Amazon’s Grocery Challenge is Real

Amazon has worked mightily to sell groceries, with all manner of tactics - online and physical - including acquiring Whole Foods and opening Amazon Fresh stores, expanding Amazon Fresh delivery to more and more regions, and adding a range of technologies that seek to make grocery shopping easier for its customers. Last week, Dan Gallagher in the Wall Street Journal highlighted these efforts, and concluded that Amazon will need to aggressively add physical locations to have any hope of gaining significant grocery market share.

Our data shows an interesting contrast between how Amazon and Walmart sell groceries. The Journal noted that Walmart actually had a slightly greater share of online grocery sales than Amazon in 2020 (the most recent year reported) and expects to maintain that advantage in this year and next. And overall, Walmart (including Sam’s Club) sells 30% of groceries in the US, compared to Amazon and Whole Foods’ combined 3%.

We focus here on how Amazon and Walmart fulfill their online grocery sales. While Amazon almost exclusively delivers grocery orders, Walmart offers another critical option: curbside and in-store pickup. This customer flexibility means Amazon has more to overcome than just Walmart’s dominance in physical stores. Walmart has made those physical stores a potent weapon in online grocery selling as well.

With perishable food, attended delivery is fairly critical, so convenient pick-up is a highly desirable option. Walmart.com has become an important portal to that pick-up feature.

We note that 33% of Amazon customers included grocery in their most recent purchase. In contrast, 45% of Walmart.com customers included grocery in their most recent purchase.