“Achieving growth will only get more challenging for grocers that don’t have a competitive offering or ways to offset the discounts,” said David Bishop, partner at Brick Meets Click. “Converting a customer into a member/subscriber motivates them to buy more frequently, especially given that most firms are promoting ‘free’ delivery. Even though there’s a cost to join, explicit fees are an on-going source of friction that many shoppers want to avoid.”
As background, the special offers and promotions made by a variety of players over the past several months have mainly focused on delivery services. Beginning in May 2024, Instacart offered 80 percent off its annual membership. Walmart followed shortly after and promoted a 50 percent discount on its membership program. Then, in July and August, Walmart, and other competitors such as Amazon and SpartanNash featured similar deals, with some offers targeting specific segments like students and teachers for the back-to-school season.
The collective impact of these promotional efforts is evident after analyzing sales results across the last six months. In the three-month period following the start of the promotions (June to August 2024), total eGrocery sales growth accelerated, increasing to 7.9 percent year over year (YOY), compared to 1.4 percent YOY for the preceding three-month period (March to May 2024).
The specific impact on delivery has been even more dramatic. Compared to last year, delivery sales grew by 16.1 percent during the June to August 2024 period versus just 0.6 percent during the March to May 2024 period. The main growth drivers between the two three-month periods included expansion of delivery’s MAU base, which increased by 13.9 percent YOY during June to August versus 4.6 percent during March to May, and skyrocketing order frequency, which climbed 14.9 percent YOY versus a decline of 2.2 percent in the prior three-month period.
For Walmart, the positive impact of the promotions likely extends beyond online sales. The share of U.S. households that primarily shop for groceries at Walmart, either in-store or online, increased to approximately 30 percent in June to August 2024 versus March to May 2024.
Households that chose Walmart as their primary grocery retailer were already more likely to buy groceries online, and now the difference between Walmart and supermarkets has widened even further on that metric. And, when households buy groceries online, Walmart’s primary customers are increasingly likely to do so from Walmart as well.
“We know regional grocers are facing increased competition from retail giants like Walmart and Amazon, who can leverage huge pools of CPG ad monies to sustain aggressive promotions and capture more share of the online business,” said Mark Fairhurst, chief growth officer at Mercatus. “Regional grocers should play to their strengths in fresh foods, private label, and convenient locations while investing in targeted promotions that resonate with existing customers. Creating stronger customer connections via relevant, personalized engagement is vital for building loyalty and competing digitally today.”
