CHICAGO—Once viewed as a luxury, grocery delivery has become a mainstream service offering, fueled by the coronavirus pandemic, NBC News reports.
“Most grocers didn’t view delivery that seriously pre-pandemic,” said James Cook, director of retail research with Jones Lang LaSalle. “But the demand for online grocery skyrocketed and that includes both delivery and click and collect.”
With eating out largely prohibited by stay-at-home orders, making meals at home became a way to both feed families and cope with pandemic-related stress. This resurgence in at-home meal making drove online grocery delivery sales.
“Despite the fact that people are now returning to restaurants, sales at grocers are holding at higher levels than before the pandemic. It’s not a zero sum game," Sara Wyeth, a lead retail and restaurant analyst with S&P Global Ratings, told NBC.
From Walmart to Kroger, e-commerce sales skyrocketed. “[Based on] everything that we can see, the customers continue to like to shop online,” said William McMullen, CEO of Kroger.
However, online delivery for retailers—and consumers—can be expensive. For grocers, the cost comes from not being set up for order fulfillment. For consumers, the goods often cost more than in-store shoppers paid because of the labor involved in gathering the items, and delivery fees.
“Mass market grocery is a high-volume, low-margin industry, and the complexities of serving online have long meant it is an unprofitable channel for many grocers, who have tended to overlay more and more cost onto their store businesses to meet e-commerce demand,” said Lawrence Hene, chief product officer at Ocado Solutions. “With the market growth in the past 18 months, this is no longer a viable long-term strategy for grocers online.”
One June survey found U.S. consumers bought $6.8 billion worth of groceries online. That’s a 23% decline from the same period last year and down 3% compared to May 2021.
To read more about the challenges associated with e-commerce and last-mile services and what consumers expect from retailers, read “Covering the Last Mile” in NACS Magazine.