Amazon positioned to give food and beverage e-commerce a much needed spark

Based on its recent bold expansion into the grocery segment, Amazon is primed to give food and beverage e-commerce a shot of adrenaline.



This was according to “U.S. Grocery Market Focus: The Amazon Food Shopper,” a report from Packaged Goods.



According to the firm’s estimates, Amazon's 2016 online food and beverages sales, including AmazonFresh, is at $1.5 billion. This volume is expected to rise to $2.3 billion in 2017, giving the company a 19% share of the online market.



While Amazon currently garners only a small share of overall grocery sales, the company’s one-two punch of expanding its AmazonFresh service and its acquisition of Whole Foods positions the online giant’s sales to trend upward in the coming years. Growth of 70% during 2018 and 2019 is realistic, as Amazon pivots to leverage its Whole Foods acquisition into multichannel growth. Even average growth during 2021 and 2025 would catapult Amazon's food and beverages sales well past $30 billion, the firm reported.



While its growth curve is nothing to trifle with, estimated sales between 2018-2020 make only minor inroads into total food-at-home sales. Realistic projections for Amazon's market share gains hardly equate to industry ownership, and the e-retail titan would still trail national chains such as Walmart and Kroger, the report stated.



"Will Amazon overtake the food and beverage market? No, but perhaps most importantly, Amazon's major foray into food will surely stretch margins in an industry where they are already notoriously thin,” said David Sprinkle, research director, Packaged Facts. “This will in turn likely result in additional industry mergers and alliances geared toward managing costs, as other retailers seek to stay in the game with a competitor long known to absorb heavy losses over time in its quest for market share.”



Further, any success Amazon has with food will also translate to strengthening its Amazon Prime value proposition, giving more shoppers more reasons to buy three times products across categories. In this respect, food sales growth will contribute to sales growth in Amazon's other retail categories, the report said.