Mass retailers like Walmart continue to pick up online grocery customers

The online grocery market ended January up 1.8% to $8.5 billion from the previous year, according to the monthly Brick Meets Click/Mercatus Grocery Shopper Survey.

The report noted that the increase in total households purchasing groceries online in January sales growth “was moderated year-over-year by a downward trend in order frequency and a composite average order value (AOV) that was nearly flat compared to the prior year.” 

“Monthly results varied by the receiving method and format as mass continued to expand share while supermarkets contracted,” the report said.

The ship-to-home category was the sole category to experience a year-over-year sales growth, climbing 7.8% to $1.5 billion. A surge in monthly active users (MAUs) and a more than 7% AOV increase resulted in a 224 basis point jump for the delivery method, which ended January with 17.4% of online grocery sales. 

Delivery sales were down slightly for the month by 0.5% year over year to $3 billion. The report noted that its 3% AOV growth was not enough to offset the decline in order volume for the month. The MAU for delivery expanded slightly in January, but that was eclipsed by a drop in order frequency from MAUs, causing the category’s portion of the online grocery market to slip 82 basis points to 35.3% year over year. 

Pickup was still the most popular fulfillment method for online grocery sales with 47.3% of the market for the month. That’s down 142 basis points for the year, though, and sales fell 1.9% to $4 billion in January. The decline was the result of a 1.8% reduction in AOV and lower order frequency from MAUs. 

“When more than 10% of U.S. households have less money to spend on groceries this year than they did last year, changes in buying behavior are certainly expected,” said David Bishop, partner at Brick Meets Click, in a statement. “The reduction in SNAP payments that took effect at the end of February 2023 is one of the factors driving the flight-to-value trend which we’ve observed and tracked since mid-2023.” 

Mass outlets, with Walmart leading the pack, outperformed the broader market, according to the report, expanding its MAU base by nearly 10%. Order frequency remained flat among its MAU base, though.

Meanwhile, supermarkets continued to struggle with MAUs contracting more than 5% year over year. The orders placed by those monthly active users also contracted, while the average dollars spent per order also dipped. 

The number of shoppers who shopped online with mass merchandise operations, like Target and Walmart, and traditional grocery stores, declined. “Last month more than 29% of households that bought groceries online from grocery also purchased groceries online using a mass retailer’s shopping service. Overall, cross-shopping rates between grocery and mass remain nearly twice as high as before the onset of the pandemic,” the report stated.

The January report shows that regional grocers are under increasing pressure to meet customer demands, according to Mark Fairhurst, global chief growth officer at Mercatus.  

Competing online is only getting more challenging for regional grocers as customer expectations continue to increase," Fairhurst said in a statement. "So, beyond improving key elements of the experience, like fill rates, wait times, and product quality, regional grocers also need to work even harder to identify additional ways to help their customers save money."