January was the peak sales month for online grocery sales, reaching $9.3 billion during the month, according to a Brick Meets Click/Mercatus Grocery Shopping Survey conducted Jan. 28-31. Sales in February started to fall, dropping 14% to $8 billion, and have remained on a slow decline since, as more Americans began leaving their homes. Sales fell 24% from January through June, according to Bloomberg Second Measure.
But for some companies, online grocery sales and delivery remain red-hot, and it's likely not a surprise to find that Walmart Grocery remains the top destination for Americans shopping online for groceries.
"While demand for grocery delivery still exceeds pre-pandemic levels, sales have been gradually declining in 2021. Through all of the expansion and contraction over the past few years, Instacart and Walmart Grocery continue to be leaders in the grocery delivery space," Bloomberg Second Measure wrote in a blog posting this week that analyzed the online grocery sales sector.
The research firm said total sales between March and April 2020 jumped 62% as COVID-19 took hold, led by Instacart, Walmart (NYSE: WMT), Shipt, Peapod and FreshDirect, with Instacart actually overtaking Walmart in the early days of the pandemic.
But order was soon restored and the traditional market players began to dominate.
As of June 2021, Walmart Grocery handles 48% of grocery delivery sales and Instacart handles 45%, the company said. Shipt, which is owned by Target (NYSE: TGT), collected 6% of sales, followed by Peapod and FreshDirect with 1% each. The latter two are regional firms, with PeaPod operating primarily on the East Coast and FreshDirect in the New York City, Philadelphia and Washington, D.C., areas.
Bloomberg Second Measure noted that Shipt's totals do not count grocery sales that originated on Target.com. The firm also noted that it is unable to differentiate grocery delivery sales from meal delivery sales on DoorDash and Uber Eats, and therefore does not include those in its rankings. Amazon is also not included due to the inability to separate grocery sales from other Amazon purchases.
Location, Location, Location
The research found region and metro areas mattered when it comes to which service consumers use. For instance, Instacart is particularly strong in California cities, holding 94% of the market in San Francisco and 86% in Los Angeles. However, in the Dallas-Fort Worth and Houston areas, Walmart Grocery is king, with 61% and 41% share, respectively. Shipt is very strong in Houston as well with 20% share.
Location likely also plays a role in average sales per customer. FreshDirect, with its strong presence in New York City and Philadelphia, led the way with a $1,087 average customer spend in Q2 2021, nearly twice the average of Walmart customers. PeaPod had the second-highest average at just over $700. Walmart was actually last in the rankings at under $600 average spend.
"Prior to Q2 2020, Instacart had the lowest quarterly sales per customer among its competitors. However, Walmart Grocery has had the lowest quarterly sales per customer since Q2 2020," the blog noted. "Between Q1 2020 and Q2 2020, Instacart's sales per customer increased 69 percent while Walmart's only increased 9 percent. But Walmart is quickly closing the gap. In Q2 2021, Instacart's average sales per customer was $602 while Walmart's was $565."
Grocery Delivery Wars Just Heating Up
The push to achieve profitability in the grocery delivery wars is continuing to heat up. Just this week, Instacart announced it will begin opening microfulfillment centers in partnership with retail grocers to handle online sales. The company will partner with Fabric, which will provide software and robotics for the facilities, which will start rolling out over the next 12 months.
Uber this week also announced it was expanding its grocery delivery service to more than 400 cities. First launched in July 2020, the service will partner with Albertsons Co. Inc.(NYSE: ACI) and 1,200 of its grocery stores, including familiar names like Safeway, Jewel-Osco, ACME, Tom Thumb and Randalls. With an even larger network in place, Uber hopes to cut grocery delivery times from days to hours — or even minutes.
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