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Food Delivery Demand Wanes

Specialty Food Association

U.S. grocery delivery demand has diminished as food prices and the cost of other necessities rise, reports ABC News. Some shoppers have transitioned to order pick up, the cheaper alternative, and others have returned to shopping in-store.

During the pandemic, grocery delivery profits exploded to $3.4 billion in June 2020, up from $500 million in a typical pre-pandemic month, according to market research firm Brick Meets Click. To meet the demand, companies like DoorDash and Uber Eats as well as national retailers like Kroger began offering delivery services for grocery items.

Recent demand, however, has shrunk: June 2022 saw a $2.5 billion spend on grocery delivery, down 26 percent from the same month two years earlier. This has caused smaller delivery companies that rushed to fill the space, like Buyk and Jokr, to file for bankruptcy or leave the domestic market. Instacart has likewise experienced hardships, cutting its valuation by 40 percent in advance of its potential IPO. In its first quarterly report of the year, Kroger also noted its digital sales have declined 6 percent.

The growth and commercial strategy lead at Chase Design, Peter Cloutier, cited cost as the biggest reason for this decline, noting the difficulty to get groceries delivered for under a $10 premium, covering labor and transportation. These premiums are compounded by the rising cost of food, up 12.2 percent over the last year, which government data indicates is the largest jump since April 1979.

Cloutier also included that many customers are wary of the item quality that workers select when choosing pick up or delivery. “There’s a trust gap between what the shopper wants to get and what the retailer fulfills,” he said.

David Bishop, partner at Brick Meets Click also indicated some patterns that may illuminate the true demand for grocery delivery, an otherwise difficult-to-calculate category. He said that the service usage can sway dependent on COVID-19 cases, and the household makeup since those with younger children or inhabitants with mobility issues are likely to continue to choose delivery. Full Story

Related: Uncle Giuseppe's Enables Catering Via Instacart; Kroger Delivery Comes to Dallas