Why did Online Grocery Sales Decline in 2023?

The U.S. online grocery market finished 2023 with $95.8 billion in total sales, down 1.2% compared to 2022, according to the annualized results from the monthly Brick Meets Click/Mercatus Grocery Shopper Survey. Online grocery shoppers’ decline in order frequency was the primary factor driving the lower sales in 2023.

The year-end results highlight regional grocers’ challenges in growing eGrocery in today’s economic and competitive environment.

The multi-year analysis is based on more than 21,000 survey responses collected each year during 2021, 2022, and 2023 from adults 18 years and older who participated in the household’s grocery shopping.

Order frequency among monthly active users (MAUs) contracted for the second year in a row in 2023. The average number of monthly online grocery orders completed (including all receiving methods) fell 6% versus 2022, following a 4% decline in the previous year.

“These annual results show that 2023 was very challenging for grocery retailing as higher prices chipped away at household purchasing power even though inflation has slowed considerably since its peak in 2022,” said David Bishop, partner at Brick Meets Click.

“Despite the challenges, Pickup continues to prove its appeal to shoppers, even without the benefits of expanded availability and/or aggressive promotions that aided Delivery in 2023,” Bishop added.

Contributing to the year-over-year contraction was an increase in the share of MAUs who made only one eGrocery order per month, which rose over 300 bps to 34% in 2023.

Average order value (AOV), not adjusted for price inflation, rose 3.0% in aggregate in 2023 versus the prior year. Each receiving method posted year-over-year increases: Delivery AOV grew by 3.0%, Pickup increased by 2.6%, and Ship-to-Home rose 1.7% over 2022.

The overall MAU base, which includes all three receiving methods, climbed 2.0% compared to the previous year.

Regarding sales performance, Pickup’s largest of the three segments finished the year relatively steady versus 2022, growing its share of eGrocery sales by 56 basis points (bps) to 46.0% in 2023.

Despite expanded availability due to increased competition among third-party marketplace providers, delivery experienced a sales dip of 0.9% in 2023 versus the prior year. Still, it gained an additional 11 bps of sales share, ending the year with 37%.

Ship-to-Home continued its annual contraction as sales slipped 4.9% year-over-year, leading to a 66-bps drop in sales share to 17%.

Related Article: Artificial Intelligence and Other Technologies

Across the U.S. eGrocery market, price-value formats like Mass and Hard Discount experienced strong expansion in their respective MAU bases during 2023.

In contrast, the Supermarket format experienced a contraction. The average number of MAUs increased by 15% for Mass and 12% for Hard Discount versus 2022, while the Supermarket MAU base shrank by 4%.

On average, 50% of MAUs engaged with Mass in 2023, up 559 bps compared to 2022; 5% of MAUs engaged with Hard Discount, up 42 bps; and 32% of MAUs engaged with Supermarkets, down 194 bps.

Due to these shifts in buying behaviors, Mass expanded its share of overall eGrocery sales by 460 bps in 2023 to 45% versus the prior year, driven by the strong growth in its MAU base. Meanwhile, the Supermarket format’s sales share contracted by 390 bps to 29% due to declines in both its MAU base and order frequency.

Cross-shopping rates between Grocery and Mass formats continued to increase in 2023. The percentage of households who bought groceries online from Grocery (Supermarket plus Hard Discount) and Mass during the same monthly period rose 150 basis points versus 2022.

As a result, 30% of the Grocery MAU base also shopped for groceries online with a Mass retailer’s service during the same month in 2023.

The composite repeat intent rate for Pickup and Delivery services associated with Grocery and Mass formats slipped by 63 bps, finishing at 61% in 2023. That downturn was due solely to declining repeat intent for Grocery services, not Mass.

“As Walmart grabs market share through its price leadership and omnichannel strategies, regional grocers find themselves in a precarious position. To remain competitive, they must intensify their efforts in improving customer engagement, offering tailored personalization, and building loyalty. This strategic shift is not just about weathering the storm of price inflation and intense competition, but about thriving in it,” said Mark Fairhurst, Global Chief Growth Officer at Mercatus.

“By providing a shopping experience that is both seamless and highly personalized, grocery retailers can retain their existing customer base and gradually attract a wider audience,” Fairhurst added.