The eGrocery sector, which saw explosive growth during the COVID-19 pandemic as consumers turned to online shopping for food staples and household items, is now navigating a new landscape as daily life returns to normal. According to AgFunder data, funding for eGrocery startups peaked at nearly $19 billion in 2021, accounting for a remarkable 35% of the overall agrifoodtech industry. However, as the world emerges from the pandemic, the question looms: has this trend endured, or has it fizzled out?
Despite the easing of pandemic restrictions, demand for eGrocery services has shown resilience. A 2024 McKinsey report predicts that online grocery and meal delivery will continue to outpace traditional in-store growth, with a combined compound annual growth rate (CAGR) of 16% from 2023 to 2030, compared to just 2% for offline grocery shopping. This shift reflects a broader consumer expectation for convenience, akin to the rapid delivery services popularized by companies like Amazon. As consumers become accustomed to quick access to a variety of products, the appetite for immediate food delivery has only intensified.
However, the road has not been smooth for many eGrocery startups. The competition in this sector is fierce, with major players vying for market share amid thin profit margins and high logistics costs. Notable failures, such as Getir’s withdrawal from the UK and US markets, alongside the struggles of other companies like Boxed and Voly, highlight the challenges of achieving profitability in this rapidly evolving landscape. Despite these setbacks, investment in eGrocery startups remains significant, constituting nearly 16% of agrifoodtech funding in 2024, a slight increase from 12% in 2023.
The funding landscape for eGrocery has seen some notable shifts. Over the past decade, eGrocery startups have raised a total of $47.9 billion across 2,458 deals, with 2021 being the peak year at 393 deals. In 2024, the sector has raised $1.7 billion up to mid-September, indicating a recovery from the funding decline seen in previous years. Emerging markets, particularly India, have taken the lead in funding, with $1.1 billion raised this year, largely driven by the rapid growth of startups like Zepto, which offers a ten-minute grocery delivery service and has secured over $1 billion in funding this year alone.
However, the eGrocery landscape is also witnessing a decline in seed-stage funding, which has dropped significantly over the past few years. From 172 seed-stage deals in 2020, the number fell to just 14 in 2024, suggesting that the market may be nearing saturation for new entrants. This trend raises concerns about the viability of new startups in a space dominated by a few major players and established incumbents.
The competitive dynamics are further complicated by the geographic shifts in investment. While China once led the eGrocery funding race with $14.1 billion raised over the last decade, the country has seen a dramatic decline in activity, reporting no deals in 2024 thus far. Meanwhile, the US and India remain strong contenders, with $12.1 billion and $6.5 billion raised respectively.
As the eGrocery sector evolves, technology will play a pivotal role in meeting consumer demands. Innovations such as automated warehouses, advanced inventory management systems, and machine learning algorithms for demand prediction and route optimization are becoming essential for companies looking to thrive in this competitive environment. The ability to deliver groceries swiftly and efficiently will likely determine the success of eGrocery startups in the coming years.
With the continued demand for convenience and speed, the future of eGrocery appears promising, albeit challenging. As the sector navigates consolidation, fierce competition, and evolving consumer expectations, the next few years will be crucial in shaping its trajectory and determining which players will emerge as leaders in this dynamic market.