Fri, 07 Oct 2022

Demand for grocery delivery cools as US food costs rise

Robert Besser
10 Aug 2022, 16:57 GMT+10

WASHINGTON D.C.: As prices for food and other basic staples are rising, U.S. demand for grocery deliveries is cooling, with some switching to pickups at curbsides or stores, which is a less expensive alternative, while other shoppers say they are comfortable doing their own shopping.

According to Brick Meets Click, a market research company, grocery deliveries witnessed considerable growth during the first year of the COVID-19 pandemic, adding that in August 2019, a typical pre-pandemic month, Americans spent $500 million on grocery deliveries, but by June 2020, this was up to $3.4 billion.

DoorDash and Uber Eats began offering grocery deliveries, while Kroger, the largest grocer in the U.S., opened automated warehouses to fulfill delivery orders. Amazon also opened a handful of Amazon Fresh groceries, which provide free delivery to its Prime members.

However, demand went down as the pandemic eased. In June 2022, $2.5 billion was spent on grocery deliveries, down 26 percent from 2020.

As a result, companies in the industry have witnessed considerable downturns. Instacart, the market leader in grocery deliveries, slashed its own valuation by 40 percent to $24 billion in March, ahead of a potential IPO, while Buyk filed for bankruptcy in the same month. In June, Jokr pulled out of the U.S. market.

"It is difficult to get groceries to a customer's door for less than a $10 premium, which covers labor and transportation. Often, the cost is higher," said Peter Cloutier, growth and commercial strategy lead at Chase Design, as reported by the Associated Press.

According to government data, in June U.S. grocery food prices were up 12.2 percent over the last 12 months, the largest increase since April 1979.

During the pandemic, Cynthia Carrasco White, an attorney for a nonprofit organization in Los Angeles, became accustomed to grocery deliveries and still prefers them, since her youngest child is not yet fully vaccinated and it saves time.

But as gas prices approached $7 per gallon and a box of strawberries neared $9, she became serious about cutting costs.

"The economy has definitely taken the wind out of our sails. It is just this endless pressure," she said.

The extra cost is not the only reason that consumers are moving away from deliveries.

Many customers are wary of the quality of items selected by workers, Cloutier noted, stating, "There is a trust gap between what the shopper wants to get and what the retailer fulfills."

Some delivery companies are trying to improve their dependability, including Uber Eats, which last month announced upgrades to its online grocery offering, including the ability for consumers to see the products as workers scan them, many shoppers have not been enticed.

Diane Kovacs, college lecturer in Brunswick, Ohio, has been using curbside pickup for nearly a decade, as she likes driving her dogs to the store and chatting with store employees.

"I think that people are not using delivery because they want to get the heck out of the house," she said, as reported by the Associated Press.

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