Over the course of the past few months, I've criticized Costco (COST 1.68%) for failing to take curbside pickup seriously. I understood the club-based retailer's thinking -- in-store shoppers spend more, and besides, most Costco stores just don't have the space needed to make the service work. Nevertheless, rivals Walmart (WMT 0.83%) and Target were crushing it with curbside pickup service that looked destined to become the new norm. Ignoring the opportunity to win (or just keep) market share was simply short-sighted.

Apparently, I was wrong.

OK, there are degrees of wrongness. Walmart did gain market share by expanding its curbside pickup service during the pandemic. Costco's sales typically soared once consumers figured out how to live with the coronavirus overhang, but it's naive to suggest revenue wouldn't have grown even more had Costco made curbside pickup service available.

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Image source: Getty Images.

A survey performed by McKinsey late last year indicated roughly three-fourths of the country's consumers tried a new way to shop during the pandemic, adding that almost half of these newcomers planned to keep using curbside even after COVID-19 was in the rearview mirror. Nearly 70% of all U.S. consumers said at the time they'd be using buy-online/pickup-in-store (BOPIS) more often going forward, according to Shopkick.

But now that the contagion's dust is settling, curbside pickup isn't the game-changing differentiator it was supposed to be just a few months back.

Curbside grocery pickup by the numbers

Data gathered by market research outfits BrickMeetsClick and Mercatus last month spells out the surprising truth. In May, online grocery sales in the United States fell 16% year over year, from $8.3 billion in 2020 to only $7.0 billion this time around. The curbside pickup portion of that tally fell from $6.6 billion then to $5.3 billion now; ship-to-home grocery sales held steady at $1.7 billion.

If your memory is good, you'll recall the wave of pantry stocking that was underway in May of last year. Some consumers (concerned that the coronavirus might further disrupt supply lines) bought months' worth of food and staples. Last month's comparison to May 2020's figure isn't necessarily meaningful.

Some of BrickMeetsClick's ancillary data, however, sheds some alarming light on last month's demand. Namely, the average number of monthly orders these online shoppers placed fell 4%, from 2.91 to 2.80, and the average order size fell 7%. But, the crux of the contraction reflects the 12% year-over-year decline in the total number of Americans that placed any online grocery order. That figure fell to 66.8 million households in May, from nearly 75 million a year earlier.

A bunch of consumers who said they were forever on board with curbside pickup aren't quite as on board as they suggested they would be just a few months ago.

Up-ended plans

It's telling, and perhaps a bit troubling ... particularly to players like Walmart, and smaller grocery rival Albertsons Companies (ACI -0.54%).

Albertson's was just reaching its full stride on the online ordering and pickup front, recently unveiling a delivery deal with DoorDash after reporting online sales growth of 282% during the quarter ending in February.

As for Walmart, CFO Brett Biggs recently commented at an investor conference, "I think online grocery is a trend that will continue. I think people learn to love that online grocery service and we're right in the perfect place to serve that customer." Biggs adds, "I think the customer interactions, the personal interactions with customers, I think that the culture of the company and how we're able to personally interact with customers, that's really different [than our competitors]. Online grocery helps with that. Grocery delivery helps with that ... We do have an advantage there, and we want to continue to grow that advantage, but it is a big advantage for us."

Online grocery is only a business-building advantage, however, if more consumers continue making it their norm.

Bottom line

It's too soon to say curbside grocery pickup's greatest growth is now in the past. We're still in a strange environment. Consumers may have visited a store last month just to reclaim a sense of normalcy as much to buy food. Perhaps last year's pantry-stocking surge was even more powerful than we appreciate.

There's another curious nuance buried in the numbers though. The monthly Brick Meets Click/Mercatus data also indicates that online grocery shopping leveled off in the latter half of last year, and on a sequential basis has fallen three times in the past four months. That's despite the fact that consumers and merchants alike are both better equipped for online shopping now than they've ever been in the past. If it's not happening now, in this environment, what's it going to take?

Given the backdrop, Costco's recent decision to not expand its small curbside pickup experiment underway in New Mexico -- CFO Richard Galanti said, "utilization has not set the world on fire" -- makes sense. There just doesn't seem to be nearly as much growth on this front as previously presumed.

This, of course, is good news for Costco shareholders, as the company has mastered the art of getting in-store shoppers to buy more than online shoppers typically do.