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Is Amazon on its way to becoming America’s favorite grocer?
A new survey finds that Amazon.com has become the preferred source of groceries for the largest number of Americans.
The findings, introduced yesterday during a streaming session at the NRF Big Show 2021, were based on a survey of 10,000 U.S. households by dunnhumby. The research found that Amazon passed the grocers — H-E-B and Trader Joe’s — that topped the list last year.
Amazon and Target were called out for making significant year-over-years gains in the annual survey. These were driven by larger numbers of consumers turning to the retailers as sources for contactless grocery services as the novel coronavirus pandemic spread across the country.
The customer data science firm also saw some regional grocery chains making significant gains during the pandemic as home-bound consumers sought reliable supplies of groceries with many key categories under pressure as a result of panic buying, particularly at the outset of the pandemic in markets where it spread.
The perception of in-stock positions helped smaller chains operating high/low pricing formats in the short-term, although dunnhumby expects that everyday low price retailers are better positioned for longer term financial success.
“COVID has led to record highs and lows in economic metrics, along with huge shifts in where and how consumers shop food retail, changing the competitive trajectories of retailers who were winning and those who were struggling before the pandemic,” said Grant Steadman, president of dunnhumby’s North American practice, in a statement earlier this week.
The survey’s rankings were based on seven separate factors: price, quality, digital, operations, convenience, discounts, rewards and information, and speed. For this year’s research, dunnhumby said it added a COVID Momentum Metric to its calculations, which enabled it to better assess how changing consumer preferences drove market share gains or losses in 2020.
Mr. Steadman said, “Amazon accelerated past every other retailer on our COVID Momentum Metric and customer safety ratings, due to its speed to shop and virtual store format.”
Amazon, despite its gains, has experienced growing pains as it has transitioned to a greater grocery focus. The retailer faced supply and delivery challenges earlier on in the pandemic and rumblings from stores have indicated tension between shoppers filling online orders and associates that work in those locations.
- Covid-19 Propels Amazon to Top U.S. Grocery Retailer for the 2021 dunnhumby Retailer Preference Index – dunnhumby/Business Wire
- Two Amazon Fresh grocery stores opening in Seattle region in latest brick-and-mortar expansion – GeekWire
- Are Amazon Prime delivery shoppers disrupting Whole Foods’ stores? – RetailWire
- Will Whole Foods draw more Prime shoppers with one-hour curbside pickup? – RetailWire
- Amazon Fresh grocery store opens touting low prices and cashier-free checkout – RetailWire
- Amazon puts new online grocery customers on hold, reconfigures Whole Foods – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: What grocers do you think have been the biggest winners since the pandemic hit the U.S.? How likely is Amazon to be able to maintain its grocery momentum?
Poll
BrainTrust
Mark Ryski
Founder, CEO & Author, HeadCount Corporation
Gene Detroyer
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
Amazon has been pursuing the grocery category for years, and the pandemic has helped it advance its position. The biggest winners have tended to be the biggest players who have the depth and capabilities to adjust to the changing market dynamics that the pandemic has created. Kroger is a good example of one that has done well. Amazon is a formidable competitor in virtually any category it pursues and I expect that it will build on the momentum from 2020 and continue to become an even bigger player in grocery.
My earlier comment on “The Amazonification of Walmart,” dating back to 2007, is possibly even more relevant today. The issue remains the same — Amazon is focused on the immediate close of the sale, at the point of purchase. While bricks-and-mortar retailers have trusted their 100 years of super-success, from letting the shopper sell to themselves (self-service,) at the exact point of purchase (the shelf,) and then doing the checkout at the exit.
The process for all parties hasn’t moved a lot, but my team today is focused on the semi-automatic mental “click,” (auto-triggering,) that drives a very large share of routine purchases of a very small suite of merchandise, commonly referred to as “The Big Head.” Amazon leverages this focus online, but seems oblivious to the potential at Whole Foods.
