Demand for grocery delivery cools in US as food prices soar

Karen Raschke, a retired New York attorney,began receiving grocery deliveries early in the pandemic.Each delivery cost her a $30 fee plus tip, but it was worth avoiding the store for her.

And this spring, Raschke learned that her rent had increased by $617 a month. Her delivery is one she cuts from her budget first. Now 75, he walks four blocks to the grocery store several times a week. She rarely takes advantage of deliveries, such as the recent heat wave.

"It's not sustainable to do it every week," she said.

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Raschke Alone No. Grocery delivery demand in the United States issluggish as prices for groceriesand otherstaples rise. Some are moving to pickup, a cheaper alternative for shoppers to pull over or go to the store to pick up their already bagged groceries.

Grocery Delivery , experienced tremendous growth in the first year of the pandemic. August 2019 — A typical pre-pandemic month — An American spent $500 million on grocery deliveries. It was a $3.4 billion business by June 2020, according to market research firm Brick Meets Click.

Companies rushed to meet the demand. DoorDash and Uber Eats are now delivering groceries. Kroger, the nation's largest grocery store, has opened an automated warehouse to fulfill delivery orders. Amazon has opened several AmazonFresh grocery stores that offer free delivery to Prime members, and ultra-fast grocery delivery companies such as Jokr and Buyk have expanded into U.S. cities.

But Pandemic Eases Demand weakened over time. In June 2022, Americans spent $2.5 billion on grocery deliveries, down 26% from 2020. For comparison, they spent $3.4 billion on grocery pick-ups, with demand down 10.5% from pandemic-time highs.

It's causing chaos in the industry. Buyk filed for bankruptcy in March. Jokr he withdrew from the United States in June. Instacart, the U.S. market leader in grocery delivery, slashed its valuation by 40% to $24 billion in March ahead of his potential IPO. Kroger said the company's digital sales, which include pickup and delivery, fell 6% in the first quarter of this year.

Some believe that delivery demand may decline further. The number of U.S. shoppers who plan to "always" use grocery delivery has halved since 2021, according to consulting firm Chase Design, according to its research.

Cost is the biggest reason. Chase Design's head of growth and commercial strategy, Peter Cloutier, who covers labor and transportation costs, said it's hard to get groceries to customers' doors at a premium of less than $10. Often the cost is high.

Consider Target's basket with eight staples, including a gallon of milk, 12 eggs, and a pound of ground beef. In stores, the order rings at $35.12. Target offers complimentary curbside pickup. Shipping is $9.99 and does not include tip.

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DoorDash also offers delivery from Target, but they charge more for each item on their website. Cart price from DoorDash is $39.90 plus tax and shipping of $12.18. When the consumer adds his $10 tip, in total he gets $62.08.

DoorDash and Target both offer free delivery with subscriptions, but they charge a monthly or yearly fee. increase.

In addition to rising food prices, insurance premiums are hard to swallow. U.S. grocery prices rose 12.2% in June in the past 12 months, the biggest rise since April 1979, according to government data.

Los Angeles nonprofit attorney Cynthia Carrasco-White was accustomed to grocery deliveries during the pandemic.

But earlier this summer, when gas prices approached $7 and a box of strawberries approached $9, she realized that cost We are serious about reducing it.

White now switches between Instacart, Uber Eats, Walmart and more, using whichever has the best offers and coupons. Sometimes she spends two hours stuffing her shipping cart and checking to see if any more promotions are posted before completing the order. Also, she reduced the tip amount for the driver.

"The economy has definitely blown the wind out of our sails," she said. "It's just this endless pressure."

Retailers have responded by varying delivery prices depending on the time of day. On a recent morning, Walmart offered to deliver her $35 order within two hours for $17.95. If the order was delivered between 3pm, it dropped to $7.95. and 4 pm.

But cost isn't the only reason some consumers are staying away from delivery. According to Cloutier, many customers are concerned about the quality of the products employees choose.

"There is a trust gap between what shoppers want to get and what retailers deliver," Cloutier said.

Carriers are trying to improve it. Last month, Uber Eats announced upgrades to its online grocery offering, including the ability for consumers to see products as employees scan them.

But that may still not appeal to some shoppers.

Diane Kovacs, a college lecturer in Brunswick, Ohio, has been using his curbside pickup for nearly a decade. It saves her money, she says, because she doesn't make impulse purchases at the grocery store.

During the pandemic, she had groceries easily delivered, but she didn't mind paying $10 or she $15 a week for the service. . But she still prefers pick-ups. She likes to take her dog to the store and chat with the employees.

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"I don't think people are taking advantage of deliveries because they want to get out of the house," she said. .

Calculating the true demand for grocery delivery is difficult. Brick Meets Click partner David Bishop said usage could fluctuate wildly if COVID cases rise or companies offer discounts.

But he sees some patterns emerging. Households with young children or those with mobility issues stick to delivery. People over 60 generally went back to shopping in person.

Bishop said deliveries were up in his first three months of the pandemic and his five years, and demand is likely still growing. Ultimately, we expect delivery revenue to settle into regular growth of approximately 10% annually. But deliveries won't go away, he said.

"I don't think we're going back to pre-coronavirus levels. The can has been opened," he said.

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