AP

Demand for grocery delivery cools as food costs rise

Aug 7, 2022, 9:00 AM | Updated: Aug 8, 2022, 3:23 am

Karen Raschke, a retired attorney in New York, started getting her groceries delivered early in the pandemic. Each delivery cost $30 in fees and tips, but it was worth it to avoid the store.

Then earlier 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. She only uses delivery on rare occasions, like a recent heat wave.

“To do it every week is not sustainable,” she said.

Raschke isn’t alone. U.S. demand for grocery delivery is cooling as prices for food and other necessities rise. Some are shifting to pickup — a less expensive alternative where 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 saw tremendous growth during 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. DoorDash and Uber Eats began offering grocery delivery. Kroger — the nation’s largest grocer — opened automated warehouses to fulfill delivery orders. Amazon opened a handful of Amazon Fresh groceries, which provide free delivery to Prime members. Hyper-fast grocery delivery companies like Jokr and Buyk expanded into U.S. cities.

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 some turmoil in the industry. Buyk filed for bankruptcy in March; Jokr pulled out of the U.S. in June. Instacart — the U.S. market leader in grocery delivery — 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 this year.

Some think delivery demand could drop further. Chase Design, a consulting firm, says its surveys show the number of U.S. shoppers who plan to use grocery delivery “all the time” has fallen by half since 2021.

Cost is the biggest reason. Peter Cloutier, the growth and commercial strategy lead at Chase Design, said it’s difficult to get groceries to a customer’s door for less than a $10 premium, which covers labor and transportation. Often, that cost is higher.

Consider a basket of eight staples from Target, including a gallon of milk, a dozen eggs and a pound of ground beef. In store, the order 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 it charges more for each item on its website. The cart rings up at $39.90 from DoorDash, which then adds $12.18 in taxes and delivery fees. If the consumer adds a $10 tip, that totals $62.08.

Both DoorDash and Target offer free delivery through subscriptions, but those come with a monthly or yearly fee.

The premiums are tough to swallow on top of skyrocketing food prices. In June, U.S. grocery food prices were up 12.2% over the last 12 months, the largest increase since April 1979, according to government data.

Cynthia Carrasco White, an attorney for a nonprofit in Los Angeles, got accustomed to grocery delivery during the pandemic. She still prefers it, since her youngest child isn’t fully vaccinated and it saves time.

But earlier this summer, as gas prices approached $7 and a box of strawberries neared $9, she got serious about cutting costs.

White now toggles between Instacart, Uber Eats, Walmart and others, using whichever has the best offers and coupons. She will sometimes spend two hours filling a delivery cart and then wait to see if more promotions are posted before she finishes her order. And she has cut back on the amount she tips drivers.

“The economy has definitely taken the wind out of our sails,” she said. “It’s just this endless pressure.”

Retailers are responding by varying delivery prices by time of day. On a recent morning, Walmart offered to deliver a $35 order within two hours for $17.95; that dropped to $7.95 if the order could be delivered between 3 p.m. and 4 p.m.

But cost isn’t the only reason some consumers are moving away from delivery. Cloutier says many customers are wary of the quality of items selected by workers.

“There’s a trust gap between what the shopper wants to get and what the retailer fulfills,” Cloutier said.

Delivery companies are trying to improve that. Last month, Uber Eats announced upgrades to its online grocery offering, including the ability for consumers to see the products as workers scan them.

But even that may not entice some shoppers.

Diane Kovacs, a college lecturer in Brunswick, Ohio, has been using curbside pickup for nearly a decade. It saves her money, she says, because she doesn’t get sucked into impulse buys inside the grocery.

She got her groceries delivered briefly during the pandemic and she didn’t mind paying $10 or $15 a week for the service. But she still prefers pickup. She likes driving her dogs to the store and chatting with the employees.

“I think that people are not using delivery because they want to get the heck out of the house,” she said.

True demand for grocery delivery is tough to calculate. Usage can swing wildly when COVID cases rise or companies offer discounts, said David Bishop, a partner at Brick Meets Click.

But he sees some patterns emerging. Households with young children and people with mobility issues are sticking with delivery. People over 60 have generally gone back to shopping in person.

Bishop says delivery saw five years of growth in the first three months of the pandemic, and demand is probably still elevated. Eventually, he expects delivery sales to settle into more regular growth of about 10% per year. But delivery won’t go away, he said.

“I don’t see it moving all the way back to pre-COVID levels. That can has been opened up,” he said.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

Arizona and New York attorneys feud over extraditing suspect...

Associated Press

Why Alvin Bragg and Rachel Mitchell are fighting over extraditing suspect in New York hotel killing

Maricopa County Attorney Rachel Mitchell says she isn't into extraditing a suspect due to her lack of faith in Manhattan’s top prosecutor.

1 day ago

A Gila monster is displayed at the Woodland Park Zoo in Seattle, Dec. 14, 2018. A 34-year-old Color...

Associated Press

Colorado man dies after being bitten by pet Gila monster

A Colorado man has died after being bitten by his pet Gila monster in what would be a rare death by one of the desert lizards if the creature's venom turns out to have been the cause.

3 days ago

Police clear the area following a shooting at the Kansas City Chiefs NFL football Super Bowl celebr...

Associated Press

1 dead, many wounded after shooting at Kansas City Chiefs’ Super Bowl victory parade

One person died after 22 people were hit by gunfire in a shooting at the end of the Kansas Chiefs' Super Bowl victory celebration Wednesday.

10 days ago

This image from House Television shows House Speaker Mike Johnson of La., banging the gavel after h...

Associated Press

GOP-led House impeaches Homeland Security Secretary Mayorkas — by one vote — over border management

Having failed to impeach Homeland Security Secretary Alejandro Mayorkas the first time, House Republicans are determined to try again Tuesday.

11 days ago

Defense Secretary Lloyd Austin, right, and Kenya's Defense Minister Aden Duale, left, listen during...

Associated Press

Defense Secretary Lloyd Austin hospitalized with bladder issue

Defense Secretary Lloyd Austin has been hospitalized following symptoms pointing to an “emergent bladder issue."

12 days ago

Joel Osteen, the pastor of Lakewood Church, stands with his wife, Victoria Osteen, as he conducts a...

Associated Press

Woman firing rifle killed by 2 off-duty officers at Houston’s Lakewood Church run by Joel Osteen

A woman entered the Texas megachurch of Joel Osteen and started shooting with a rifle Sunday and was killed by two off-duty officers.

13 days ago

Sponsored Articles

...

Collins Comfort Masters

Here’s 1 way to ensure your family is drinking safe water

Water is maybe one of the most important resources in our lives, and especially if you have kids, you want them to have access to safe water.

...

Day & Night Air Conditioning, Heating and Plumbing

Day & Night is looking for the oldest AC in the Valley

Does your air conditioner make weird noises or a burning smell when it starts? If so, you may be due for an AC unit replacement.

...

Fiesta Bowl Foundation

The 51st annual Vrbo Fiesta Bowl Parade is excitingly upon us

The 51st annual Vrbo Fiesta Bowl Parade presented by Lerner & Rowe is upon us! The attraction honors Arizona and the history of the game.

Demand for grocery delivery cools as food costs rise