A decline in the frequency of online grocery orders drove a 1.2% year-over-year drop in total online sales to $95.8 billion in the U.S. online grocery market in 2023, according to the annual results of the Brick Meets Click/Mercatus Grocery Shopper Survey released Thursday.
It’s the second year in a row the order frequency of active monthly users (MAUs) declined, according to the report, which surveyed 21,000 shoppers in the U.S. That year-over-year contraction in online orders came in at 6% compared to the prior year, surpassing the 4% year-over-year decline in 2022, the report noted.
The decline in orders was exacerbated by a 300 basis-point increase to 34% in the number of MAUs who said they made only one online grocery purchase per month in 2023.
Despite the drop in online orders for the year, the base of MAUs rose 2% year over year. Shoppers appear to have largely settled on a receiving method with 70% saying they exclusively relied on either pickup, delivery, or ship-to-home, up 172 basis points from the previous year.
Pickup held steady as the most popular way of receiving online orders, growing its share of online sales by a modest 56 basis points to end the year at 46%. The report added that the expanded availability of delivery methods due to increased competition did not appear to help grow the receiving method, which experienced a sales decline of 0.9% for the year and captured 37% of the online sales market. Meanwhile, the ship-to-home method dropped 66 basis points to make up 17% of the market for the year.
“These annual results show that 2023 was very challenging for grocery retailing as higher prices chipped away at household purchasing power even though inflation has slowed considerably since its peak in 2022,” said David Bishop, partner at Brick Meets Click, in a statement. “Despite the challenges, pickup continues to prove its appeal to shoppers, even without the benefits of expanded availability and/or aggressive promotions that aided delivery in 2023.”
Mass merchandisers and hard discount grocers expanded their shares of the online grocery market in 2023 by 460 basis points to end the year with 45% due to strong MAU growth. The growth came at the expense of the supermarket format, which dropped 390 basis points to 29% for the year, a result of declining MAUs and order frequency.
Shoppers increasingly chose to place their online purchases through both mass merchandise and supermarket formats for the year as the cross-shopping rate increased 150 basis points from the previous year. Nearly a third (30%) of shoppers purchased online groceries from both in the same month over the course of the year, the report noted.
The repeat intent rate – the share of MAUs who are very likely to use the same service again – for the pickup and delivery methods of online purchases declined in 2023 by 63 basis points to 61%, a trend driven solely by a decline in repeat intent for grocery services, which fell 311 basis points to 54%. That’s compared to an increase in repeat intent for mass merchandise shoppers, which grew by 48 basis points to 66%.
“As Walmart grabs market share through its price leadership and omnichannel strategies, regional grocers find themselves in a precarious position. To remain competitive, they must intensify their efforts in improving customer engagement, offering tailored personalization, and building loyalty. This strategic shift is not just about weathering the storm of price inflation and intense competition, but about thriving in it,” said Mark Fairhurst, global chief growth officer at Mercatus, in a statement. “By providing a shopping experience that is both seamless and highly personalized, grocery retailers can retain their existing customer base and gradually attract a wider audience.”
Total online grocery spending declined 18 basis points to capture 12.5% of the market for the year. When considering just the pickup and delivery methods – most stores do not offer ship-to-home as a delivery method – the decline was a mere 6 basis points year over year and made up 10.4% of all grocery spending in 2023.