Grub Delivery Crashes

11/01/2022
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    A delivery worker rides his bicycle. U.S. demand for grocery delivery is cooling as food prices rise. (AP/John Minchillo)
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    People shop at a grocery store in Glenview, Illinois. (AP/Nam Y. Huh)
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    A 24-hour grocery pickup location at a Walmart in Oklahoma City, Oklahoma (AP/Sue Ogrocki)
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    Market researcher David Bishop says in general, households with young children and people with mobility issues still use delivery. People over 60 have mostly gone back to in-person shopping. (AP/Andres Kudacki)
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    Many shoppers prefer to select their own produce. (AP/Nam Y. Huh)
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Grocery delivery flourished at the beginning of the pandemic. Companies rushed to fill demand. But as the contagion eased, inflation kicked in. Folks started pinching pennies. Now delivery demand is falling—as food prices rise.

Karen Raschke started using grocery delivery during the pandemic. She considered $30 in fees and tips worth it to avoid stores for a time.

But this spring, Raschke’s rent increased. The 75-year-old scratched delivery from her budget. She now walks four blocks to the store herself.

Raschke’s experience mirrors nationwide trends.

In August 2019, Americans spent $500 million on grocery delivery. By June 2020, that ballooned by nearly seven times! DoorDash, Uber Eats, Amazon, Walmart, and others began offering local delivery. The market was ripe for expansion.

Fast forward to June 2022. American grocery delivery orders plunged. Global delivery companies that had expanded into the United States went bankrupt. The demand that drove these services evaporated almost as quickly.

Cost is the biggest reason for the downturn. For example, a basket of eight staples from Target, including milk, eggs, and ground beef rings up at $35.12 in store. Delivery adds $9.99, plus a tip. That’s more than a 40% surcharge on the order.

DoorDash delivers from Target but charges more for each item purchased. The same order rings up at $39.90 plus $12.18 in taxes and delivery fees. With a $10 tip, it totals a whopping $62.08.

The costs are tough to swallow, especially with soaring prices. This summer, U.S. grocery prices rose 12.2% over last year.

Some retailers are responding by varying delivery prices over the day. On a recent morning, Walmart offered to deliver a $35 order within two hours for $17.95; that dropped to $7.95 if the order could be delivered between 3 and 4 p.m.

But cost isn’t the only reason some consumers are axing delivery. Strategist Peter Cloutier cites customer suspicion about product quality selected by delivery workers.

He says, “There’s a trust gap between what the shopper wants to get and what the retailer fulfills.” That’s understandable. You probably care more about picking your own bananas than a stranger would, right?

Market researcher David Bishop sees patterns emerging. He says households with young children and people with mobility issues still use delivery. People over 60 have generally gone back to in-person shopping.

Bishop thinks delivery will eventually settle into slower, regular growth. But one thing seems certain: It’s not going away. He says, “That can has been opened up.”

Why? Our loving heavenly Father knows our every need. He knows about inflation, hunger, and mobility. He tells His children: “Do not be anxious, saying, ‘What shall we eat?’ . . . your heavenly Father knows that you need [all these things].” (Matthew 6:31-32)