Actor Sarah Jessica Parker who plays the protagonist, writer Carrie Bradshaw, on HBO's popular TV series "Sex and The City," once famously said on the show, "Shopping is my cardio."
That phrase seems to be having its moment as consumers head back to malls and supermarkets after enduring two years of a pandemic holed up in their apartments and shopping online.
While consumers bought most of their everyday goods and necessities on the internet for the better part of two years, the surge is starting to wane.
Reasons are wide ranging from record high inflation to stiff competition from delivery rivals, an expert noted.
New data shows American consumers want to limit price hikes on groceries and other home goods and are less willing to pay a premium for rapid delivery than they were last year.
"Additionally, with inflation hitting levels that have not been seen in the U.S. in 40 years, consumers who are looking to mitigate price increases on groceries and other household essentials are more hesitant to pay a premium for ultrafast delivery than they would have been last year," said Euromonitor Senior Consultant Bob Hoyler in a blog post for Retail Dive. Euromonitor is a global market research firm.
Inflation in the U.S. reached a 40-year high in March, according to data from the Bureau of Labor Statistics.
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Mounting Delivery Losses
A delivery rider from DoorDash (DASH), Uber Eats (UBER) or Lyft (LYFT) might have become the only regular visitor across most households in the country during the peak of the pandemic in 2020.
But things are starting to change as people return to work, travel and other related outdoor activities.
"A huge segment of the consumer base is eager to return to pre-pandemic shopping behaviors, which often means prioritizing shopping in brick-and-mortar stores over making purchases via the internet," wrote Hoyler.
This has been counter productive for online delivery companies leading to a dramatic change in the composition of the ultrafast delivery market compared to 2021.
"Ultrafast delivery has since hit an unexpected speedbump," added Hoyler.
Startups and smaller companies competing in the online delivery segment including Gopuff, Buyk and Jokr have either recorded losses, considered downsizing or shut down operations entirely, added Hoyler.
"In December 2021, ultrafast delivery startup 1520 ceased operations. In March 2022, both Buyk and rival player Fridge No More completely shut down. Meanwhile, Jokr was rumored to be in talks to sell its operations in New York City after reportedly sustaining massive losses (although Jokr disputes this claim)," Hoyler wrote.
Last month, GoPuff which operates across 1, 200 cities in North America and Europe, reportedly laid off 3% of its staff, as part of a cost-cutting measure.
Hoyler added that market watchers should expect more consolidation in this segment.
"With many smaller players struggling, there is certain to be consolidation within the industry, which will benefit the larger, more established operators," said Hoyler.
But companies like Gopuff and DoorDash appear to be well-positioned for future growth in the space.
Gopuff has a history of operating in student friendly neighborhoods, university towns and other tier-two cities, giving it a leg up on the competition in smaller metro areas, Hoyler pointed out.
While DoorDash has diversified into other segments and has invested heavily in adding to its own DashMart convenience locations, said Hoyler.
Retail giant Amazon (AMZN) continues to dominate this space setting consumer expectations for online delivery of goods and services.
"Gopuff and DoorDash must be aware that e-commerce behemoth Amazon – with its massive scale, unparalleled U.S. logistics infrastructure, and ridiculously deep pockets – could encroach on their turf if it really wished to do so," said Hoyler.
