Amazon’s Grocery Play Sends Rivals to the Clearance Aisle
Grocers, your same-day delivery of boardroom panic has arrived, courtesy of AmazonAMZN. Yesterday, the e-commerce giant announced a move to expand same-day grocery delivery to 2.3K cities by the end of the year — more than doubling its current grocery delivery footprint and sending competitors’ stocks tumbling.
Delivery wars heat up: The market’s reaction was swift and brutal. InstacartCART plummeted over 11% on the news, with traditional grocers like KrogerKR and WalmartWMT also falling. To make matters worse for competitors, Amazon is offering free same-day delivery for members on orders over $25, undercutting rivals’ minimums and adding another perk to its Prime membership ecosystem.
- In a recent interview, CEO Andy Jassy said he’s “very bullish” on Amazon’s grocery business — which generated over $100B in gross sales, excluding Whole Foods and Amazon Fresh.
- Amazon Fresh is also doubling down on aggressive pricing — undercutting rivals on staples like produce, snacks, and beverages, plastering stores with signage and signaling the discounts are permanent.
Feeding the Ad Machine
Amazon’s grocery push isn’t just about selling bananas and bread — it’s a strategic play to strengthen its rapidly growing advertising business. Every grocery order becomes a data point, which has grown so formidable that it sent ad platform Trade Desk down 40% last week.
- Customer grocery preferences and shopping habits provide valuable data for personalized campaign targeting across Amazon’s entire ecosystem.
- And more Prime members mean more eyeballs for ads and richer datasets for targeting — creating a virtuous cycle that traditional grocers will struggle to match.
Investors care about one thing: And that’s growth among its cash cow, Amazon Web Services, which is Amazon’s largest business, and has been growing slower than Alphabet’sGOOG and Microsoft’sMSFT. As a result, Amazon remains one of the few Magnificent Seven companies trading below all-time highs alongside AppleAAPL, TeslaTSLA, and Alphabet, though Alphabet is near its record. But with Amazon’s high-margin ad business reaching $15.7B in the recent quarter — nearly half of AWS’ — that unit could finally capture investors’ attention.