Are Inflation, COVID Headwinds Driving E-Grocery Sales to Climb?

Driven by inflationary times and strong demand for delivery and pickup services prompted by ongoing COVID concerns, online grocery sales for July jumped 17% year over year to $7.8 billion, new monthly data from Brick Meets Click and Mercatus revealed.

With inflation for food at home at 12.2%, more than 68 million households went online to buy groceries last month, a 3% gain vs. last year, but only the pickup and delivery segments benefited from that increased demand, Brick Meets Click and Mercatus reported.

Pickup’s monthly active user (MAU) base expanded more than 5% and deliveries expanded nearly 4% during the month, while ship-to-home’s MAU base contracted more than 4%.

“COVID concerns coupled with inflation have forced a tradeoff between two fundamental desires for shoppers—not getting infected and not paying more than necessary,” said David Bishop, partner with Brick Meets Click, in a statement. “While online shopping—especially delivery—costs more than in-store shopping, using an online service may help prevent illness, which could cost more in the long term due to lost wages and other life complications.”

Rising COVID concerns during the month of July revealed that only one-fifth of households were “not at all concerned” about catching COVID, and 36% of those households indicated using a grocery pickup and/or delivery service during the past month.

As concern increased to “slightly,” “somewhat,” “very” and “extremely,” pickup and/or delivery usage rates climbed to 6%, 15%, 20% and 53%, respectively, Brick Meets Click and Mercatus reported.

“It’s worth noting that during July 2022, 41% of all U.S. households used a grocery pickup and/or delivery service, suggesting that around 5 percentage points, or over 10% of MAUs, were influenced by COVID concerns to some degree if compared against usage rates for those with no concern," Brick Meets Click and Mercatus said.

Headwinds from inflation and COVID also likely helped to explain shifts in where households are shopping online for groceries. “Compared to July of last year, mass, which appeals to more cost-conscious shoppers, experienced an increase of just over 1% in the number of MAUs while grocery’s MAU base contracted over 10%,” Brick Meets Click and Mercatus reported.

Inflation’s impact was visible in spending as the average order value (AOV) aggregated across all three receiving methods grew 11% on a year-over-year basis. Delivery reported the largest AOV increase, growing 13% vs. the prior year, followed by ship-to-home, which rose 9%; pickup reported a more modest gain of 5%. From a channel perspective, AOVs for pickup and delivery orders climbed 9% in grocery and 10% in mass vs. July 2021. 

Monthly order frequency increased 3% as MAUs received 2.8 online grocery orders in July 2022—the highest average order frequency since December 2021, Brick Meets Click and Mercatus reported.

Pickup gained more than 2 points of order share in July vs. last year, rising to 39% of all orders as order frequency among its MAUs increased by 10%. Delivery gained around 1.5 points of order share, finishing with 31% of all orders as order frequency for its MAU base rose 8%. Ship-to-home’s order share dropped 4 percentage points to under 30% as MAUs received 9% fewer orders during the month.

Looking at key channels showed that mass customers increased the number of monthly orders by 5%, while grocery customers decreased their order frequency by 2%, Brick Meets Click and Mercatus reported.

Online grocery shoppers using the same service again within the next month remained very stable finishing at 64% for July. That month-over-month gain was attributed to stronger repeat intent scores from mass (68%) as the gap vs. grocery (at 58%) widened, landing at 10 percentage points for the month, Brick Meets Click and Mercatus reported.

“Online customers are highly motivated by convenience, and pickup offers customers a higher degree of convenience and control at a lower cost than delivery,” said Sylvain Perrier, president and CEO of Toronto, ON Canada-based Mercatus, in a statement. “My advice to regional grocers is to use your store locations to your competitive advantage and promote pickup services to your delivery customers.”

Cross-shopping between grocery and mass increased to 30% in July—4 points higher than last year. This means that 3 in 10 customers who placed at least one online order with grocery during the past 30 days also placed an order with a mass retailer.

“These results should motivate grocery retailers to reassess elements of their value proposition as well as how well they are executing their respective strategies,” Brick Meets Click and Mercatus said.

Brick Meets Click's July Grocery Shopping Survey, sponsored by Mercatus, was conducted July 29-30 with 1,690 U.S. adults who participate in their household's grocery shopping.