Amazon Not the Easy Winner in US Grocery Fight
Forbes was quick to hand Amazon the leadership of online grocery in “Online Grocery Sales To Reach $100 Billion In 2025; Amazon Is Current And Future Leader” Danziger made the same arguments we hear a lot:
- Amazon is already winning, with 18% of online grocery sales today.
- Amazon bought Whole Foods, acquiring some brick and mortar Whole Foods stores and the Whole Foods 365 Everyday Value private label.
- Amazon Fresh is already delivering in some markets.
Amazon is certainly strong, but the online grocery battle has barely entered the first quarter in the US market. While Amazon may have the strongest share of online grocery, look at their top 3 categories: beverages, coffee, snacks foods. Amazon is strong in what some in the industry have labeled “spear-fishing”. I buy a case of coconut water (I really like coconut water) every month. Some people buy cases of nutrition bars. Maybe you like a particular coffee brand you can’t find somewhere else (Amazon’s best seller in coffee is Lavazza). Amazon has brilliantly crafted an art+science experience of finding a particular item for the best price. What we haven’t seen a lot of yet is a great “full basket” grocery shopping experience. The behavior of shoppers in a full grocery shopping experience is fundamentally different than when they are looking for one particular item for the best price.
Full basket grocery shopping and fill-in/stock-up trips are frequent, higher volume, and often low consideration (assuming similar pricing). According to statista, Americans make about 1.5 trips to the grocery store per week. They need more than coffee, coconut water, and granola bars. The experience of online grocery shopping is about to evolve dramatically as grocery shoppers demand that you already know what they want, you are connected to their apps and smart devices and they can shop from anywhere at any time. So far, no online grocer in the US has significantly adapted to the advantages of virtual shopping and the lost benefits of physical shopping for a full basket grocery shopper. It is time to elevate the experience of online grocery shopping.
In September 2017, Walmart announced it’s 1,000th online grocery pickup location, with plans to add 1,000 more in 2019. Ninety percent of Americans live within 10 miles of a Walmart store. Kroger is approaching 1,000 ClickList locations (we’ve counted ~800 including banner stores). These are full grocery stores that can offer the same prices with little or no delivery fees (Walmart is free, Kroger is typically $4.50). Delivery fees, tips, and service fees add up at 2 trips per week and many families will opt to shop after the kids go to bed and pick up the groceries on the way home from work the next day. In contrast to some competitors, Amazon (with the acquisition of Whole Foods), now has around 450 locations.
It’s clearly still early in this fight, and both retailers and brands continue to increase the pace. More on breakthrough innovation we’ve seen from brands, publishers, and retailers in a future article.