Some people go to bars or clubs on weekend nights. I go to the grocery store. I love to mosey through the aisles, looking 
for new snacks, picking up five apples before I decide on the right one. I’m apparently not the only one. On a recent Friday night at the Whole Foods in Cambridge, Mass., I encountered a pair of musicians, on flute and classical guitar, playing lovely melodies near the wine and cheese section. Clearly, the natural foods chain believes a lot of people see food shopping as entertainment.
Recently, however, disaster struck: I ran out of oatmeal. I realized it would be much easier to order a six-pack of Quaker Oats on Amazon.com than to make an extra trip to the store. I was even willing to eat (shudder) cold cereal for breakfast two days in a row while I waited for delivery. Thus, my pantry entered the Internet age.
My pantry is not alone; 2014 could be the year of online grocery. Traditional brick-and-mortar chains should be worried. The fact that AmazonFresh expanded to two new cities in 2013, after six years operating only in Seattle, is just one cause for concern. Currently, 3.3 percent of total U.S. grocery spending—a $500 billion industry—is online, according to a report from Brick Meets Click. It could reach 11 percent by 2023, a growth rate of nearly 13 percent per year.
Internet sales growth will accelerate as online food prices come down—and they will. Today, brick-and-mortar chains are cheaper than Internet grocers in part because they have economies of scale. Online entrants should be able to match that scale in the long term. Web retailers like AmazonFresh have an advantage: They need only one warehouse in each city where they operate, which is much cheaper than running dozens of stores. While delivery fees add to the cost of online ordering today, new models are changing the game. Relay Foods, an Internet grocer in the Washington, D.C., area, lets customers pick up purchases at a centralized location for free. Ahold USA, which owns online pioneer Peapod as well as two traditional chains, Giant and Stop & Shop, also offers free pickup in some locations.
As consumers have shifted purchasing preferences, VCs have reopened their minds to the idea of online grocery shopping, after a decade of Webvan-induced fear. In 2009, when Relay Foods first tried to raise funding, nine of 10 investors passed, according to its co-founder and president, Arnie Katz. Now, Katz says, nine of 10 are willing to consider it. In 2013, his company raised more than $8 million. So did Instacart and Good Eggs, while Greenling raised more than $5 million.