H-E-B was one of the first grocers in the country to outline and publish what they were doing to combat COVID-19, from cleaning to supporting local restaurants by selling their meals in H-E-B stores. They have taken care of their partners (store associates) through increased pay incentives which have become permanent. Amazon has been playing in the grocery waters for a long time and while they have made great gains in technology, service and assortment, they have a long way to go and will continue to refine their format to hopefully tailor it to the neighborhood they service.
Meaningless measure. They had toilet paper early on when everyone else was out.
Funny. A few months ago we had a discussion about Whole Foods pricing. An example of their higher prices vis-a-vis traditional grocers was paper products. While Whole Foods offers paper products, I thought “who buys paper products at Whole Foods?” The next time I was at Whole Foods I looked. Of the 36 people waiting to checkout (yes, I counted them) not one had any paper products in their basket.
So that’s the “bottom line” … eh? 🙂
There can be no doubt that Amazon has been growing, and will continue to grow, market share in groceries. Its online operation is very efficient and easy to use and that is one of the reasons it is so attractive to consumers. On top of all that, this year’s acceleration of online in food has acted as a catalyst for Amazon’s growth.
As for being the favorite grocer, I think that’s interesting but it’s a bit of a qualitative statistic based on a limited sample. There are lots of grocers (Wegmans, Publix, etc.) which while smaller should probably come much higher on the list.
Having been to Whole Foods multiple times in the past several months, I wrote this post, Is Amazon Killing In-Person Grocery Shopping to Make Us Buy Online?. Quite simply the crush of online shoppers in brick and mortar locations makes many shoppers feel like they are intruders and their beloved brand is little more than a warehouse. I think the definition of “grocery” has wide latitude here. I buy certain tea bags from Amazon but 95 percent of my purchases are in person. While Amazon would count me in as a grocery customer, I doubt that distinction tells a real story. And outside of a time we were all locked in our homes paranoid we’d all die, is it momentum or opportunism?
Interesting difference. For for stuff, including produce, about 60% of our purchases are in store. For all other packaged grocery, almost 100% of our purchases are online.
I’m not sure about them being number one. But they certainly will be in the top three or four in at home grocery shopping in most markets. The big advantage they have is their investment in the “to home” transportation infrastructure. We see almost every grocery chain struggling to deliver goods to homes and maintain an acceptable margin in what is a retail vertical that already has a very slim margin. Amazon will be able to do this without having to add significant delivery fees.
I don’t think Amazon will stop until they are #1. And their pricing on many grocery items is higher than others like Walmart, Kroger, etc. who tend to run with “store shelf pricing” online.
Amazon’s pricing model is probably the one that will need to be in place for the home delivery of grocery to be profitable. I suspect these operators who are using in-store pricing and free shipping on low margin grocery, are losing money on every order. That is probably not going to be sustainable for most retailers.
Pandemic grocery winners are those that are most innovative and quick to adapt. The most popular technology used to address the pandemic is touch-free scan and go mobile checkout. Reaching over 30 percent shopper adoption at some of their stores, Fairway Market in New York City set the industry standard with their mobile checkout platform. New York’s Westside Market is also the first to incorporate indoor location search and navigation (using SIRL’s technology) and AI digital scale (using Tittler’s technology) in their mobile checkout application. Sam’s Club and Sainsbury are top tier grocery retailers that are leading scan and go with record growth and adoptions. Other grocery retailers offering touch-free scan and go technology as a competitive advantage include McKeever Price Chopper, Big Y, Spar, Okay, Co-Opportunity, Mother’s Market, HyVee, Walmart, Kroger, Wegmans, H-E-B, AHOLD, Tesco, Waitrose.
Fairway was bankrupt and was liquidated last year. Some stores are still open, under different ownership (different ownership has different IT). Are they still using this technology?
Only one Fairway store hit 30% adoption; another hit 20% adoption, most hit only 10%.
