The dynamics of the US online grocery market have taken a downturn as recent data reveals a 7.0% decline in total sales compared to the previous year, according to the latest Brick Meets Click/Mercatus Grocery Shopping Survey conducted in late July 2023. This downward trend has been observed across all delivery methods and is attributed to a decrease in order frequency and constrained spending per order, despite an increased base of monthly active users (MAUs) as compared to the previous year.
The report indicates that the growth in the overall MAU base was propelled by a nearly 5% surge in US households purchasing groceries online, primarily driven by a significant 7% increase in the Pickup MAU base. Ship-to-Home’s base remained stable, while Delivery experienced a marginal contraction of 1% compared to July 2022.
The drop in order frequency, which was recorded at 10% less than the previous year, has played a significant role in the decline of monthly sales, leading to a nearly 6% reduction in online orders for July 2023. Of this decline, Delivery experienced a steep plummet of 13%, contributing to around three-quarters of the overall drop in online orders. Pickup orders decreased by 3%, while Ship-to-Home orders experienced a 2% dip.
The report also highlights the impact of constrained spending, with the average order value (AOV) experiencing a decline of approximately 1.5% compared to July 2022. Though Delivery saw a slight increase of less than half a percent in AOV and Ship-to-Home witnessed a 1% gain, these gains were insufficient to offset Pickup’s 2% decline in AOV.
Commenting on the findings, David Bishop, a partner at Brick Meets Click, noted, “July’s results reflect the growing financial challenges many consumers are facing today. These challenges along with evolving expectations, driven by experience engaging with Mass, are contributing to the growing gap between conventional grocers and their Mass rivals.”
Shifts in sales distribution were also evident. Pickup and Ship-to-Home observed expansion, while Delivery encountered a contraction. Pickup secured a 45% share of eGrocery sales, marking an increase of more than one percentage point compared to July 2022 despite a 4.5% sales dip. Ship-to-Home’s sales share rose by over one point to 19%, with a 1.0% decrease in sales. Conversely, Delivery ceded nearly 2.5 points, concluding the month with a share of just under 36% as its sales experienced a notable 12.8% decline.
Further analysis of the report reveals distinct differences between the Mass and Grocery formats. Mass experienced a surge in customer numbers, while Grocery observed only a modest increase in MAUs, consistent with the trend seen in the previous month. Both formats saw a drop in order frequency, though the decline was more substantial for Grocery than Mass. Additionally, Grocery’s average order value dipped by over 5%, while Mass experienced a marginal uptick.
While the overall repeat intent rate stood at 63% for July, showing a decline of merely 50 basis points compared to the previous year, the repeat intent rate for Mass was significantly higher by almost 18 points than that of Grocery. This widening gap of 730 basis points is the largest since the surveys began tracking this metric in January 2021. Much of Mass’s monthly gain can be attributed to improved repeat intent rates for Delivery.
Amidst these shifts, online’s share of total grocery spending for July decreased by 130 basis points to 13.2% compared to the previous year. Excluding Ship-to-Home, which is not commonly offered by traditional supermarkets, the adjusted contribution from Pickup and Delivery stood at 10.7%, down 120 basis points from the previous year due to the underperformance of Delivery.
As Sylvain Perrier, President and CEO of Mercatus, emphasizes, “To drive continued engagement, regional grocers need to offer their customers value for their money and more convenient ways they can save.” Loyalty programs and promotional offers are key tools to encourage repeat purchases and reinforce the monetary value customers receive.