company has been expanding in the past year and its logistics system has enabled it to provide faster delivery of a large number of food items — both packaged and fresh. Also, Amazon lowered its grocery subscription fee last month, a move analysts saw as an attempt to stay competitive with Wal-Mart.
"We're very happy with the Amazon Fresh and we have now expanded quite a bit," Amazon.com CFO Brian Olsavsky said last month in discussing the company's third-quarter earnings.
Yet there are signs Amazon maybe seeing growing pains with its direct-to-consumer grocery deliveries. For one, AmazonFresh's website cautions, "Due to customer demand, delivery windows may be limited." Amazon did not respond to requests for comment for this story.
Besides Amazon, other warehouse-based food delivery services include Peapod, Fresh Direct and MaxDelivery. Also, newer entrants have stiffened competition in the category
"We will do nine figures of revenue this year," said Chieh Huang, co-founder and CEO of Boxed.com, a wholesale delivery service selling grocery products and other household items. Just 2 ½ years ago the business was still in Huang's New Jersey garage and now the company operates four fulfillment centers nationally and delivers in all the lower 48 states.
At Kroger, the company's ClickList online grocery service is growing and allows consumers at more than 500 locations to select from more than 40,000 items and pick up orders at stores. Last week, the Cincinnati-based supermarket operator told analysts at its investor conference that the ClickList rollout is progressing well
Also, Instacart, an app-based retail delivery service, has partnered with Kroger and several other major retailers including Whole Foods, Costco and Target, and this fall began expanding in key U.S. markets.
"For the stores, it's a way to maintain their market share," said Patricia Orsini, an analyst at eMarketer. "That's why you're seeing all this growth happening."
Target offers Instacart in three markets at present and the retailer also allows customers to select an Order Pickup option for packaged food items, or nonperishables.
There's also a cash-back online service known as Shop.com, which has ties to Wal-Mart, Jet.com (recently acquired by Wal-Mart) and others. It gets a commission from retailers starting at 2 percent and sells over a million items, including snacks, beverages and baby foods, as well as other packaged foods and nongrocery products.
"We stick to mainly the dry goods area," said Eddie Alberty, vice president of strategic partnerships at Shop.com. "For us it's kind of a walk, crawl and run approach."