If you miss the days of going to smaller, specialty stores for groceries, get ready because they're probably over.
Going to multiple stores to satisfy your different food needs—a butcher shop, a cheese shop, a wine store, a produce farm stand, and a fish market—may seem quaint and European. But that's no longer how most of the United States operates.
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Larger corporations and big box stores have gobbled up smaller competition, either acquiring them or driving them out of town entirely.
Most of these larger stores also generate billions of dollars in revenue across multiple segments and have more pricing power to make products cheaper and therefore more attractive to the average customer.
When you are a small family store competing against Walmart (WMT) For example, survival is difficult. This is especially true when Walmart also sells many other items the average shopper might need, such as pet supplies, medications, outdoor gear, and more.
Online shopping is more popular
It may be even harder to compete with a company that offers online grocery shipping and delivery, something larger companies have been working on in recent years.
Thanks to the rise of online shopping, it's natural to want to shop for everything from the comfort of your home, including weekly grocery staples.
Image source: Walmart
And when Covid hit, online shopping became more widely adopted, more out of necessity than convenience. If you're one of the people who wore a mask in the store and sanitized all of your bags and packages before taking them inside, chances are you've used one of these delivery or drive-thru services.
Walmart vs amazon: the battle of the century
It's no surprise that one of the fiercest competitors in the grocery sector is Walmart. Located within 10 miles of 90% of the population, Walmart is the largest supermarket chain in the United States and has been using its physical stores as fulfillment warehouses to get orders to shoppers faster.
amazon (AMZN) , which acquired Whole Foods in 2017, has been trying to take away some of Walmart's impressive market share. Its Prime membership option is a logistical force to be reckoned with, but it's still struggling to find its footing in supermarkets.
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In April, amazon said it would launch a $9.99-a-month grocery subscription tier, ideally to complement its Prime membership, through which customers can receive unlimited groceries for free on orders of $35 or more. This is progress, but the company still has a long way to go.
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“We've worked very hard on the profitability trajectory over the last 18 months and we like the way it's taken shape,” amazon CEO Andy Jassy said on the first-quarter earnings conference call Monday. . “You have to have a perishable products business and a massive physical presence. And we have been working on that with amazon Fresh.”
amazon currently operates fewer than 50 amazon Fresh grocery stores. But amazon hopes its delivery efforts will take off faster.
“It's a very valuable offering for our Prime members and it's off to a great start. So I think we have a lot of ways to continue helping customers meet their grocery needs,” Jassy continued.
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“And we have some building blocks that I think could also change how people divide up their grocery orders over time. But I remain optimistic that that will continue to grow for us.”
Jassy added that he was “optimistic” about amazon's efforts, but some analysts have doubts.
“I would say groceries have been amazon's enemy,” Jason Goldberg, director of commercial strategy at Publicis Groupe, said after the report. “amazon has to invent a value proposition for groceries and I don't think we've seen it yet.”
“Walmart and Instacart are doing much better in the perishable, fresh and frozen sector,” he added. “It's totally believable to me that 35% of amazon customers include an edible item in their last order, but I can guarantee you it's probably a paper towel and not a banana.”
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