Online Grocery Peaked in 2021 – It Just Doesn’t Work for Most

In 2020, as Covid up-ended our lives, I fielded lots of inquiries about how to make use of Direct-to-Consumer sales. 

If you remember, e-commerce sales had just exploded overall at the time. Americans received multiple stimulus checks and payroll protection and could not spend money at events or restaurants. Savings ballooned in a country that does not save. America was trapped at home with multiple digital screens and flush with cash.

If we look at the monthly sales data collected by Bricks Meets Clicks, run by David Bishop’s team, online grocery sales quadrupled in just one month, March 2020, and kept growing steadily for the next 18 months or so. Online grocery (home delivery from the store, pickup at the store, and ship-to-home from warehouses like Amazon) eventually peaked at just over $9B monthly in early 2021. And then it slipped to around $8B monthly in most of 2022. On an annual basis, online grocery peaked in 2021 and slipped a lot in 2023.

Early signs show more usage loss by lower-income consumers in 2024.

What’s most important to note is that online grocery has not followed the topline pattern of overall grocery. It has not grown artificially due to inflationary price increases – the ones taken by retailers in 2022 and 2023. So, online grocery is declining on an inflation-adjusted basis. And it is declining its share of grocery.

What appears to be happening is withdrawal from online grocery at the lower end of the income scale combined with decreasing order values. Instacart significantly has helped make this enormous surge in online grocery possible. 

But the fee structure and required tips add up if you do most grocery shopping this way. While affluent homes may have switched to 100% of groceries via Instacart during the first two years of the pandemic, this is simply not viable for middle-class homes. So, there has been a natural reduction in online cart size.

Only so many households feel their personal time is so valuable that they need to eliminate grocery shopping in-store for a substantial chunk of their groceries OR who just can’t get to the store today for something they need. 

The real net benefit of online grocery ordering to founders of consumer brands remains one thing: the relatively high ROI for Instacart ads – what we might call – modern trade marketing at the point-of-click. Otherwise, it may have honestly peaked.