U.S. Online Grocery Sales Remain Strong as Volumes Increase But New Users Slow

The total U.S. online grocery market posted $8.1 billion in sales during November as 60.1 million U.S. households placed on average 2.8 orders during the month, according to the Brick Meets Click/Mercatus Grocery Shopping Survey fielded Nov. 11-14.

The report revealed higher order volume—but fewer first-time users—than the last time the firms surveyed shoppers in August. That indicates shoppers who may have turned to online grocery as an alternative to in-store visits amid the initial COVID breakout for the first time have since stuck with it. It’s also an indication that retailers need to devote attention to retaining their online shoppers as the rate of new users slows.

“Concerns about contracting the virus, stay-at-home orders, or retail restrictions motivated many to try a service within the last nine months, and now a significant share of those households considers online shopping a desirable alternative to an in-store trip. This presents opportunities as well as threats to established business models and practices,” said David Bishop, partner with Brick Meets Click.

For households that buy groceries online, delivery and pickup services are playing an increasingly essential role in meeting their grocery needs. During November, grocery delivery and pickup services generated sales of $5.9 billion, accounting for 73% of the total $8.1 billion in online spending and capturing 13 more share points compared to August.

The growth in delivery and pickup orders was fueled by increases in the number of households who used delivery or pickup in the past 30 days and by higher order frequency. Comparing November to August, the number of monthly active users grew about 3% to 38.7 million households, while the average number of orders that these users placed increased 2% to 1.62 per month.

“It’s evident the U.S. has an expanded base of engaged customers who continue to become more comfortable shopping online for a broader range of grocery products,” Bishop said. “And, when this happens as quickly as it has this year, it creates a range of challenges for service providers, including building capabilities and competencies, and managing costs and customers.”

One leading indicator, “likelihood to use a specific service again,” recorded a new high score showing customer satisfaction, the firms said. For November, 83% of the monthly active users of delivery or pickup indicated they are extremely or very likely to use the most recent service again within the next 30 days, which was up eight points vs. August and up 40 points vs. the record low posted in March when the initial surge in demand degraded the shopping experience.

Although this strong positive score reflects improvements in the overall shopping experience, the research revealed how a declining share of first-time customers—17% during November, down from 23% in August—is  also helping to increase these scores. The research showed that the probability that a first-time customer will use a service again is 59% as compared to 94% for those who placed four or more orders, so it’s clear that the indicator is being aided by a more experienced mix of shoppers.

“As the online customer mix skews to the more experienced users, retailers will experience headwinds for growth in their delivery and pickup offers. This challenge emphasizes the importance of leveraging tactics designed to boost usage and spending per order with existing customers,” said Bishop.

The monthly sales trend, which has remained above the $8 billion level since May, combined with a customer mix that reflects a declining share of first-time users, underscores the growing importance for companies to develop, implement and execute sustainable business building strategies.

“Now that we’re months into the pandemic, we’re seeing online grocery shopping becoming engrained among U.S. consumers,” said Sylvain Perrier, president and CEO of Mercatus. “This behavior change shifts the strategic conversation for grocers from acquisition to increasing conversion and retention by driving strong digital engagement. For grocery retailers, the question now becomes how best to provide a differentiated experience that maintains their newly acquired online customers. The answer lies in offering innovative digital solutions and a seamless, rich multichannel experience.”