Amazon Nabs 1/5th of U.S. Grocery Ecomm

Amazon secured nearly one-fifth of online food and beverage sales in the United States in 2017, double that held by Walmart, No. 2 in the ecommerce grocery market, according to new research from Packaged Facts, a Rockville, Md.-based market research firm.

Amazon boasted 18 percent compared with Walmart’s 9 percent, noted “Online Grocery Shopping in the U.S.: Food Industry Disruptor Series," making Amazon “the 800-pound online-retailing gorilla for virtually every category of consumer goods one might care to mention.” However, when it comes to groceries, companies are better off not trying to “out-Amazon Amazon.”

First, online grocery is anticipated to enjoy strong growth and plenty of money to go around between competitors: Online grocery sales comprised barely 1 percent of the money that U.S. households spent on foods and beverages in 2014, Packaged Facts estimates – a percentage forecast to easily hit double-digit market share in the coming years, and triple by 2022. It’s not unreasonable to expect 20 percent to 30 percent market share over the next decade.

Second, Amazon’s competition can take advantage of the Seattle-based company's being new to fresh groceries, leaving other companies space to develop services in that space and avoid direct competition in areas where Amazon already does well. For instance, Amazon’s acquisition of Whole Foods Market has somewhat helped Instacart by creating an immediate threat to brick-and-mortar grocers, incentivizing them to develop online sales and partner with the San Francisco-based third-party delivery provider while saving the high costs associated with developing their own delivery infrastructures. Others are partnering or expanding their current relationships with Birmingham, Ala.-based Shipt, another third-party delivery service.

Moreover:

• Bentonville, Ark.-based Walmart – arguably Amazon’s chief rival at the moment – is reducing online-grocery delivery costs via offering click-and-collect fulfillment at its vast network of stores. As of September 2017, the mega-retailer offers pickup of online orders at 1,000 stores nationwide, with 400 points opening this year alone. 

• New York-based ecommerce grocery provider FreshDirect has built a successful network in the New York metro area, and has developed a reputation as a curator of fresh food to the point that customers trust the company to select choice produce and meat for their online orders. This long-term success is built on the fact that FreshDirect has eliminated one of the main stumbling blocks to fresh delivery: the look-and-feel component that many consumers want when selecting produce and meat.

• Ahold Delhaize subsidiary Peapod has been able to repurpose unused space in sister banner Stop & Shop’s stores as distribution centers for improving last-mile delivery efficiency. The Chicago-based service, which already boasts a quarter-century of experience in online grocery delivery, also continues to focus on new options for its customers by working with major food producers such as General Mills and Campbell Soup Co. to produce meal-kit deals and collaborating with other outside partners to develop meal plans and provide recipes.