Online grocery sales are dipping, but some retailers are faring better than others

While online grocery shopping surged during the height of the pandemic, consumers this year aren’t clicking with it like they once did. The channel has lost momentum as why and what consumers are buying online has shifted, particularly as financial pressures weigh on their purchasing decisions.

The US online grocery segment brought in $7.2 billion in total sales in July, down 7% year over year, per a monthly Brick Meets Click/Mercatus Grocery Shopping Survey. This stretches across pickup, delivery, and ship-to-home at online retailers across all segments, including traditional grocers like Kroger and Publix, mass players like Walmart and Target, as well as DTC sellers like Amazon, Hello Fresh, and Thrive Market.

• While the total number of households shopping for groceries online rose 5%, order frequency dropped 10%. The total number of online orders sank almost 6%, largely attributed to a 13% dip in delivery orders. Average order value (AOV) was also down 1.5%, with the biggest drop coming from pickup.

SymphonyAI Retail CPG also recently reported, in an analysis of 58 million consumer baskets, that 52% of e-commerce grocery shoppers have left online grocery in the past year across the US and Europe.

Impacted by factors like inflation and the loss of the SNAP emergency allotments, “there’s increasing pressure on the purchasing power of households in the US,” Brick Meets Click partner David Bishop told Retail Brew. That drop in AOV could indicate shoppers downgrading to value brands or delaying purchases until a sale comes along, as well as a renewed use of online grocery for more convenience-oriented occasions.

But not all grocery retailers are seeing such a dramatic drop—and not all consumers are heading straight from their computers and phones back to the same IRL stores.

Basket case: Per SymphonyAI, while 60% have returned to shopping in stores, 40% have taken their business elsewhere. That’s a notable loss for retailers, as omnichannel grocery shoppers are more valuable to retailers than those that just shop brick and mortar, Laetitia Berthier, head of customer success at SymphonyAI, noted.

• SymphonyAI has found that in-store grocery shoppers that move to online shopping grow their spend by 15%–18%, both due to larger basket sizes and higher frequency of orders. This also boosts retailer loyalty, she said. As online grocery basket sizes shrink, retailers with lower delivery fees and order thresholds (plus those that have a wider selection of private label products sold online) are more likely to succeed, she noted.

That’s a major reason why the mass channel (i.e., Walmart and Target) saw a sizable lead over traditional grocers in repeat intent rate, a slight boost in AOV, and an influx of monthly average users in July, while traditional grocers only saw a few new users and a larger drop in order frequency, per Brick Meets Click.

Retailers at a national scale have been better positioned for e-comm business compared to grocery stores with multiple banners and thus various operating systems, like Kroger or Ahold Delhaize, and their delivery fees tend to be less pricey, Bishop noted. Target and Walmart also benefit from a stronger ship-to-home business, which helps drive grocery sales.

Looking ahead…For all grocery sellers, pickup, which accounted for 45.1% of online purchases in July, has become the “best positioned today in the near term and the medium term to continue to grow its share,” Bishop said, as the generally cheapest option of the three methods. Meanwhile, the ship-to-home segment, which includes Amazon, marketplaces like Thrive Market, and meal kits like Blue Apron and Hello Fresh, has seen a long-term decline as consumers turn to easier-to-manage pickup or delivery services.

The current trends in online grocery will likely continue through the rest of 2023 and into next year, especially as student loan payments restart next month, Bishop predicted, though online grocery might start turning the corner in the second half of 2024. Meanwhile, retailers, particularly smaller grocery players, may cut back on investments in automation, he said:  “[It’s] going to become much more costly and competitive to compete and win online.”