A Kroger location in my area has a “scan and go” technology (you can use their scanner or use their app on your own phone) and very few customers use it. I don’t think 25 customers a day use this (this is a very high volume store, thousands of customers a day). Other locations have actually removed it due to lack of use and/or theft issues.
I think there are major shrink concerns with this technology. Not going to say it was why Fairway went bankrupt … it wasn’t.
Amazon may be sophisticated enough to better detect the fraudulent transactions and flag theft.
My top choices are my local Ralphs (Kroger) and Trader Joe’s. Ralphs is full service where you can get everything you need. Trader Joe’s always has a line, and they do the best job of managing cleanliness and store traffic but don’t have a full assortment. Whole Foods is the worst experience as stores are often out-of-stock on staples and full of people picking orders.
One of the interesting findings of the dunnhumby research is that Trader Joe’s remains in the top three retailers while continuing to only offer in-store as an option to shop.
H-E-B and Trader Joe’s are terrific brands yet Amazon’s unmatched convenience is addictive. The dunnhumby stats prove consumers crave prompt home delivery, a trend that will outlast the pandemic.
Even when life resumes, Just Walk Out technology at Amazon Go and rivals’ stores will set new brick-and-mortar standards for convenience, ease and time savings. Also, I expect Whole Foods and Amazon Fresh will continue to expand nationwide when the time is right. Amazon’s hungry to win and its grocery party is just getting started.
Meanwhile, Walmart’s pervasive grocery reach and low-cost leadership are perfectly timed to serve essentials when wallets are slim. Target’s exclusive private labels keep improving, encouraging us to fill our baskets there more frequently.
Once grocery stores consistently arrive at my door, my life will be complete. (I’ve rocked pandemic-like cocooning for decades!)
Well considering that the survey doesn’t seem to include any metrics relative to volume, frequency, basket size or any other measure of “how much” it’s a bit hard to tell, but preferred source?
It was interesting looking at the numbers and comparing them to my own personal experience. Here in our New Jersey home Amazon/Whole Foods (produce and supplements), ShopRite (conventional groceries), Trader Joe’s (unique food finds) and Target (conventional groceries and non-foods) have been the top four recipients of our expenditures going back to March.
My question is, where do the fresh groceries delivered by Amazon come from? Is everything sourced through Whole Foods?
As a consumer, I prefer to have groceries delivered by a local grocer because I know that store and I am familiar with the quality of items I will receive. I’m in the suburbs of Chicago and Jewel-Osco is my go-to store. During the early days of the pandemic I confidently shopped via Instacart because I could choose which store the shopper would shop. These days grocery chains like Kroger, Jewel (SuperValu) and others offer just as many conveniences as Amazon. I prefer to keep it local.
Discovery leads to new habits and the pandemic has forced most of us to discover what alternatives we have in shopping. For us, for food products, nothing beats Whole Foods. The offerings, the prices, the associates, the efficiency of the checkout. For delivery, we can order in the morning and have it in the afternoon. For basic products, it is hard to beat Amazon. I needed to buy toothpaste and ordered it on Amazon. I got it the next day. I didn’t even need it the next day. They spoil us. We don’t need anything else and won’t until a new discovery comes along, and it will.
The biggest winners? Hard to say, other than anecdotally with our hard data, but I’d love to see Costco’s numbers. My guess is that companies like H-E-B, Wegmans, and Trader Joe’s which had great connections to their customer bases pre-COVID-19 fared better during the pandemic. But, again, without firm numbers it’s little more than a gut check. As to Amazon, if maintaining its pandemic rate of growth is measured in dollars I suspect we’ll see a slight slide when/if the pandemic passes. But if we are speaking in a broader sense meaning will its penetration of the grocery market will continue to grow, the answer is, yes.
Yet another Amazon “false narrative.” The vast majority of Americans live in the physical world and purchase groceries in the physical world from a wide variety of stores — usually not even aware that their local store (say Ralphs) is owned by the national chain Kroger.
