Until five years ago, Amazon was the undisputed market leader for online groceries in the United States. Now, however, Walmart has taken over the lead and keeps on expanding it. What happened?
Turning point
It is a remarkable finding: in 2016, Amazon still held 24 % of the online grocery market (food purchases) in the US, while Walmart – by far the largest physical supermarket chain in the country – only had a 16.3 % market share. However, in 2019 already, Walmart had closed the gap and overtook its online rival. Since then, Amazon has only seen the gap with the new market leader grow larger.
By the end of 2024, Walmart will achieve 58.92 billion dollars in online food sales (almost 54 billion euros), Insider Intelligence calculated: that is more than 18 billion dollars more than Amazon’s 40.50 billion dollars (37 billion euros). This gives Walmart a 26.9 % market share, while Amazon’s drops further to 18.5 %. Competitors such as Kroger, Target and Albertsons are still much more behind.
Expensive technology
This is despite the great efforts that Amazon has made to gain a strong position in the important food market, both in the physical world – with the acquisition of Whole Foods and the roll-out of cashless Amazon Go and Fresh shops – and online, with its delivery service. However, the online giant has been facing many obstacles.
Organic supermarket chain Whole Foods, for example, is positioned too up-market to appeal to the large mass of consumers. The expansion of its own shops is also proving difficult: Amazon is struggling with the expensive technology of cashless shopping and has put the further implementation of Amazon Fresh and Go shops on hold, to give itself time to fine-tune the strategy first. In some shops, for example, the retailer is testing the ability to shop without an app and pay at a traditional checkout.
Shop network
The economic climate is not helping either. Due to high inflation, US consumers are also ‘down-shopping’, meaning they shop at cheaper chains and exchange brands for private labels. Walmart benefits hugely from this, with its sharper price positioning. Moreover, that chain already has a physical outlet – with a pick-up point in the parking lot or in-store – less than ten miles from 90 % of all US households.
Amazon Fresh does have some pick-up points as well, but it still has to rely mainly on delivery. The online giant now wants to lower the barrier by streamlining the shopping experience across its various brands. The delivery option is gradually being opened up to consumers who do not have a Prime subscription. It should be added that Amazon has a highly developed logistics network.
Capital-intensive model
As in Europe, online groceries in the US have experienced strong growth during the pandemic years. In 2020, there was a growth spurt of up to + 56 %, but in 2021 the online market share of all retailers dropped again. Consumers then increasingly turned to delivery services like Instacart, DoorDash or Uber Eats, which typically pick up groceries from smaller food retailers, causing the bigger players – and thus Walmart – to see some sales drain. This year, Walmart would be the only major food retailer to increase its market share.
“Delivery apps exploded in 2021, taking advantage of the sudden digitisation of groceries due to the pandemic”, analyst Brian Lau of Insider Intelligence says. “Many, like Doordash, promised ultra-fast deliveries in less than 30 minutes and offered deep discounts to attract new customers.” That boom was short-lived: US consumers still prefer bulk purchases. In times of rising inflation and deteriorating macroeconomic conditions, the capital-intensive model of delivery within 15 minutes became too expensive. People started looking more for bargain deals, to Walmart’s advantage.
