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Amazon Still Dominates Online Grocery, But Can It Grow?

Survey reveals online shoppers spend more per trip, shop more frequently for groceries at alternative outlets

BARRINGTON, Ill. -- Amazon is capturing as much of the overall online grocery market as all of its brick-and-mortar supermarket rivals combined, but it trails its rivals in areas such as perishable penetration, basket size and grocery shopping frequency, according to a new consumer survey from strategic advisory firm Brick Meets Click.

This comes at the heels of innovation in brick-and-mortar shopping. Last month, Amazon opened an Amazon Go convenience store—the e-commerce company’s fourth nationwide—in Chicago. Days later, it was reported that Seattle-based Amazon plans to open 3,000 Amazon Go stores by 2021.

Brick Meets Click’s survey showed Amazon and the online components of U.S. supermarket retailers each controlled about 30% of the overall online grocery business. Mass merchants such as Walmart were next with 13%, followed by online delivery platforms such as FreshDirect (11%), “other” (7%), club stores (6%) and meal-kit providers (4%). The study was based on a May survey of 4,855 adults who participate in grocery shopping for the household. Third-party providers such as Instacart and Shipt were captured under the respective retail channels the consumers shopped using those services.

Brick Meets Click had previously estimated online grocery to account for more than 5% of the total spend on groceries, which in its definition includes alcohol, dairy, bakery, deli, frozen, general merchandise, grocery (food and nonfood), health and beauty, meat and seafood, and produce.

Amazon has captured its leadership position by transforming how households shop for groceries over time by launching services such as Subscribe & Save, AmazonFresh, Prime Pantry and Prime Now, and through the acquisitions of Quidsi and Whole Foods. But in order to grow its share, Amazon needs shoppers to shop more frequently and for a wider range of goods, including perishable foods, Brick Meets Click noted. Further establishing a physical presence will also help.

“Until recently, Amazon’s success relied heavily on leveraging its ability to overcome the physical constraints that the limit the reach and the breadth of assortment brick-and-mortar retailers can offer,” said David Bishop, partner with Brick Meets Click.

“To grow grocery market share, Amazon needs to strengthen its physical presence and persuade consumers to buy highly perishable products from it,” said Bishop. “Whole Foods' connection to Prime Now and exclusive Prime membership benefits will help to varying degrees, but more moves are clearly needed.”

More data from the survey showed:

  • Even though 77% of the households that are online buy products or services from Amazon, only 11% bought any groceries from it during the past 30 days.
  • Households who buy groceries online from Supermarkets turn to those retailers more than two times per month as compared to 1.7 times for Amazon. 
  • The average grocery order for customers buying from Amazon is $45, which significantly trails what customers spend online at supermarkets ($116) or online delivery rivals such as Fresh Direct and Peapod ($143).

Supermarkets outperform Amazon in terms of both purchase frequency and sales per order, according to the research. To protect their shopper base and attract more online trips, supermarkets will likely leverage these strengths—plus their physical locations—to make online grocery shopping even easier while also reinforcing the value of the in-store shopping experience, Brick Meets Click concluded.

Barrington, Ill.-based Brick Meets Click provides guidance to companies looking to enhance their growth strategies by leveraging the convergence of digital and physical retail. The advisory firm combines industry expertise and insights into the physical and digital marketplace to help businesses plan for the future.

Photograph: Shutterstock

 

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