Inflation prompts online grocery brand loyalty and sales to dip

Digital grocery sales dipped nearly a full percentage point in the first quarter compared with the same period last year, as shoppers seek deals to mitigate high food costs, according to “State of Digital Grocery Performance Card for Q1, 2023,” a joint report from Incisiv and Wynshop. 

Nearly two-thirds of shoppers (63%) were actively looking to cut costs in Q1, according to the Grocery Doppio report. Also, brick-and-mortar stores earned a bigger slice of the sales pie in the first three months of the year, with digital sales share dropping to 13.9% for the quarter from 14.8% a year ago. 

"Many grocery shoppers are going back to stores to seek deals and avoid online fees and minimums,"  Gaurav Pant, chief insights officer at Incisiv and Grocery Doppio, said in a statement. "While the digital grocery market is now much larger than before the pandemic, inflation has normalized growth at something near to the original trend line." 

Shoppers are getting less bang for their buck when it comes to digital orders, too. The report noted a 13% increase in the digital basket size over the quarter, but the number of items per basket remained flat.  

The report is based on data from 1.7 million grocery orders and polling of more than 27,000 shoppers and more than 2,600 grocery executives. 

Inflationary pressure could be helping grocers by driving shoppers to their private-label brands. The report notes that nearly three out of every four shoppers purchased a private-label item in the first quarter of the year. Only 17% said they would pay more for a premium brand.  

Grocers are also helping to bolster slumping sales by offering Supplemental Nutrition Assistance Program (SNAP) benefits for digital orders. Roughly a third (31%) of grocers are now accepting SNAP online, and regional grocers are making these benefits available faster than their national counterparts. The report noted that 53% of regional grocers are accepting SNAP online, while only 15% of national grocers are doing so.  

This could be in part why shoppers are spending more on digital orders with national grocers. The report shows that the average spend for digital shoppers is $149.10 for national grocers, $75.20 for regional, $51 for local and $34.90 for smaller stores. 

"Shoppers are spending more at the big national chains in a bid to stretch their grocery dollars," according to Charlie Kaplan, chief revenue officer of Wynshop. "The national chains have also invested in their online businesses. To protect their market share, local and regional grocers need to increase their online functionality to promote private brands, to offer SNAP benefits and to provide efficient order fulfillment by both pickup and delivery methods." 

Digital order growth experienced a substantial year-over-year reduction in the first quarter of 2023, dropping to 0.8% from 1.4% a year ago, according to the report. Digital orders had a much stronger foothold with large grocers, where they represent 15% of overall orders. 

Delivery services fulfilled more of the digital orders for small grocers, though, where 62.2% of all online orders were delivered rather than picked up. That statistic was 45.3% for large grocers.