January online grocery sales rise an estimated 16.6%

Consumers purchased $10 billion in online groceries in January, up 16.6%, according to Brick Meets Click and Mercatus. The growth was from all three fulfillment methods — delivery, ship-to-home, and pick up — with delivery leading the charge.

David Bishop, a partner at Brick Meets Click, said much of the delivery growth is driven by mass retailers and specifically Walmart. He said the ongoing promotional tactics are having an intended positive impact on frequency and spending, which is helping Walmart increase and retain market share.

Delivery sales rose by roughly 37% in January to $4.1 billion. As a result, delivery gained 6.1% in sales share and now has 41% of total e-grocery sales, the report states.

“Delivery’s impressive growth has been driven by membership promotions, but shoppers can easily shift platforms depending on which factor matters most to them — price, product, or convenience,” said Mark Fairhurst, chief growth marketing officer at Mercatus.

Walmart Chief Financial Officer John David Rainey recently said the popularity of expedited delivery has resulted in more than 30% of orders coming from customers and members who elected to pay a convenience fee to receive their scheduled delivery in less than one hour or less than three hours. Walmart also reported its membership income for its subscription service grew by double-digits in the quarter ending Jan. 31.

Bishop said the pickup mode also continues to grow sales, but it conceded 5% of its market share to delivery at 42% of the e-grocery sales. Sales increased by 3.66% to $4.2 billion with monthly average users declining while average order sizes increased.

The ship-to-home mode garnered sales of $1.6 billion in January, up 6.66% year over year. The number of monthly users expanded with more frequent orders, despite a drop in average order values. Bishop said the ship-to-home segment continues to benefit from in-store challenges, such as locked-up merchandise in categories like health and beauty to prevent theft. However, slower growth relative to delivery resulted in a 1.1% decline in the share of ship-to-home, bringing it to 16% of total e-grocery sales in January.

Bishop said traditional grocery operators are grappling with growing competition from mass retailers. Over the past three years, mass retailers like Walmart have had half of all the monthly average orders each January compared to one-third for supermarkets and less than 5% for deep discounters.