The U.S. online grocery market declined for the third straight month in June following peak levels in 2021’s first quarter, the latest Brick Meets Click/Mercatus Grocery Shopping Survey shows.
U.S. online grocery sales totaled $6.8 billion in June, down 3% from $7 billion in May and a 23% drop from $8.8 billion in June 2020, when sales had risen 6% month to month. Decreases in the number of monthly active users (MAUs), order frequency and spending per order accounted for the June 2021 falloff, according to Brick Meets Click, a Barrington, Ill.-based strategic advisory firm focusing on digital technology’s impact on food sales and marketing.
Delivery and pickup sales for June were $5.3 billion, the same as in May but down 26.4% from $7.2 billion in June 2020. Ship-to-home sales — covering online grocery purchases delivered via parcel couriers like Federal Express, UPS and the U.S. Postal Service — came in at $1.5 billion, a decrease of 11.8% from $1.7 billion in May and down 6.3% from $1.6 billion in June 2020.
Spending per order contracted in June as the weighted average across pickup, delivery and ship-to-home dipped roughly 7% from a year earlier, fueled primarily by a more than 11% decrease in average order value (AOV) for delivery, Brick Meets Click reported.
Still, compared to pre-pandemic spending levels, June 2021 AOVs remain elevated, with delivery up 6%, pickup up 12%, and ship-to-home up 14% from August 2019. Also of note, Brick Meets Click said, pickup continued to gain as a preferred option among online grocery users, and online cross-shopping between supermarket and mass retail channels for groceries stands near all-time highs.
The Brick Meets Click study, conducted June 27 to 28 and sponsored by Mercatus, polled 1,789 U.S. adults who participated in their household’s grocery shopping and made an online grocery purchase in the previous 30 days.
“We all know that the pandemic disrupted the way many U.S. households bought groceries, but it’s now becoming more evident how some retailers have more effectively changed the way they sell groceries,” David Bishop, partner at Brick Meets Click, said in a statement. “When you look beyond online grocery’s monthly performance, the big picture shows which retail segments are winning market share by providing a more seamless shopping experience for their customers.”
Overall, 63.5 million U.S. households purchased groceries online in June, down 12% from June 2020. The decrease spanned all age groups, though the drop in monthly active users was more pronounced among the youngest (ages 18 to 29) and oldest (over age 60) online grocery shoppers, down more than 15% each, versus a 6% decline among core users (ages 30 to 44).
The monthly average user base for pickup service surged nearly 16% year over year, compared with decreases of 1% for delivery and 6% for ship-to-home, Brick Meets Click pointed out.
In terms of transactions, monthly active users (MAUs) in June placed an average of 2.70 online grocery orders, down 6% from 2.89 orders in June 2020. Yet the share of pickup orders climbed almost 7% year over year — for 42% of total order share — while order share fell 2% for delivery and 4% for ship-to-home.
Brick Meets Click said its research also examined online grocery shopping differences among households in four market types by geo-coding responses via zip code. In June, pickup regained the top share in large metropolitan markets and again became the leading method across all four market types, gaining monthly order share in all market types versus a year ago. Meanwhile, delivery order share edged up only slightly in the least populated markets year over year, while ship-to-home’s order share shrank across all market types.
What’s more, the June research found that 33% of monthly active users received online grocery orders just through pickup, and 16% got their online grocery orders only via delivery. The overall usage rate for pickup in June rose almost 5% higher versus June 2020 and was up more than 23% from August 2019. Those numbers underscore the need for retailers to offer both click-and-collect and delivery to stay relevant and support the total addressable market for online grocery service, Brick Meets Click noted.
“Given June’s results, it’s hard to deny U.S. consumers’ clear preference for pickup services in all market types,” stated Sylvain Perrier, president and CEO of Toronto-based grocery e-commerce provider Mercatus.
The repeat intent rate — the likelihood that a monthly active user will order again with the same grocery service in the next month — climbed 4% year over year to 60% in June. However, repeat intent for mass retailers like Walmart and Target came in nearly 9% higher on average versus the supermarket channel.
“The cumulative effect of consistently executing a sound strategy that delivers against the brand’s promise has helped mass retailers outperform grocery on key metrics, including MAUs, order frequency and AOV in June 2021,” explained Bishop. “It’s vital for grocers to compete against mass, but it’s also essential that grocery retailers don’t try to operate like mass, since that is an unsustainable strategy.”
The channel distinctions stand out considering that the share of online customers who used both a supermarket service and a mass retail service to buy groceries in June topped 28% for the second straight month, Brick Meets Click said. In addition, the company’s research indicates that mass merchants could now supermarket operator’s chief competitor in online grocery, given that the cross-over shopping rate was only 15% pre-COVID (in August 2019).
“Regional grocers looking to solidify their sales gains also confront a more competitive environment. The mass merchants and third-party delivery services are all looking to protect their share of online wallet,” Perrier observed. “One clear action grocers should take is to double-down on modeling your repeat online customers’ shopping preferences and develop a re-engagement strategy that plays to your retail brand’s unique strengths. Second, invest both in the technology and realignment of your operating models so you can improve the overall customer pickup experience at a lower cost to your business.”