Is Amazon Lagging in Online Grocery Derby?

A new study from Brick Meets Click finds that Amazon grocery shoppers spend an average of $74 per month vs. the estimated $200 per month for shoppers who use grocery delivery services such as Instacart.

The report from the Barrington, Ill.-based strategic advisory firm probing online grocery spending patterns of U.S. consumers forecasts a 15% growth rate in 2019, driven by an increase in the overall share captured by online in 2019 to 6.3%. Retailers that offer both delivery and pickup, however, are poised to increase their online sales between 25% and 30%, per Brick Meets Click.

While the projection finds a larger share of online grocery spending shifting toward brick-and-mortar retailers offering both delivery and pickup, the report indicates that sales gains will not be evenly distributed because of variances in how well providers are improving the shopping experience.

“Increasing the number of households who have access to online grocery shopping services with home delivery or pickup could add almost two points to the percentage of U.S. households who buy groceries online, pushing the 2019 monthly rate past 25% at the national level," David Bishop, partner with Brick Meets Click, noted in a release. "At the same time, this will offer a meaningful boost to particular providers in those market areas, as we expect that most of the sales generated by new households going online for groceries will flow toward the brick-and-mortar delivery or pickup providers.”

As it regards Amazon’s vulnerabilities with the continuing shift toward delivery and pickup grocery services, Bishop said that while “Amazon may help customers buy those hard-to-find favorite items or get recurring orders of some essential groceries and receive them in two or three days, a delivery or pickup service can dramatically improve shopper outcomes when it comes to satisfying a broad range of overall household grocery needs.”

Further, Brick Meets Click found that when compared with Amazon households, household that use an online grocery delivery or pickup service place more frequent orders (1.9 vs. 1.6 orders per month) and spend considerably more money per order (an average of $105 vs. $46).  “This equates to households spending almost three times more with a delivery or pickup service vs. Amazon on a monthly basis,” or $200 vs. $74, respectively.

“Whether an online grocery shopper uses delivery or pickup, both services offer shoppers greater convenience, more control and better ability to accomplish more of the household’s grocery shopping than providers who ship orders to the home in two or even three days,” noted Bishop. “Where else can a grocery shopper receive an order in one hour or less, select a specific time slot for receiving the order, and get almost all the same things as when shopping in the store?” 

While the factors are spurring notable shifts, Brick Meets Click believes specific retailers offering delivery or pickup to capture a larger share of the online grocery market in 2019 will need to do a better job at improving shopper outcomes.

“It ultimately comes down to creating an experience that customers perceive as a more valuable alternative to shopping–one that better fits the way they want to select and get their groceries,” Bishop said. Further, while the implications are straightforward, “excelling at execution is more challenging. Providers have to understand whether winning more sales depends on simply improving execution, requires refining elements of the strategy, or some combination of both.”