In steps Amazon, which is a full national chain known for online sales. The idea that Amazon would get the lion’s share of online grocery purchases is no surprise — they get the bulk of ALL online purchases.
However are they a “favorite?” Not in one million years. Most Americans (like 80 percent) prefer to shop in a store — but that preference is spread across hundreds of brands, many local. The result is Amazon gets the vast bulk of the remaining 20 percent (say 10 percent) and no single store brand gets 10 percent. But the cumulative value of “anywhere but Amazon” is where America’s favorite way to shop lies — and that is decidedly NOT Amazon.
Amazon is certainly aware of the percentage breakout of shoppers by store and online. You don’t have to look any further than the Whole Foods acquisition and the origination and expansion of the Amazon Fresh conventional supermarket concept for proof.
Agreed. At the same time, Amazon never hesitates to create an impression of “we changed everything” regardless of whether it’s really true. 🙂
But the survey work isn’t from Amazon — I’m just amazed at many people don’t really notice that a “most” headline can be achieved while they’re not really that important in grocery.
Also interested in your thoughts. Looking at the survey details, some things suggest care with this RPI. Kroger rates 25th on their list — yet it is continually improving according to their stores. Yet the Kroger share of grocer is quite large.
Statista shows Kroger with 10% share and Walmart with 25% share — and they are the two largest in 2017. That year, Target’s share is 1.4%.
If RPI is reliable, then it must “predict” — but I don’t see evidence that’s happening. Is it connected to true market growth or simply a new metric that’s interesting to consider? Haven’t worked with it enough to know.
Unless I’m mistaken, Walmart and Kroger are 1/2 in grocery sales. Whenever you have a survey-based brand strength measure that bears no relationship to sales, it usually indicates the survey metric is poorly constructed.
The headline asked if Amazon was on its way to becoming America’s “favorite” grocer. The answer is no. All things being equal post-pandemic, Amazon will continue to grow its share of the grocery business as a convenient source of goods. But “favorite” grocers cultivate loyal shoppers who prefer the personal touch. That is something that H-E-B, Wegmans, Costco and others do well.
Amazon, Target and Walmart are the perfect retailers for the COVID-19 pandemic. They had the selection and the convenience. Amazon advanced in the grocery industry, and consumers have been trained to use their services. That’s not likely to change moving forward. However, the competition (Target, Walmart and others) will make competitive progress. Amazon won’t be alone in offering these services.
Many people hate going to the grocery store. For those people, if Amazon is the provider who has the easiest to use website, best product mix, and executes orders well (not damaged, not missing items, arriving timely), they will certainly become a favorite grocer for a large segment of customers.
I fully expect Amazon (and others who have picked up online sales, notably Walmart) to maintain all business gained during the pandemic and potentially build on those gains.
Conventional grocers who do not do much of anything well, with very high shelf pricing, are the most vulnerable to losing their shirt with the customers moving online.
It is also pointed out here that many customers still like to select fresh items like produce in the store on their own. With Whole Foods, Amazon has control over what is one of the most effective retailers of fresh produce, meat, prepared food, etc. on a national level. So there is also that advantage.
A cynic would likely greet this “news” with a yawn. “Preference” isn’t sales (and sure enough, Walmart, America’s largest grocer, is a lofty 14th on the survey). I won’t go so far as to say this is meaningless. I’ve no doubt the top finishers will crow about their positions, but I wouldn’t get too excited about it either: the grocery sector is filled with hundreds of operating names — many of them, of course, divisions of large chains like Kroger and Albertsons — so it isn’t surprising that the few national chains rank highly. Combine that fact with the Amazon PR juggernaut and I wouldn’t expect much less than a Number 1.
My perspective is that friction elimination is the key here. While Amazon continues to remove points of friction for the customer in terms of the journey they will continue to flourish. For those competing, they must recognize that eliminating the customer friction in every area is key to maintaining their market share.