Online sales drop by $1bn from April to May 2022 fueling migration towards mass channel shopping

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Photo Credit: GettyImages / SDI Productions (Getty Images)

Total online grocery sales dropped on a monthly basis to $7.1bn in May 2022 (down from $8.1bn in April 2022), but are still slightly above (+1.7%) the same period last year, according to the latest Brick Meets Click/Mercatus Grocery Shopping Survey, which attributes the monthly decline to rising inflation.

Compared to last year, sales for pickup (includes orders that are received by customers either inside or outside a store or at a designated location/locker) and delivery (includes orders received from a first- or third-party providers such as Instacart, Shipt or the retailer's own employees) rose by 9% and 5% in the month of May, respectively.

Pickup, the largest online grocery shopping segment with 45% share of sales, experienced a 10% gain in its monthly active user base (MAU) and mid-single digit increase to its average order value (AOV), offset by a marginal drop in order frequency. 

Delivery, with a dollar share of 36%, saw modest gains in MAU and AOV and a roughly 5% drop in order frequency. 

Ship-to-home, which represents 19% of online grocery sales, registered the largest drop in sales of 16% vs. the prior year, a more than 10% decline in AOV and order frequency, and a 10% drop in its MAU base.

"Beneath the top-line results, it’s evident that as price inflation erodes purchasing power customers are increasingly focused on finding ways to pay no more than necessary when shopping online," said Brick Meets Click in its survey. 

Cost tops list of primary purchase drivers

For customers shopping in the Mass and Grocery channels, price has become a primary motivating factor in grocery shopping. According to the survey, the percentage of shoppers who cited cost as the most important selection criteria rose by 6% from 37% in August 2020 when customers were first asked the question, to 43% in May 2022. The jump was more steep for grocery customers than in mass with a 10% increase among the number of grocery channel shoppers citing cost as their top consideration when shopping.

“Interestingly, for Grocery customers, the importance of ‘getting the products you want’ has dropped from the top consideration to the bottom when ranked against the elements of cost and convenience, and this holds true for both Pickup and Delivery services,” said David Bishop, partner at Brick Meets Click, who speculated that the importance of cost may push more shoppers towards pickup services.

“Less than one-quarter of online grocery customers who shop with Grocery or Mass online use both Pickup and Delivery services, so the increased cost consideration within this group may actually drive more demand toward Pickup," he said. 

“Customers appreciate the convenience of ordering online, but they are also becoming more cost conscious,” commented Sylvain Perrier, president and CEO, Mercatus.

“So, to defend the base business, Grocers can promote pickup to address both issues. Assuming the pickup experience aligns with customer expectations, showcasing the savings associated with pickup’s lower fees, no fuel surcharges, or zero tips can better protect your online customers and sales by highlighting a more affordable alternative to home delivery.”

Migration towards mass channel

While the mass channel is not immune to the effects of inflation, the channel did see a 20% surge in its MAU base last month vs. the same period last year. By comparison, grocery declined by over 10% in its MAU base vs. last year. 

A similar trend played out with order frequency. Online customers shopping in the mass channel placed nearly 2% more orders on average in May versus the prior year while the online grocery channel experienced a 5% decline in order frequency. And while AOVs for both Grocery and Mass grew during the month versus May 2021, both trailed the general rate of grocery inflation, suggesting fewer items in the basket, according to the survey data.

The share of grocery’s MAU base that also shopped online with mass for groceries during the month hit 33%, a new record high in cross channel shopping.

"Even though this elevated rate may be temporary, grocers are at a risk of losing customers to Mass," said Brick Meets Click.