Walmart, Amazon battle

Retailers fight for market share of online grocery sales.

As retailers like Walmart Inc. and Amazon battle for market share of U.S. online grocery sales, researchers are trying to track how they’re faring. However, an industry expert says determining market share in the digital realm isn’t as straightforward as it is for in-store sales.

Two recent reports show Amazon dominating the online grocery market. The papers differ, though, in their estimates of the percentage of that market that Amazon has cornered.

Research firm One Click Retail, for instance, reported earlier this year that Amazon’s estimated $2 billion in food and beverage sales in 2017 represented an 18 percent share of the nation’s online grocery market. The report pegged Walmart’s market share at less than half that amount, followed by Kroger — the second-largest U.S. grocer after Walmart — Target, Costco and various supermarket chains.

A survey conducted in May by Brick Meets Click showed Amazon with 30 percent market share. Amazon’s biggest competition according to this survey comes from supermarkets, which together made up another 30 percent of the market. (Amazon purchased supermarket chain Whole Foods in 2017.) After that comes the mass retailers such as Walmart and Target with a combined market share of 13 percent. Online delivery platforms such as Peapod and Fresh Direct, various other small or regional retailers, and meal kit providers round out the market.

A problem with studies like these, though, is they may be working off of incomplete data, said Keith Anderson, se

nior vice president of strategy and insight at Profitero. Some key retailers in online grocery — notably Amazon — don’t share their sales information with big-data clearinghouses like Nielsen and IRI, he said. That forces researchers to use other sources, like e-receipt data or browser tracking, to try to extrapolate a retailer’s sales volume.

“That approach is better than nothing, but isn’t as precise as the data available for brick-and-mortar, where essentially all of the retailers are sharing their full transaction logs,” Anderson said. That sharing “makes it much more straightforward to calculate market size and any given retailer’s market share,” he said.

As for which of the two surveys that peg Amazon’s online grocery share at 18 percent and 30 percent, respectively, is likely the most accurate, Anderson said that may depend on what product categories are included.

“I’m inclined to guess that Amazon’s share is closer to 18 percent of the perishable, local online grocery market – that is, AmazonFresh and Prime Now – as a percentage of the broader landscape” that includes Walmart Grocery, Kroger Clicklist, and Instacart and its partners, he said.

On the other hand, “if you include Amazon’s sales of shelfstable consumables shipped nationally in a brown box via Amazon.com or Prime Pantry, the 30 percent figure is more believable,” he said.

Walmart remains far and away the nation’s leader in total grocery sales. The Bentonville retailer reported in August that it had the best second-quarter same-store sales in nine years, led by its fresh food category.

In a survey Forrester Research conducted in the fourth quarter of 2017, more people said they had purchased groceries from Walmart.com than from Amazon, Forrester analyst Sucharita Kodali said.

Online grocery sales include both “click and collect,” where customers place orders online and then pick them up at the store, and home delivery of online orders. Despite retailers’ continuing efforts to improve delivery service, more than half of customers who order online choose to pick them up, Kodali said.

Several researchers say less than 3 percent of sales last year in the $1 trillion U.S. grocery sector were made online, but they predict that percentage will grow in coming years. Consumer research firm GlobalData projects that by 2022, 10 percent of all U.S. grocery purchases will be made online.

Kodali said Forrester isn’t “bullish” on the growth of online grocery, largely because of the expense involved for retailers — and for customers who balk at paying for delivery. Anderson agrees “the economics are challenging,” but sees buying groceries online as eventually becoming mainstream because of expected improvements in automation and autonomous delivery over the next 10 years.

Plus, Anderson said, “As more millenials, and younger, enter their high-consumption lifestage — starting families and forming households — they’re already predisposed to buying online.”