Inflation, SNAP cuts lead to steep drop in online grocery sales

Online grocery sales fell 7.6% in March compared to a year ago, as consumers prioritized savings over convenience, according to the monthly Brick Meets Click/Mercatus Grocery Shopping Survey released Tuesday. 

That drop primarily came from a 7.4% decline in delivery and an 8.5% decline in pickup orders, the report noted. The ship-to-home category fell 5.9%. 

The survey also revealed that value is becoming even more important: The cost category increased by 3% in  importance to shoppers and surpassed convenience to become the top concern. Of the households that used pickup or delivery, 44% said "not paying more than necessary was the most important criteria in selecting an online grocery service.” 

“Lower-income households are more attracted to pickup services because it costs much less to use than delivery, due to the additional charges, fees and tips,” said David Bishop, partner at Brick Meets Click, in a statement. “During March 2023, households earning under $50,000 annually were 34% more likely to use pickup, while households making over $200,000 per year were over twice as likely to use delivery.” 

The elimination of SNAP benefits also likely played a role in declining pickup and delivery sales. The report noted that more than three-quarters of those enrolled in the SNAP program lost a $95 boost to their benefits that was implemented during the coronavirus pandemic. 

Online grocery order frequency dropped to 2.42 times per month (down 10%), the lowest level since the onset of the pandemic in March 2020, the report concluded. That is still almost 20% higher than the pre-COVID numbers. 

Cross-shopping between grocery and mass retailers stood at 28% in March, dropping less than one percentage point (90 basis points) from a year ago, but that rate varied between two of the largest mass retailers—Walmart and Target. While Walmart’s cross-shop rate remained steady, the year-over-year rate for Target fell 280 basis points, or nearly 3 percentage points. 

The repeat intent score, or repeat customer rate, also declined in March, with 61% of those surveyed saying they will use the same service within the next 30 days. That’s a decline of 290 basis points from March 2022.  

First-time customers dropped a whopping 600 basis points, while frequent customers (those who made four or more orders from the same service over three months) dropped by 220 basis points. 

Online shopping’s piece of the total-grocery-spending pie similarly dropped 160 basis points to 12.7%, and the contribution from pickup and delivery—excluding the ship-to-home category—dropped 130 basis points to 10.6%. 

“Now is the time for conventional grocers to prioritize maintaining engagement with existing customers,” said Sylvain Perrier, president and CEO of Mercatus, in a statement. “Proven ways of growing your online revenue hinge on providing a great customer experience, encouraging your more-loyal customers to use frequently and benefitting from positive word-of-mouth advocacy that will attract others to use your online services.”