Rising food prices seem to be taking a toll on the demand for grocery delivery services that became widely popular during the COVID-19 lockdowns. As inflation sends the cost of food and other consumer goods ever skyward, a number of Americans who were previously comfortable spending a bit extra for the convenience of delivery now see such options as fiscally unsustainable.
As one retiree recently told the Associated Press, she had been willing to pay roughly $30 per delivery for added fees and a tip for the driver but is no longer able to absorb the extra expense.
While 75-year-old Karen Raschke said she still occasionally orders delivery, she is once again making the trip to her local supermarket for most shopping trips.
In addition to higher prices for food and other necessities, she said that her monthly rent spiked by more than $600 earlier this year.
It turns out that Raschke’s situation is increasingly common across the country. On average, Americans spent about $500 million each month just prior to the pandemic, but that number grew almost sevenfold by June 2020.
U.S. demand for grocery delivery is cooling as food prices rise and some shoppers shift to less expensive grocery pickup or return to stores. Experts say grocery delivery saw five years of growth in the first three months of the pandemic. https://t.co/FsXLLWyKIt
— The Associated Press (@AP) August 7, 2022
Individual supermarket chains, food delivery companies, and other entities quickly shifted their focus to delivery to meet the demand, though in recent months the revenue for such services has been steadily declining. As of two months ago, Americans were spending only $2.5 billion each month on supermarket delivery – nearly $1 billion less than the same month two years earlier.
With the future of grocery delivery increasingly uncertain amid rampant inflation and relaxed COVID-19 mitigation measures, the industry is seeing profits fall across the board.
One market leader prepared for an initial public offering earlier this year and was forced to drastically reduce its valuation. According to Instacart’s own estimate in March, its value had dropped by roughly 40% from its previous high. Other companies are already reporting similar dips in their sales and revenue stemming from grocery delivery.
Supermarket prices continue to cause sticker shock for cash-strapped shoppers, with the 12.2% year-over-year inflation rate in June marking the highest level in more than 40 years. While goods of all types ticked up, some of the categories hardest hit by rising prices included frozen meat, chips, and poultry.
As Numerator CEO Eric Belcher explained at the time, Americans are becoming much more value-conscious as a result. In addition to skipping delivery services, he said: “Many of these shifts – including high-income households trading down to dollar stores – are unexpected.”