With many consumers concerned about elevated inflation and the fast spread of the latest COVID-19 variant, the U.S. online grocery market snapped back in July after modest gains the previous month.
Online grocery sales climbed 8.3% to $7.8 billion for July after a 1.4% month-to-month uptick to $7.2 billion in June, according to the latest Brick Meets Click/Mercatus Grocery Shopping Survey, released Tuesday. That came after monthly decreases of 12.3% in May and 6.9% in April.
Annual growth was even sharper in July, surging 17% from July 2021 and easily topping year-over-year gains of 5.9% in June and 1.7% in May, which had marked a rebound from declines of 3.8% in April and 6.5% in March.
Strong demand for pickup and delivery service fueled increases in July, Barrington, Ill.-based strategic advisory firm Brick Meets Click noted. E-grocery sales through pickup totaled $3.4 billion in July, the same as in June but up 17.2% from July 2021, when sales were $2.9 billion. Delivery sales came in at $3 billion in July, jumping 20% from $2.5 billion June and 25% from $2.4 billion in July 2021.
Ship-to-home online grocery sales reached $1.4 billion in July, up 7.7% from $1.3 billion in June but flat year over year. Those results stemmed a long-term decline in the ship-to-home channel since the pandemic’s onset in March 2020, when usage of pickup and delivery exploded.
Fielded July 29 and 30 by Brick Meets Click, and sponsored by grocery e-commerce specialist Mercatus, the study polled 1,690 U.S. adults who participated in their household’s grocery shopping and made an online grocery purchase in the previous 30 days. Delivery includes retailer and third-party services (e.g. Instacart, Shipt), while pickup includes in-store, curbside, locker and drive-up services. Ship-to-home sales cover online grocery purchases delivered by parcel couriers like Federal Express, UPS and the U.S. Postal Service.
“COVID-19 concerns coupled with inflation have forced a tradeoff between two fundamental desires for shoppers: not getting infected and not paying more than necessary,” explained David Bishop, partner at Brick Meets Click, which focuses on how digital technology impacts food sales and marketing. “While online shopping — especially delivery — costs more than in-store shopping, using an online service may help prevent illness, which could cost more in the long term due to lost wages and other life complications.”
During July, more than 68 million households went online to purchase groceries, up 3% from a year ago, but just the pickup and delivery channels benefited from that higher demand, Brick Meets Click noted. The monthly active user (MAU) base grew more than 5% for pickup and almost 4% for delivery, whereas the ship-to-home’s MAU base shrunk by over 4%.
Only a fifth of households were “not at all concerned” about catching COVID, and 36% of those households indicated using a grocery pickup and/or delivery service in July, the research found. As COVID concern advanced to “slightly,” “somewhat,” “very” and “extremely,” pickup and/or delivery use rates rose 6%, 15%, 20% and 53% respectively.
Brick Meets Click said 41% of all U.S. households used a grocery pickup and/or delivery service in July, indicating that roughly five percentage points (or over 10%) of MAUs were influenced by COVID concerns to some degree, compared against usage rates for those with no concern.
The crosswinds caused by inflation and COVID also likely reflect shifts in where households are shopping online for groceries. Compared with July 2021, mass merchants — appealing to more cost-conscious shoppers — saw an increase of just over 1% in the number of MAUs versus a more than 10% contraction in the MAU base for supermarkets.
Average order value (AOV) for online grocery in July also showed inflation’s impact. Aggregated across all three channels, AOV rose 11% year over year for the month, led by delivery (+13%) and followed by ship-to-home (+9%) and click-and collect (+5%). From a retailer perspective, AOVs for pickup and delivery orders climbed 9% for supermarkets and 10% for mass merchants from July 2021.
Monthly order frequency edged up 3%, as MAUs received 2.8 online grocery orders in July, the highest average order frequency since December 2021, Brick Meets Click report. Still, the advisory firm said, the wasn’t evenly distributed across the receiving segments or key channels like supermarkets and mass.
Pickup gained more than two points of order share in July versus last year, growing to 39% of all orders as frequency among click-and-collect MAUs rose 10%. Delivery added about 1.5 points of order share, finishing July with 31% of all orders as order frequency for its MAU base rose 8%. Ship-to-home’s order share fell four percentage points to less than 30%, as MAUs received 9% fewer orders during the month. Mass customers increased the number of monthly orders by 5%, compared with a 2% decline in order frequency among supermarket customers.
Repeat intent, or the likelihood of an online grocery shopper to use the same service again within the next month, came in at 64% in July, up nearly a point from the previous month. Brick Meets Click attributed the uptick to stronger repeat intent scores from mass (68%), as the gap with supermarkets (58%) widened, finishing at over 10 percentage points for the month.
“Online customers are highly motivated by convenience, and pickup offers customers a higher degree of convenience and control at a lower cost than Delivery,” stated Sylvain Perrier, president and CEO at Toronto-based Mercatus. “My advice to regional grocers is to use your store locations to your competitive advantage and promote pickup services to your delivery customers.”
Cross-shopping between supermarkets and mass increased four points year over year to 30% in July, meaning that three in 10 customers who placed at least one online order with supermarkets during the past 30 days also placed an order with a mass merchant. That result, Brick Meets Click said, should motivate supermarket retailers to rethink elements of their value proposition and reassess their strategic execution.