Record monthly sales driven by membership discounts, demographic shifts and retailer innovation
The U.S. grocery industry’s digital transformation hit a new milestone in February, with online grocery sales surging 31 percent year-over-year to $10.3 billion, according to the latest Brick Meets Click/Mercatus Grocery Shopper Survey.
This marks the ninth consecutive month of positive growth, underscoring how aggressive subscription strategies, demographic shifts, and retailer adaptability are fueling online grocery’s dominance. For supermarkets, mass retailers and suppliers, the data reveals critical opportunities – and challenges – in a sector where online now claims 18 percent of total online grocery spending.
Delivery dominates as older shoppers embrace digital
Delivery continued its upward trajectory, skyrocketing 45 percent year-over-year to $4.5 billion – nearly 44 percent of total online grocery sales. This surge was powered by a growing base of monthly active users (MAUs), particularly among shoppers aged 60+, plus a rebound in engagement with 18-29-year-olds. Higher order frequency and average order values (AOVs) also cemented delivery’s lead.
Why It Matters for Grocers: The adoption by older demographics calls for user-friendly platforms – think larger font sizes and simplified checkouts – and targeted marketing strategies that emphasize convenience and reliability.
Pickup holds steady, ship-to-home gains traction
Pickup sales climbed 19 percent year-over-year to $4.1 billion. Despite the increase, pickup’s share of total online grocery sales dipped around 400 basis points to just over 39 percent – a slide partly attributed to in-store anti-theft measures (e.g., locked plexiglass displays) pushing some shoppers toward other fulfillment channels.
Meanwhile, ship-to-home sales jumped 29 percent to about $1.8 billion, retaining around 17 percent of total online grocery spending. This uptick was driven mostly by a surge in MAUs who prefer home delivery to bypass in-store security measures, along with modest increases in order frequency and AOV.
Key Takeaway: While pickup remains cost-effective for retailers, the growth of ship-to-home highlights the need for flexible fulfillment options. Supermarkets should explore carrier partnerships (FedEx, UPS) to match the logistics prowess of mass retailers.
Supermarkets close the gap with mass in repeat intent
Both supermarket and mass formats saw improved repeat intent rates for delivery and pickup. Grocery (including supermarkets and hard discounters) narrowed the gap with mass, with the likelihood of reusing the same service finishing just 7 percent below pre-COVID levels – a post-pandemic high.
“Regional grocers are converting first-time shoppers into loyal customers, but so is Walmart,” said Mercatus’ Mark Fairhurst. “Success hinges on pairing personalized offers, seamless fulfillment, and loyalty rewards.”
Actionable Insight: Localized promotions and frictionless online experiences – such as real-time inventory updates and accurate substitutions – are vital to retaining price-sensitive shoppers once trial discounts end.
[RELATED: January 2024 Online Grocery Sales Jump To $10B]
Membership discounts unlock latent demand
The growth streak coincides with retailers rolling out deeply discounted annual memberships – a strategy that has locked in many households despite inflationary pressures. More than 80 million households placed online orders in February, a record high.
“These offers tap into latent demand by helping customers save money on online grocery,” said David Bishop of Brick Meets Click.
Strategy Watch: Grocers must carefully balance the costs of steep promotions with profitability. Tiered membership structures (e.g., free pickup on orders above $100/month) could sustain momentum without eroding margins.
The road ahead: online vs. in-store dynamics
With online grocery sales climbing at seven times the pace of overall grocery spending (5 percent YoY), retailers face a pivotal choice: double down on digital or risk ceding share. For suppliers, this shift demands rethinking packaging, promotions and omnichannel assortments.
Tip for Retailers: The data confirms that online grocery is no longer a pandemic-era outlier – it’s the new baseline. To compete, prioritize tech investments (e.g., AI-driven personalization), streamline fulfillment and leverage loyalty programs that reward recurring engagement.
For more insights on grocery retail trends, explore The Shelby Report’s coverage of Online Grocery Technology.