The U.S. online grocery market finished December with $9.1 billion in total sales, up 2.4% compared to a year ago and only 2% lower than the record high of $9.3 billion last seen in Q1 of 2021, according to the monthly Brick Meets Click/Mercatus Grocery Shopping Surveyfielded December 28-29, 2022.
December’s strong monthly sales results and year-over-year gain were driven by a combination of more households buying groceries online during the month and slightly higher average order values (AOVs), although these still trailed grocery price inflation.
“The investments that Mass retailers have put into their Pickup services are a significant driver of the format’s gains,” David Bishop, partner at Brick Meets Click, said in a press release. “And while lower prices are a contributing factor in the growth of the Mass MAU base, being able to more consistently execute at the store level is also helping to strengthen retention and engagement with existing customers, especially when compared to Grocery.”
Sales trends: Mixed results for receiving methods and formats
Pickup was the only method to gain sales during December, up 14.7%. Delivery declined very slightly, down 1.8%, and Ship-to-Home dropped more dramatically, down 16.2%.
As with November trends, orders placed with Mass retailers contributed more significantly to the growth of total online grocery sales than orders placed with Grocery retailers, driven by changes in the two formats’ MAUs, average order value (AOV), and order frequency.
Base of Monthly Active Users (MAU) up
More than half of all U.S. households ordered groceries online during December, up 4% versus a year ago.
- Pickup benefited the most from this increase in demand as almost 5% more MAUs opted to use this receiving method in December. Delivery was slightly positive, and Ship-to-Home experienced a drop of more than 8% in MAUs.
- By format, while the Grocery MAU base climbed nearly 7% versus the prior year, the Mass MAU base expanded nearly three times faster and attracted almost half of the total MAU base in December.
Cross-shopping between Grocery and Mass climbs to 30%
During December, more than 30% of MAUs bought groceries online during the month from both Grocery and Mass, about 130 basis points higher than a year ago.
The level of cross-shopping between Grocery and Mass remained elevated for the second month in a row, likely driven by persistent inflation and/or a more acceptable experience driving Mass’ customer expansion.
Average Order Value (AOV) is up overall YOY but mixed trends by method/format
For December, spending per order across the three receiving methods grew about 6% versus last year on an aggregate basis, which is below grocery-related price inflation.
By method: Pickup’s AOV for the month was slightly above the aggregate average, while Delivery matched the aggregate, and Ship-to-Home posted a mid-single-digit decline.
By format: Grocery reported a gain in AOV of 4% versus last year, while Mass AOV grew three times faster with a year-over-year increase of 12% for December.
Order frequency is down overall YOY but mixed trends by method/format
Overall order frequency, defined as the average number of orders received by an MAU during the period, slid 7% versus December 2021 at the aggregate level.
By service method:
- Ship-to-Home’s order frequency contracted twice as much as the aggregate.
- Delivery’s drop wasn’t as severe but still a double-digit decline.
- Pickup saw order frequency grow slightly among its MAUs.
By format, order frequency continued to show divergent year-over-year trends as it decreased by 7% for MAUs of Grocery and increased 3% for MAUs of Mass.
eGrocery share of spending down
Total grocery spending during the last week of December climbed nearly 15% compared to last year.
- As a result, the online share of total grocery spending fell slightly versus the prior year, finishing at 13.2%.
- Excluding Ship-to-Home, since most conventional supermarkets don’t offer it, the adjusted contribution from Pickup and Delivery was 11.0% for the month.
Composite repeat intent down: Grocery lags Mass by 10+ points
From a top-line perspective, the composite repeat rate (the likelihood that customers will use the same service again within the next month) dropped 670 basis points to 56% for the month versus a year ago.
- First-time users drove the majority of the YOY decline.
- Customers who used a service four or more times in the past month also contributed, although their rate dropped by about half as much as the first-timers’ rate.
While repeat intent rates were down for both Mass and Grocery in December, Mass continues to outperform Grocery on this metric.
- Mass and Grocery were at parity on this measure on Dec. 21
- For Dec ’22, Mass gained a 10-point advantage driven by Grocery’s significant drop during the month.
“Regional grocers have many opportunities to improve the customer experience and the profitability of operating an online grocery service today,” said Sylvain Perrier, president and CEO at Mercatus. “From our ongoing work and research into online customer behavior, we’ve learned how important it is to develop a strategy that makes sense both financially and operationally and that builds on how a grocer is positioned in the market and with their core customers.”