Digital grocery continues to see growth as consumers become more comfortable with the concept post-global pandemic. Online grocery skyrocketed during the pandemic, but now has become part of the norm as demonstrated by the overall online grocery sales for April totaling $8.2 billion, up 0.9% year-over-year.
As the market continues to evolve, a recent shopping survey from analytics and strategic insight firm Brick Meets Click and e-commerce technology software company Mercatus unveils the uptick was driven by a rebound in monthly active users (MAUs) and a higher average order value (AOV).
While online grocery sales were up for the month of April, year-over-year performance varied widely across the three key segments: Delivery sales increased 20%, pickup decreased 3%, and ship-to-home plunged 19%. That said, U.S. online grocery sales have inched up 1% versus a year ago.
“A macro view of the eGrocery market can reveal certain opportunity gaps, but it may also obscure key shopping dynamics within a particular segment of the market,” said David Bishop, partner at Brick Meets Click. “For example, it’s difficult to see how little overlap exists between the households that use pickup and those that use delivery services or to know that pickup grew stronger in mass during April unless you’re able to dig deeper into the segment dynamics as we do in our monthly reports.”
So, while the jump in April can be attributed to a rebound in users and higher than average online basket sizes, delivery only finished up by 1% on a two-year stacked basis versus 2021 as the segment’s customer base fell 9% last year.
The expansion of new delivery providers and services has attracted more consumers by making delivery more readily available, however, the other two segments experienced a pullback in spending per order compared to 2022:
- April pickup sales declined largely due to lower order frequency and reduced order sizes
- Ship-to-home sales were the result of deterioration across key shopping metrics (i.e.continued contraction of its monthly active user base along with double-digital drops in both average order size and order frequency)
What’s more, and arguably most concerning is the trending down of repeat intent scores. For grocers, the likelihood a consumer will use the same service within the next 30 days for April 2023 dropped 530 basis points compared to last year, landing at under 58%, driven by a dramatic drop from the most-frequent customers.
Additionally, the repeat intent rate for mass declined nearly 300 basis points in April versus the prior year, but the repeat intent rate for grocery fell almost 900 basis points. This makes it the most significant gap recorded to date between the two formats and surpasses the record gap set in January 2023.
“Given that customers vote with their wallet, the expanding gap in repeat intent between Mass and Grocery should be a red flag that warrants grocers re-evaluate all aspects of the customer experience,” said Sylvain Perrier, president and CEO, of Mercatus. “Customers’ expectations continue to evolve based on past experiences, which means it’s vital that grocers continue to improve the execution of various aspects, whether that’s a more personalized experience, fewer out-of-stocks, or shortened wait times.”
Online’s share of total grocery spending fell 20 basis points in April to 12.1% versus last year. Excluding ship-to-home (since most conventional supermarkets don’t offer it), the adjusted contribution from pickup and delivery finished at 10.0%, up 40 basis points compared to a year ago, due to delivery’s strong performance for the month.
Along the same lines, research from Grocery Doppio also reported that the use of digital technologies by both shoppers and grocery store associates is forecast to increase in 2023, but improvements are necessary.
While digital tools are generating more supermarket sales, grocers also are increasingly leveraging the technologies to support operations, but the research also shows that many users are dissatisfied with online operations:
- 73% of store associates are unhappy with their digital tools
- 81% of grocery executives believe upgrading their store technology is critical to meeting their digital growth
- Operators project an average 0.7% decrease in grocery technology budgets in 2023 compared to 2022
- Lack of technology talent
Perhaps Perrier sums it up best, “Going forward, online growth will be fueled by the steps grocery retailers take to provide a differentiated customer experience that blends technology, insight, and operational excellence to encourage more frequent repeat purchases. Fundamentally, it comes down to knowing who your customers are, understanding what they want, and developing better ways to satisfy those needs.”
The survey was conducted April 28-29 and polled 1,746 adults, 18 years and older, who participated in the household’s grocery shopping.