Kroger, Walmart Closing Gap on Amazon’s Digital Dominance?

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Kroger, Walmart Closing Gap on Amazon’s Digital Dominance?

By Jim Dudlicek - 03/15/2019

While Amazon is pushing into the grocery channel in a big way, larger traditional players that are investing in omnichannel appear to be holding their own against the ecommerce giant.

Building on its investment in Whole Foods Market, Amazon appears to be doubling down on brick and mortar, with reports that it intends to launch another grocery chain in the foreseeable future and is shopping around for a small regional group of stores.

Meanwhile, giants like Kroger and Walmart continue to invest in omnichannel initiatives, leveraging their strengths in traditional retailing against innovations in online shopping, seamless experience and last-mile delivery.

New Nielsen ecommerce data, powered by Rakuten Intelligence, shows that Amazon’s dominance in digital retail, specifically for CPG products, is slipping. In fact, over the past two years, established brick-and-mortar stores appear to have taken share back and closed the competitive gap.

“While it's no secret that traditional brick-and-mortar retailers have ensured ecommerce is part of their overall strategy, data shows that some of the biggest brick-and-mortar players have turned strategy into reality, and have posted incredible growth along the way,” Nielsen reported. “In fact, key retail players like Walmart, Kroger and Target have grown their online customer base—all by at least 90 percent more than Amazon—over the past two years.”

Amazon does have significantly greater domestic buyer reach—10 times more—than any of the other merchants, Nielsen noted, so there’s not as much room to grow its buyer base. But the Chicago-based market researcher contended that’s not the only reason for the rapid success of its competitors.

“These merchants have succeeded, in part, because they’ve embraced the click-and-carry model where consumers buy an item online and pick it up at a physical store,” the Nielsen study said. ”In fact, we estimate that the share of click-and-carry sales grew from 4 percent to 11 percent of all CPG ecommerce sales in just two years.”

Consumers like this model, Nielsen contended, because it gives them the confidence to expand their online shopping beyond health and beauty. In fact, the grocery and gourmet food category has a compound annual growth rate (CAGR) of nearly 50 percent over the past three years, just behind pet supplies, Nielsen noted.

At a high level, online penetration of CPG is growing. Online CPG sales have increased 30 percent year over year, and 60 percent of shoppers have browsed and ordered CPG online, according to Nielsen data, and more than one-quarter (28 percent) of shoppers have purchased CPG online a few times per month.

“Yet despite the increased willingness of consumers to shop online, challenges remain,” the Nielsen study said. “Twenty-nine million people began shopping for CPG products online in the past two years, yet only two-thirds of all ecommerce shoppers buy CPG products through the internet. Among the barriers that deter them, food quality tops the list.”

Connecting with unreached CPG e-commerce consumers represents a massive opportunity, Nielsen asserted: “Amazon still sits on the ecommerce throne, but the competitors are circling as all battle for their piece of the omnichannel pie.”