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Who is winning the online grocery war?

Amazon may be grabbing more online grocery wallet share, but traditional retailers are not out of the race yet.

At the beginning of summer 2018, Amazon captured 30% of online grocery spending in the United States. However, the traditional supermarket channel captures about the same share of this market, according to a new consumer survey from Brick Meets Click, a strategic advisory firm.

Amazon continues to transform how households shop for groceries through services like Subscribe & Save, AmazonFresh, Prime Pantry, Prime Now, and its recent acquisitions of Quidsi and Whole Foods Market. Yet, there are opportunities available to supermarket companies that will enable them to maintain — and grow — their own market share.

For example, of the 77% of the households that are buying products or services from Amazon, only 11% bought groceries from the online retailer in the past 30 days. Households that do buy groceries online are shopping with supermarkets more than two times per month as compared to 1.7 times each month from Amazon.

The average grocery order for customers buying from Amazon is $45. This significantly trails what customers spend online at supermarkets ($116) or even online delivery platforms like Fresh Direct and Peapod ($143).

The advantage for supermarkets is that they outperform Amazon in terms of both purchase frequency and sales per order. To protect their shopper base and attract more online trips, supermarkets will likely leverage these strengths and plus their physical locations to make online grocery shopping even easier. This strategy will also reinforce the value of the in-store shopping experience, according to the research.

“Until recently, Amazon’s success relied heavily on leveraging its ability to overcome the physical constraints that the limit the reach and the breadth of assortment brick-and-mortar retailers can offer,” said David Bishop, partner at Brick Meets Click.

“To grow grocery market share, Amazon needs to strengthen its physical presence and persuade consumers to buy highly perishable products from it,” Bishop added. “Whole Foods connection to Prime Now and exclusive Prime membership benefits will help to varying degrees, but more moves are clearly needed.”
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