ALEXANDRIA, Va.—U.S. consumers are cutting out grocery delivery or shifting to pickup as other costs rise, such as housing and food, reports the Associated Press.
During the pandemic, grocery delivery soared as people avoided visiting grocery stores, spending $3.2 billion on grocery delivery in June 2020, compared to $500 million in August 2019. In response, Uber Eats and DoorDash began delivering groceries, while Kroger opened automated warehouses to fulfill delivery orders. Ultra-fast grocery delivery services, such as Jokr, were founded and expanded rapidly.
But consumers are cutting out extra expenses to grapple with decades-high inflation, and grocery delivery is one area that is on the chopping block. Grocery delivery was down 26% in June 2022 from June 2020, with consumers spending $2.5 billion on delivery.
According to Peter Cloutier, the growth and commercial strategy lead at Chase Design, it’s tough to delivery groceries for less than $10 in fees due to cost of labor and transportation, and that’s not including a tip to the delivery driver. These fees combined with increased food prices—U.S. grocery food prices were up 12.2% over the past 12 months—has many rethinking how they get their groceries.
Consumers are also rethinking grocery delivery because of the quality of food they receive. “There’s a trust gap between what the shopper wants to get and what the retailer fulfills,” Cloutier told AP.
However, households with young children and people with mobility issues are sticking with delivery. According to David Bishop, a partner at Brick Meets Click, noted that grocery delivery is still up compared to pre-pandemic times. He told AP that he expects delivery sales to settle into more regular growth of about 10% per year and that delivery won’t go away.
“I don’t see it moving all the way back to pre-COVID levels. That can has been opened up,” he said.
Food-delivery apps, such as DoorDash, Uber Eats and Grubhub, are also facing headwinds. Much like grocery-delivery apps, these food-delivery apps were used heavily during the pandemic and are now facing slow growth. But now that the pandemic has waned and rising prices weigh on the American consumer, food-delivery apps are offering new ads and deals to attract customers, updating their apps to encourage more spending and deliver more than food to keep and attract new customers.
The question is whether consumers will consider food and grocery delivery a luxury or a necessity if an economic downtown occurs.
“There is more economic pain incoming for consumers,” Matthew Goodman, a senior analyst at the data analytics firm M Science, told the Wall Street Journal. “You have to wonder if more price-sensitive consumers are going to be willing to pay for that convenience as often as they have been.”
According to the NACS “Last Mile Fulfillment in Convenience Retail” report, 61% of retailers are satisfied with their third-party delivery partners. Concerns include high fees, little access to consumer data, difficulties delivering age-restricted products and service and operational issues.
Here’s what c-stores are doing to make delivery work for their businesses.