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Demand for grocery delivery cools as food costs rise

AP – Karen Raschke, a retired attorney in New York, started getting her groceries delivered early in the pandemic.

Each delivery cost USD30 in fees and tips, but it was worth it to avoid the store.

Then earlier this spring, Raschke learnt her rent was increasing by USD617 per month.

Delivery was one of the first things she cut from her budget.

Now, the 75-year-old walks four blocks to the grocery several times a week. She only uses delivery on rare occasions, like a recent heatwave.

“To do it every week is not sustainable,” she said.

Raschke isn’t alone. United States (US) demand for grocery delivery is cooling as prices for food and other necessities rise.

A man shops at a supermarket in New York. PHOTO: AP

Some are shifting to pickup – a less expensive alternative where shoppers pull up curbside or go into the store to collect their already-bagged groceries – while others said they’re comfortable doing the shopping themselves.

Grocery delivery saw tremendous growth during the first year of the pandemic. In August 2019 – a typical pre-pandemic month – Americans spent USD500 million on grocery delivery.

By June 2020, it had ballooned to a USD3.4 billion business, according to Brick Meets Click, a market research company.

Companies rushed to fill that demand. DoorDash and Uber Eats began offering grocery delivery. Kroger – the nation’s largest grocer – opened automated warehouses to fulfil delivery orders.

Amazon opened a handful of Amazon Fresh groceries, which provide free delivery to Prime members.

Hyper-fast grocery delivery companies like Jokr and Buyk expanded into US cities.

But as the pandemic eased, demand softened. In June 2022, Americans spent USD2.5 billion on grocery delivery – down 26 per cent from 2020. For comparison, they spent USD3.4 billion on grocery pickup, which saw demand drop 10.5 per cent from its pandemic highs.

That’s causing some turmoil in the industry. Buyk filed for bankruptcy in March; Jokr pulled out of the US in June. Instacart – the US market leader in grocery delivery – slashed its own valuation by 40 per cent to USD24 billion in March ahead of a potential IPO. Kroger said its digital sales – which include pickup and delivery – dropped six per cent in the first quarter of this year.

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