Egrocery sales rise in April, but there are big red flags

The topline

The April 2023 edition of the Brick Meets Click/Mercatus Grocery Shopping Survey showed:

eGrocery sales totaled $8.2 billion for April 2023, rising 0.9% from April 2022.

Online’s share of total grocery spending fell in April. It was down 20 basis points to 12.1% when compared to last year.

Delivery vs. pickup

There was significant divergence among the three primary fulfillment categories. Delivery sales were up 20%. Meanwhile, pickup was down 3%, and ship-to-home fell 19%.

Digging deeper into key metrics yields the reason why this happened. In delivery, the monthly active user base grew 11% from a year ago, and was up 1% on a two-year basis. The average order value also rose 5%.

In pickup, the monthly active user base also grew in the “mid-single digits," according to the report. However, the category also saw a lower order frequency, while average order volume fell.

The repeat gap

The biggest point of interest in this month’s findings for grocers comes in the area of repeat intent.

The likelihood that a customer will use the same service within the next 30 days fell 530 basis points compared to last year. This was a decline to just under 58%. In particular, the most precipitous drop came among the most frequent customers, who completed 4+ orders in the last three months.

Most importantly, there’s also a huge gulf in the intent to repeat between grocery and mass retailers. Both saw declines, but at a different scale. Grocery fell 900 basis points, while mass retail was down 300 basis points. It’s the biggest gap between the two categories recorded by the survey, surpassing the previous record set in January of this year.

The issues for grocery appear when one digs down into fulfillment methods. Delivery for grocery orders fell significantly compared to mass. That’s important because delivery is a much higher share of online orders in grocery than it is in mass.

The findings are a major warning sign for grocers.

“Given that customers vote with their wallet, the expanding gap in repeat intent between mass and grocery should be a red flag that warrants grocers re-evaluate all aspects of the customer experience,” said Sylvain Perrier, president and CEO of Mercatus, in a statement. “Customers’ expectations continue to evolve based on past experiences, which means it’s vital that grocers continue to improve the execution of various aspects, whether that’s a more personalized experience, fewer out-of-stocks, or shortened wait times.

It’s worth noting that these trends are coming at a time when rising prices have put particular pressure on consumers shopping for food. Over the last year, food at home has consistently been among the top categories experiencing dramatic levels of inflation. As a result, consumers have sought stores with lower prices. There are signs that this is changing behavior. Walmart is gaining higher-income consumers that may not normally shop there. While grocery delivery may be another area that sees pullback, the findings suggest that consumers are choosing not just how they shop, but where they shop for essentials, as well.