The demand for food delivery cools as food costs rise

Karen Raschke, a retired attorney in New York, began getting groceries delivered at the start of the pandemic. Each delivery cost $ 30 in tax and tips, but the shop was worth it.

Then earlier this spring, Raschke learned that his rent was increasing by $ 617 per month. Delivery was one of the first things he cut from his budget. Now, the 75-year-old walks four blocks to the grocery store several times a week. He only uses delivery on rare occasions, such as a recent heatwave.

“Doing it every week isn’t sustainable,” he said.

Raschke is not alone. US demand for food deliveries is cooling as the prices of food and other basic necessities rise. Some are switching to pickup – a less expensive alternative where shoppers pause on the sidewalk or go to the store to pick up bagged groceries – while others say they’re comfortable shopping alone.

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Food delivery experienced tremendous growth during the first year of the pandemic. In August 2019, a typical pre-pandemic month, Americans spent $ 500 million on food delivery. By June 2020, according to Brick Meets Click, a market research firm, it had risen to a $ 3.4 billion business.

Companies were quick to fulfill that request. DoorDash and Uber Eats have started offering grocery delivery. Kroger, the nation’s largest grocery store, has opened automated warehouses to fulfill delivery orders. Amazon has opened a handful of Amazon Fresh groceries, which provide free delivery to Prime members. Hyper-fast food delivery companies like Jokr and Buyk have expanded into cities across the United States.

Shoppers shop at a grocery store in Glenview, Illinois on Monday, July 4, 2022. US demand for grocery deliveries is cooling as food prices rise. Some shoppers are switching to a less expensive grocery pickup, while others are returning to the store. (AP Photos / Nam Y. Huh / AP Images)

But as the pandemic subsided, the demand subsided. In June 2022, Americans spent $ 2.5 billion on food delivery, down 26% from 2020. For comparison, they spent $ 3.4 billion on food pickups, which has saw demand drop 10.5% from pandemic peaks.

This is causing some turbulence in the industry. Buyk filed for bankruptcy in March; Jokr retired from the United States in June. Instacart, the US market leader in grocery delivery, reduced its valuation by 40% to $ 24 billion in March before a potential IPO. Kroger said its digital sales, which include pickup and delivery, were down 6% in the first quarter of this year.

Some think that the demand for delivery could decrease further. Chase Design, a consulting firm, says its surveys show that the number of US shoppers planning to use grocery delivery “all the time” has dropped by half since 2021.

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Cost is the main reason. Peter Cloutier, Chase Design’s head of growth and business strategy, said it’s hard to get groceries to a customer’s door for less than a $ 10 premium, which covers labor and transportation. Often, that cost is higher.

Consider a basket of eight staples from Target, including a gallon of milk, a dozen eggs, and half a pound of ground beef. In-store, the order would sound for $ 35.12. Target offers free curbside pickup. Shipping costs $ 9.99, not including tip.

DoorDash also offers delivery from Target, but charges more for each item on its website. The cart comes in at $ 39.90 from DoorDash, which then adds $ 12.18 in tax and delivery charges. If the consumer adds a $ 10 tip, the total is $ 62.08.

Wal Mart collects areas outside during the day, no cars visible

A 24-hour grocery collection point at a Walmart in Oklahoma City on May 30, 2017. US demand for grocery deliveries is cooling as food prices rise. Some shoppers are switching to a less expensive grocery pickup, while others are returning to the store. (Photo AP / Sue Ogrocki, File)

Both DoorDash and Target offer free delivery via subscriptions, but those have a monthly or yearly fee.

The rewards are hard to swallow in addition to the skyrocketing food prices. In June, US food prices rose 12.2 percent over the past 12 months, the largest increase since April 1979, according to government data.

Cynthia Carrasco White, a Los Angeles-based nonprofit attorney, has grown accustomed to delivering groceries during the pandemic. She still prefers it, since her younger child is not fully vaccinated and it saves time.

But earlier this summer, when gas prices approached $ 7 and a box of strawberries approached $ 9, he took cost cutting seriously.

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White now alternates between Instacart, Uber Eats, Walmart, and others, using the one that has the best deals and coupons. Sometimes he spends two hours filling a delivery cart and then waits to see if any other promotions are posted before completing his order. And he has reduced the amount he tips drivers.

“The economy has definitely taken the wind out of our sails,” he said. “It’s just this infinite pressure.”

Resellers respond by varying delivery prices based on the time of day. On a recent morning, Walmart offered to deliver a $ 35 order within two hours for $ 17.95; which dropped to $ 7.95 if the order could be delivered between 3pm and 4pm

Shoppers in a grocery store stand in front of a section of meat

Shoppers shop at a grocery store in Glenview, Illinois on Monday, July 4, 2022. US demand for grocery deliveries is cooling as food prices rise. Some shoppers are switching to a less expensive grocery pickup, while others are returning to the store. (AP Photos / Nam Y. Huh / AP Images)

But cost isn’t the only reason some consumers are moving away from delivery. Cloutier says many customers are wary of the quality of items selected by workers.

“There is a trust gap between what the buyer wants to achieve and what satisfies the retailer,” Cloutier said.

Delivery companies are trying to improve it. Last month, Uber Eats announced updates to its online grocery offering, including the ability for consumers to see products as workers scan them.

But even that may not appeal to some buyers.

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Diane Kovacs, a college lecturer in Brunswick, Ohio, has been using the sidewalk pickup truck for nearly a decade. She saves her money, she says, because she doesn’t get sucked into impulse purchases inside the grocery store.

During the pandemic she received the expense for a short time and didn’t mind paying $ 10 or $ 15 a week for the service. But she still prefers retirement. She likes to take her dogs to the store and chat with the employees.

“I think people don’t use delivery because they want to get out of the house,” she said.

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The real demand for food delivery is difficult to calculate. Usage can fluctuate wildly as COVID cases rise or companies offer discounts, said David Bishop, partner of Brick Meets Click.

But he sees some patterns emerge. Families with young children and people with mobility problems stick to childbirth. People over 60 have generally returned to shopping in person.

Bishop says the delivery saw five years of growth in the first three months of the pandemic and that demand is likely still high. Eventually, he expects delivery sales to stabilize at more steady growth of around 10% per year. But the delivery won’t go away, he told her.

“I don’t see him returning to pre-COVID levels. That can has been opened,” he said.

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