Can Amazon Win Over Grocery Shoppers With Cheaper Goods and Faster Delivery?
Your pantry might be in for a Prime upgrade as Amazon looks to shake up the grocery business at just the right time. With grocery prices rising 20-30% over the past three years, Amazon sees a chance to take on Big Grocery — but to succeed, it’ll need to get out of its own way.
AmazonBasics, grocery edition: Amazon has already made some serious moves in the food retail sector, from its $13.7B Whole Foods acquisition to launching Amazon Fresh grocery stores and experimenting with Amazon Go convenience stores. With ~575 locations, the online retail giant’s physical footprint pales in comparison to industry incumbents. But the secret sauce for success might lie in its delivery capabilities.
- Since 2022, Amazon’s grocery e-commerce sales have grown at a double-digit pace, and in 2024, revenues are expected to rise 11.2% year-over-year (YoY) — surpassing $40.5B, according to eMarketer.
- To compete with rapid shipping options from Target and Walmart, Amazon introduced a $99.99/yr grocery delivery plan last month.
Competing with Discounts
The world’s largest online marketplace is also looking to take advantage of consumer frustration with traditional food retailers, who’ve been cutting prices due to weaker demand and foot traffic. Amazon’s plan? Compete on value.
- On Tuesday, the digital retail disruptor announced its new private label, Amazon Saver, offering hundreds of pantry staples and perishables — aiming to capture shoppers looking for cheaper alternatives to name brands (CNN).
- On top of that, it slashed prices on more than 3K items at Amazon Fresh stores — which includes its online grocery delivery — with additional discounts for Prime members.
Opportunity costs: Amazon CEO Andy Jassy called the grocery business a “big opportunity” and is focused on expanding the company’s struggling physical stores despite a series of recent closures. Still, Jassy admits Amazon hasn’t quite found the winning formula, saying, “We must find a mass grocery format that we believe is worth expanding broadly.” With eMarketer forecasting that 88% of grocery sales still happen in physical stores, Amazon faces an uphill battle to win shoppers — but the promise of cheaper goods and fast delivery could change that. Grocers and wholesalers, beware.
