The online grocery market in March posted $8.0 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, 2023. The year-over-year decline was driven by the large core eGrocery segments of delivery and pickup, which contracted 7.4% and 8.5%, respectively, and ship-to-home, which fell 5.9%.
According to the report, cost considerations are now the most important factor in determining where customers shop and how they receive online grocery orders. During March 2023, cost rose in importance by 300 basis points (bps) 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 criterion 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,” said David Bishop, Partner at Brick Meets Click. “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-bps rise relative to cost being the most important selection criteria while households using delivery reported only a 140-bps gain for cost.
Another income-related factor that likely had a more significant adverse effect on pickup sales than delivery sales was the ongoing elimination of emergency SNAP 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 average number of online grocery orders completed by monthly active users (MAUs) 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. In March, monthly order frequency dropped to 2.42, the lowest level since COVID disrupted the way Americans shop for groceries in March 2020, although still nearly 20% above the pre-COVID measure.
Monthly order frequency for both grocery and mass declined in March, but the downward trend was more pronounced for grocery. Order frequency dropped 10% among grocery’s MAUs, whereas it dipped just 2% for mass. While mass customers are still more likely to consider cost the most important criteria in selecting a service, grocery customers have become more cost-conscious. This shift may have contributed to the greater decline reported for grocery.
The persistent pressure for households to “stretch the dollar” likely strengthened the benefit to grocery’s MAUs 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 bps lower than a year ago, but there were notable differences between Grocery MAUs’ use 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 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 don’t 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,” said Sylvain Perrier, president and CEO of Mercatus. “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.”