Online grocery shopper base shrinks by over 50% in U.S., Europe

More than half of the grocery e-commerce customer base in the United States and Europe has exited the channel over roughly the past year, a new study by SymphonyAI Retail CPG revealed.

From the 2022 first quarter through the 2023 first quarter, the U.S. and European online grocery customer base shrank 52%, according to “The 2023 State of Grocery E-Commerce” report, released last week by the retail and CPG marketing and research specialist, a unit of Palo Alto, California-based SymphonyAI. Of those e-grocery users, 60% returned to shopping only at their brick-and-mortar store, and 40% left their retailer entirely—not shopping its physical or online store.

And those going back to store-only were tighter with their dollars, cutting their overall spending by 16% and looking elsewhere for their other grocery needs, SymphonyAI Retail CPG reported.

The Q1 2023 study examined 58 million households and 607 million transactions across Europe and the U.S., covering 7.5 billion units of volume (818 million online) and traditional grocery retailers. Results were compared against the same period a year ago.

Grocery e-commerce household penetration dropped to 6.5 customers out of 100 in Q1 2023 from a peak of about 8.5 of 100 in Q2 2020, the report said. The research showed a 14% net decline in the total number of online shoppers, i.e. departing shoppers offset by new shoppers.

Online grocery revenue growth—the single-largest driver of e-commerce performance—fell 1% from Q1 to Q1 2022-2023. Declines among other key drivers included online customers (-14%) and basket size (-5%), while increased metrics included frequency and item value, both up 11%.

SymphonyAI Retail CPG noted in the study that e-grocery customers acquired “post lockdown,” i.e. after COVID-19 restrictions, have a 71% churn rate compared with a 50% rate among those becoming digital grocery customers during the pandemic.

“The overall decline in online customers and their impact on e-commerce growth is significant,” explained Laetitia Berthier, head of client engagement at SymphonyAI Retail CPG. “Contrary to expectations, the losses are coming not from shoppers who were forced online during the height of the pandemic, but rather those shoppers who had moved online after the pandemic. It’s critical for retailers to understand those customer dynamics and their fast-changing needs to succeed in the critical online channel.”

Omnichannel versus in-store difference

As of the 2023 first quarter, 71.4% of grocery customers shopping online also did so in-store, roughly double the percentage in Q2 2020 at the start of lockdowns, according to the study data. Similarly, online grocery sales growth among omnichannel shoppers—buying both in-store and online—stood at 6.2% at the close of Q1 2023, approximately twice as high as online-only customers.

SymphonyAI Retail CPG said omnichannel shoppers also typically deliver an incremental 15% to 18% sales lift versus in-store-only customers, or about a 9% increase apiece in basket size and shopping frequency. The research showed that omnichannel customers, too, are more likely to remain primary shoppers with a certain retailer, with a retention rate of 5% in Q1 2023.

The SymphonyAI study also pointed to “massive opportunities” for retailers to spur digital engagement, incremental growth and customer loyalty in grocery shopping. For instance, the number of households seeking private-label products online deliver revenue growth of more than 10%, with 35% of households buying private brands online. Ensuring that the most-purchased store-brand items are available online could add 0.9% in incremental digital sales, the research said. Likewise, 37% of online grocery households are promotion-sensitive versus 31% for in-store-only customers.

And there are still grocery e-commerce novices. SymphonyAI Retail CPG estimated that 83% of current in-store customers haven’t used online grocery services at any time over the past five years, and 5.5% of these shoppers are top e-commerce prospects. The report said that converting these consumers to omnichannel grocery shoppers could mean another 0.8% in total retailer revenue.