Home run: How food delivery is winning spend from in-store grocery shopping

By Simon Anderssen, head of 22seven Insights

Until 2019, analysts could rely on the relative stability of the grocery retail share of a customer’s total monthly food spend. It was simple: grocery retail increased in step with total food spend.?

That all changed in 2020.

Since Covid, in-store grocery retail has lost spending share to both its own on-demand delivery services –?Checkers Sixty60, PnP asap! and Woolies Dash – and to prepared food delivery services like Mr D Food and Uber Eats.

We have written previously about the?shift towards on-demand grocery delivery, now let’s look at how prepared food delivery has contributed to this spending shift.

Uber popular

Services like Mr D Food and Uber Eats have soared in popularity. Are they more popular than on-demand apps like Checkers’ Sixty60? Very much so. In 1Q22, twice as many 22seven users transacted on a prepared food delivery app than on any on-demand grocery delivery app.?

When we?analysed?the?age demographics, we noticed that prepared food delivery?is especially popular?among younger consumers.?This?bodes well for continued growth as those consumers age and their monthly food wallet increases.

Mr Convenient

Food delivery might be popular, but how much are users actually spending??

We looked at the median transaction value in the first quarter of 2022 and discovered that spend on a prepared food delivery order is less than half of an on-demand grocery order.

It’s obviously convenient to have takeaways delivered, but is this low-margin model sustainable for the companies and stakeholders involved?

Convergence is coming

Delivery services –?both for prepared food and for groceries –?are becoming engrained in consumers’ habits. The question is how to make these services more profitable and sustainable. One solution could be marketplace and infrastructure convergence: Grocery retailers will begin to incorporate restaurant and prepared food delivery elements into their offering, and food delivery apps will expand to include on-demand grocery delivery.

This has already begun. PnP recently announced a?partnership with Takealot, for example, which will allow users to purchase on-demand groceries via the Mr D app; and Woolworths has rolled out a series of standalone NOW NOW stores to try grab a share of delivery food spend via platforms like Mr D and Uber Eats.?

Ultimately, if retailers want to grow their share of the total food profit pool, they will need to experiment in areas outside their comfort zone: outside the physical store, but also with data and analytics, and in partnerships with other companies.?

Find out more

Contact us for access to our full food spending report, which includes a detailed breakdown of the shift described above, as well as scenario modelling and market predictions. We also publish a monthly Grocery Dashboard that tracks aggregated user spending across the various channels, in real time.

Nugget?is 22seven Insights’ free newsletter about data-driven consumer trends.?Make sure you don’t miss one – sign up?here.

22seven?is a safe and secure digital service that allows you to see all your money in one place and get a personalised budget, automatically. Our goal is to help South Africans take control of their finances.