Grocery Grows at Amazon

When Amazon bought Whole Foods Market in 2017 for $13.7 billion we knew the market was set for disruption.

But, boy, did it come fast.

Per a new report from CIRP (Consumer Intelligence Research Partners) ‘grocery’ has now become the most popular category at Amazon.

“Amazon targeted grocery long ago, and it is starting to pay off,” said Josh Lowitz, CIRP Partner and Co-Founder. “Grocery has displaced electronics as the most popular category at Amazon, with almost a third of customers including grocery in their most recent purchase. Whole Foods is part of the picture, with 40% of Amazon customers having shopped there. It remains limited by its geographic reach, however, so Amazon will likely need to continue exploring other physical grocery store plans.”

Currently Amazon offers two grocery delivery services: Fresh and Whole Foods. With the Whole Foods option Prime members can load up a cart and get free delivery for orders over $35, and choose a two-hour delivery window.

CIRP notes that at least 66% of Amazon customers have purchased groceries on the site at some point.

“Even though grocery is traditionally a low-margin business, Amazon would naturally target it because of the repeat, regular shopping trips,” said Mike Levin, CIRP Partner and Co-Founder. “Already, we see grocery and Whole Foods customers shop more
frequently at and join Amazon Prime more.”

Stark Insider Take

Amazon Fresh Amazon Whole Foods Market grocery delivery options
Two delivery options available today: Amazon Fresh and Amazon Whole Foods Market. Will Amazon eventually merge the two?

No surprise that Amazon has set its sights on yet another market and is quickly making inroads.

Despite the low margins, having customers visit on a regular visit results in a certain amount of cross-sell across other categories. Many shoppers will likely fill up their Whole Foods carts and schedule delivery and then decide to order a few other non-grocery household goods while they’re on the site. This behavior helps Amazon with predictable revenue streams and forecasting into the future.

Also, it’s important to keep in mind the actual Whole Foods stores gives Amazon a valuable real estate footprint across the country. No surprise then you see Amazon Echo stations with various Alexa-enabled products in stores. Yet more opportunity for cross-selling, this time in physical locations.

Interesting to note that in an earlier survey in 2018 CIRP discovered that ‘grocery’ was the second most popular category. In only three years Amazon has become a major destination for grocery shoppers. That’s quite something.