Billions of dollars are pouring in as the U.S. online grocery market is booming

Investors have poured billions of dollars into on-demand grocery delivery companies after the coronavirus pandemic accelerated consumers' shift to online shopping, and venture-backed grocery companies have raised more than $10 billion in funding so far in 2021, according to Pitchbook data, surpassing the $7 billion such companies raised last year.

In the U.S., Instacart was valued at $39 billion in a March funding round, while Gopuff raised money at an $8.9 billion valuation. Meanwhile, in China, Xingsheng Youxuan raised a whopping $3 billion this year, the largest funding round for a grocery startup to date.

The craze has spread to Europe in the last year, with many grocery apps gaining attention for their fast delivery ( 10-20 minutes), like Getir, Gorillas, Weezy, Flink, Zapp and Dija, which often rely on so-called “dark stores,” small fulfillment centers where orders are picked up and then delivered by couriers.

In fact, many sellers in the United States and Europe were struggling before the COVID-19 pandemic, but have come back to life thanks to the rise of online groceries.

The current digital grocery delivery market is becoming increasingly crowded, and some retail experts say a wave of consolidation is coming.

Luke Jensen, CEO of Ocado Solutions, a subsidiary of British grocery technology pioneer Ocado, said the amount of money being invested in the opportunity is seriously disproportionate to the size of the opportunity, and that large technology companies such as Amazon and retail giants could be potential acquirers.

Even during the UK’s strict COVID-19 lockdown in January, 16% of the country’s grocery sales were online, according to Nielsen data, a record high and representing a huge opportunity to increase online penetration.

But Janssen said grocery startups compete primarily with convenience stores rather than big supermarkets, which means they have targeted a small part of the market and will attack that part to make good profits.

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