Mass-market retailers are stealing online grocery business from traditional grocers

Online grocery orders fell 10% in November compared to the year before, totaling $7.7 billion in sales, according to the monthly Brick Meets Click-Mercatus grocery survey released Tuesday. But one segment is seeing growth: Mass-market retailers.

Monthly active users (MAUs) of online grocery ordering at traditional grocers contracted 5% in November, the survey found, while the base of those ordering groceries online from mass retailers grew by 6%. Similarly, Grocery MAUs reported a 11% decrease in their orders in November, while mass-retailer MAUs completed 8% more orders than during the same period last year.

The shift was fueled by shoppers looking for bargains amid soaring food inflation, Brick Meets Click said.

Total grocery spending fell 5% in November compared to the year before, with online sales decreasing at twice that rate.

“Given that many shoppers are becoming more cost conscious, grocers should consider offering a tiered fee structure based on when a customer wants to receive their order and reduce some of the additional costs customers face when shopping online,” Mercatus President and CEO Sylvain Perrier said in a statement. “We know that if offered the choice between shorter cycle times and lower fees, a significant share of online customers will see a time later that day or even the next day to save at least a couple of dollars.”

The overall online sales decline was driven by fewer households buying groceries online, lower ordering frequency and less spending on each order, the survey found.

The total number of households that ordered groceries online for delivery, pickup or ship-to-home shrunk by 7% in November over the year before. A “dramatic drop” in the 60-and-older demographic and a “significant slide” among the core 30-44 segment contributed to the drop.

Perhaps unsurprisingly, cost was cited as the top deciding factor when consumers select where to shop online.

In November, the cross-shopping rate between traditional grocers and mass retailers, which measures the share of grocery monthly active users who also shopped online for groceries with mass retailers, grew 6 percentage points, to 30%, over the last year.

“When it comes to shopping online–especially for delivery or pickup–cost considerations include more than the price paid for a basket of products,” said David Bishop, partner at Brick Meets Click, in a staement. “Many customers also evaluate the total cost associated with using the service, which can include special charges, standard fees and tips. And, when comparing the total of these costs to the customer, there’s a sizable gap in favor of mass versus grocery.”

Overall online order frequency dropped by just under 4% in November vs. the prior year, the firm found, representing shrinking demand for ship-to-home, relatively flat pickup sales and delivery growth in the “low single digits.”