Grocery Delivery Falls Off as Prices Rise

Inflation, premium charges drive consumers back to stores
By Newser Editors and Wire Services
Posted Aug 7, 2022 5:20 PM CDT
Rising Prices Cool Grocery Delivery Market
Shoppers pick out groceries at a store in Glenview, Ill., last month.   (AP Photo/Nam Y. Huh)

Karen Raschke, a retired attorney in New York, started having groceries delivered early in the pandemic. Each delivery cost $30 in fees and tips, but it was worth that to avoid the store. Then this spring, Raschke learned her rent was increasing by $617 per month. Delivery was one of the first things she cut from her budget. Now, the 75-year-old walks four blocks to the grocery several times a week, the AP reports. She only uses delivery on rare occasions, like during a recent heat wave. "To do it every week is not sustainable," she said.

US demand for grocery delivery is cooling as prices for food and other necessities rise. Some consumers are shifting to pickup—a less expensive alternative in which shoppers pull up curbside or go into the store to collect their already-bagged groceries—while others say they're comfortable doing the shopping themselves. Grocery delivery had tremendous growth in the first year of the pandemic. In August 2019—a typical pre-pandemic month— Americans spent $500 million on grocery delivery. By June 2020, it had ballooned to a $3.4 billion business, according to Brick Meets Click, a market research company. Companies rushed to fill that demand.

But as the pandemic eased, demand softened. In June 2022, Americans spent $2.5 billion on grocery delivery, down 26% from 2020. For comparison, they spent $3.4 billion on grocery pickup, which saw demand drop 10.5% from its pandemic highs. That's causing turmoil in the industry. Buyk filed for bankruptcy in March; Jokr pulled out of the US in June. Instacart, the US market leader, slashed its own valuation by 40% to $24 billion in March ahead of a potential IPO. Kroger said its digital sales, which include pickup and delivery, dropped 6% in the first quarter of 2022. Some think delivery demand could drop further, per the AP. A consulting firm says its surveys show the number of US shoppers who plan to use grocery delivery "all the time" has fallen by half since 2021.

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Cost is the biggest reason. Consider a basket of eight staples from Target, which in store would ring up at $35.12. Target offers curbside pickup for free; delivery costs $9.99, not including a tip. DoorDash also offers delivery from Target but charges more for each item on its website. The cart rings up at $39.90 from DoorDash, which adds $12.18 in taxes and fees. If the consumer adds a $10 tip, that totals $62.08. DoorDash and Target offer free delivery but only with a monthly or yearly fee. The premiums are tough to swallow on top of skyrocketing food prices; in June, US grocery food prices were up 12.2% over the past 12 months, according to government data. There's another factor. An Ohio woman who has returned to shopping in person said, "I think that people are not using delivery because they want to get the heck out of the house."

(More food delivery stories.)

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