Walmart has surged ahead of supermarkets, extending its share lead from 1.5% in Q2 of 2022 to a significant 5.7% advantage in Q2 of this year, according to a report by Brick Meets Click and Mercatus.

This robust growth for Walmart as a dominant player in the grocery e-commerce market comes on the heels of the peak in food-at-home inflation witnessed in Q3 of the preceding year. With an annual grocery inflation rate reaching 13.5% in August 2022, consumers’ sensitivity to food prices has continued despite the gradual deflation of this rate. Brick Meets Click’s analysis of Consumer Price Index (CPI) data revealed that U.S. households experienced a decline in purchasing power of over 7% during the first half of 2023 compared to the previous year. This follows a decrease of over 9% during the same period in 2022. Pre-pandemic, the purchasing power had displayed less volatility, declining by 0.5% and 1% during the first half of 2018 and 2019, respectively.

While Walmart’s e-commerce growth surged, Target maintained moderate progress, capturing approximately 7% of total online grocery sales in the second quarter. Target’s effective execution, particularly in pickup orders, coupled with its positioning in terms of price between supermarkets and Walmart, has contributed to the retailer’s online grocery success.

The report also highlights a concerning trend for traditional grocers: the widening gap in repeat intent rates between mass merchants and supermarkets in both pickup and delivery channels.

However, a potential positive for supermarkets is the rise of the pickup channel. This lower-cost service is gaining ground in grocery e-commerce sales, constituting nearly 48% of the market by the end of Q2. Both supermarkets and mass retailers have contributed to the growth of this channel as they expand its availability to more stores.

As competition intensifies between traditional grocers and mass retailers, the report suggests focusing on savings, personalization, and pickup as critical strategies. Sylvain Perrier, President and CEO of Mercatus, emphasizes the value of leveraging analytics and insights to offer personalized recommendations, discounts, and targeted strategies to boost both online and in-store repeat purchases. In this competitive landscape, offering consumers avenues for saving money while delivering online experiences aligned with their expectations becomes vital.

The findings of this report are based on a thorough analysis of data from the Brick Meets Click/Mercatus Grocery Shopping Survey, which compiled responses from 21,799 individuals in 2021, 20,948 in 2022, and 11,001 over the initial six months of 2023.