Online grocery sales decline in face of consumers’ rising cost concerns

As food costs continue to rise, consumers are tightening their belts and forgoing convenience in favor of savings — especially when it comes to online delivery and pickup, a new survey finds.

The U.S. online grocery market in March posted $8 billion in total sales, down 7.6% compared to last year, according to the monthly Brick Meets Click/Mercatus Grocery Shopping Survey fielded March 30-31. 

The year-over-year decline was driven by the large core online grocery segments of delivery and pickup, which contracted 7.4% and 8.5% respectively, as well as ship-to-home which fell 5.9%, the survey found.

“Cost considerations are now the most important factor in determining where customers shop and how they receive online grocery orders,” says the Barrington, Ill.-based Brick Meets Click.

During March 2023, “cost” rose in importance by 300 basis points compared to a year ago, knocking “convenience” — defined as “getting the order when you want without delay” — out of the top spot. For the month, 44% of households that used a pickup or delivery service from a grocery or mass retailer indicated that not paying more than necessary was the most important criteria in selecting an online grocery service.  

“Lower income households are more attracted to pickup services because it costs much less to use than delivery, due to the additional charges, fees and tips,” David Bishop, partner at Brick Meets Click, said in a news release. “During March 2023, households earning under $50,000 annually were 34% more likely to use pickup while households making over $200,000 per year were over twice as likely to use delivery.”

Given that the impact of grocery inflation is regressive, this helps set the stage for why, during March 2023 versus last year, households using pickup reported a 420-basis-points rise relative to “cost” being the most important selection criteria, while households using delivery reported only a 140-basis-points gain for “cost,” the survey found.

Brick Meets Click says another income-related factor that likely had a greater negative effect on pickup sales than delivery sales was the ongoing elimination of emergency Supplemental Nutrition Assistance Program benefits.

March 2023 marked the first month that more than three-quarters of the households participating in SNAP lost the additional $95 per month in pandemic-related support to buy groceries, joining the balance of SNAP households who had lost this amount earlier, the release said.  

The average number of online grocery orders completed by monthly active users continued to decline from pandemic highs, whether due to ongoing attempts to stretch a dollar, further decline in concerns about respiratory infections or a combination of factors, the release said.

In March, monthly order frequency dropped to 2.42, the lowest level since COVID-19 disrupted the way Americans shop for groceries. Order frequency is still nearly 20% above the pre-COVID measure, the release said.

Monthly order frequency for both grocery and mass declined in March, but the downward trend was more pronounced for grocery, the survey found. Order frequency dropped 10% among grocery’s monthly active users, whereas it dipped just 2% for mass.

While mass customers are still more likely to consider “cost” the most important criterion in selecting a service, grocery customers have become more cost conscious, and this shift may have contributed to the greater decline reported for grocery, the release said.   

The persistent pressure for households to “stretch the dollar” likely strengthened the benefit to grocery’s monthly active users of also buying groceries online from a mass retailer during the month. Overall, the cross-shopping rate stood at 28% for March, which was just 90 basis points lower than a year ago.

However, there were notable differences between grocery's monthly active users' employment of Walmart and Target. The cross-shop rate for Walmart remained essentially unchanged, while it fell 280 basis points for Target versus March 2022, the survey found.

The frequency of repeat purchases declined steeply in March. The likelihood that a customer would use the same service within the next 30 days finished at nearly 61%, down 290 basis points compared to last year, the release said.

The online share of total grocery spending was also down in March, falling 160 basis points to 12.7% versus last year. Excluding ship-to-home, since most conventional supermarkets do not offer it, the adjusted contribution from pickup and delivery dropped 130 basis points and finished at 10.6% for the month.

“Now is the time for conventional grocers to prioritize maintaining engagement with existing customers,” Sylvain Perrier, president and CEO of Mercatus, said in the release. “Proven ways of growing your online revenue hinge on providing a great customer experience, encouraging your more loyal customers to use frequently and benefitting from positive word-of-mouth advocacy that will attract others to use your online services.”

Check out the Brick Meets Click eGrocery Dashboard for March 2023 or visit the eMarket/eShopper page for additional insights and information about the full report.