Huge delivery discounts from retailers like Walmart and Instacart helped boost grocery e-commerce sales in July.
The overall U.S. online grocery market ended the month with sales of $7.9 billion, up 9.2% year over year, according to the latest data from the Brick Meets Click/Mercatus Grocery Shopper Survey.
Delivery sales supported by special offers played a big role, with Walmart offering a 50% discount on its Walmart+ membership in mid-July, bringing the annual fee down to $49, and Instacart offering an 80% discount on its annual membership.
As a result, delivery sales increased by 22% in July. Home deliveries increased by 6%, while self-collection remained stable year-on-year.
“Walmart and Instacart aren’t the only players using deep discounts to drive delivery demand,” says David Bishop, partner at Brick Meets Click. “For example, Amazon offered a 90-day free trial of Prime in July, up from the usual 30 days, along with unlimited grocery delivery. DoorDash and Uber Eats are also keeping low or no delivery fees to increase their market share.”
Both grocers and mass retailers saw year-over-year increases in monthly active users (MAU) in July. Grocers’ base grew twice as fast as last year, at about 7%, and mass retailers saw an increase of nearly 8%. Delivery MAU increased more than 10% year-over-year, and home delivery items increased nearly 4%. Pickup MAU decreased slightly (less than 2%).
Ecommerce order volume also increased 5% year over year in July. Delivery orders led the way with a nearly 20% increase, while growth in the ship-to-home user base offset a decline in order frequency, resulting in a 2% increase in order volume for the month. However, pickup order volume declined 3% compared to July 2023, reflecting lower order frequency on a shrinking MAU base.
Total spend per order increased nearly 4% year-over-year across all three methods. Average order values (AOV) for home delivery increased the most, growing 4%, while pickup and delivery were up 3% and 2%, respectively.
Mass retail saw AOV increase by 3%, while grocery remained flat year-on-year.
“Intense competition in grocery delivery is eroding local grocers’ control over customer interactions,” said Mark Fairhurst, chief growth officer at Mercatus. “While third-party marketplaces can drive short-term gains in order volume, they also make it harder for grocers to achieve the economies of scale needed to reduce operating costs.”
“I’m not sure many grocers would jump at the opportunity to open a farmers market in their store’s parking lot. However, many are willing to do something similar when it comes to relying on marketplaces for their online business,” Fairhurst added.
Cross-shopping rates for July 2024 remain high, as nearly one in three customers continued to shop online at both grocery and mass retail stores last month. The proportion of grocery customers (including both supermarkets and hard discounters) who also received an online grocery order from a mass retailer was 32.1% in July.
The share of grocery customers receiving online orders from Walmart reached nearly 22.5%, up 430 basis points year-over-year and the highest level reached so far in 2024. At Target, the share rose 100 basis points, reaching 14.9%, the highest level this retailer has reached in the past two years.
