Amazon Online Grocery Boom? Not So Fast… by Wolf Richter

A lot of money gets spent on groceries, but the percentage that falls to grocers bottom lines is surprisingly small. Now, with Amazon’s purchase of Whole Foods and its intention to expand online grocery shopping, that percentage will probably get even smaller. A shakeout is coming. From Wolf Richter at wolfstreet.com:

All big gorillas have been trying, but consumers just don’t want to.

Maybe Amazon has figured out that you’re not the only one who isn’t buying groceries online. Maybe it has figured out, despite all the money it has thrown at it, that selling groceries online is a very tough nut to crack. And no one has cracked it yet.

Numerous companies have been trying. Safeway started an online store and delivery service during the dotcom bubble and has made practically no headway. A plethora of startups, brick-and-mortar retailers, and online retailers have tried it, including the biggest gorillas of all — Walmart, Amazon, and Google. Google is trying it in conjunction with Costco and others. It just isn’t catching on.

And this has baffled many smart minds. Online sales in other products are skyrocketing and wiping out the businesses of brick-and-mortar retailers along the way. But groceries?

That’s one of the reasons Amazon is eager to shell out $14.7 billion to buy Whole Foods, its biggest acquisition ever, dwarfing its prior biggest acquisition, Zappos, an online shoe seller, for $850 million. Amazon cannot figure out either how to sell groceries online though it has tried for years. Now it’s looking for a new model — namely the old model in revised form?

This is why everyone who’s online wants to get a piece of the grocery pie: The pie is big. Monthly sales at grocery stores in June seasonally adjusted were $53 billion. For the year 2016, sales amounted to $625 billion:

But it’s going to be very tough for online retailers to muscle into this brick-and-mortar space, according to Gallup, based on its annual Consumption Habits survey, conducted in July. Consumers just aren’t doing it:

  • Only 9% of US households say they order groceries online at least once a month, either for pickup or delivery.
  • Only 4% do so at least once a week.
  • By contrast, someone in nearly all households (98%) goes to brick-and-mortar grocery stores at least once a month, and 83% go at least once a week.

To continue reading: Amazon Online Grocery Boom? Not So Fast…

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5 responses to “Amazon Online Grocery Boom? Not So Fast… by Wolf Richter

  1. On a personal level, shopping at the supermarket is a sublime event. I love to browse, handle a product, look at the literal miracle of abundance, compare industrial made food to home made, get ideas and inspiration, window shop, develop my own recipes by checking out an ingredients contents, its the whole experience really. Food is a big part of my life.
    Am I an outlier or do others experience such things?
    I have no interest shopping online for food, but for ordering bulk from a wholesaler, or rarities I can not get or make locally.

    Like

    • mtnforge,
      I think supermarkets are amazing–all those choices and selections, all those companies competing for my dollars. I do 95 percent of the grocery shopping in our house, because I do most of the cooking. So yes, food and groceries are big parts of my life, too.

      Liked by 1 person

      • Pretty neat how similar we both think. I’m saying you said exactly what it is to me. Wow.

        Worked for a company where I had to travel the US. We sponsored skilled metal fab/welder immigrants from Poland and Yugoslavia in the 80’s.
        Took this one young man with me as a helper on one particular job. He was “fresh off the boat”. We where given a per diem of $65 bucks a day for food each. I liked to get a motel room with a kitchen, and go to the grocery store instead of eat out. The per diem was cash no conditions, tax free, and you could piggy bank a considerable chunk of it over the year. Anyways, this kid and me went to a huge local non franchise grocery store, the first place as you entered was the produce dept, this kid all of a sudden stops, and tears started to go down his face, I’m looking at him all worried like something is terribly wrong, asking him if was OK. He didn’t say anything for a spell, just stood there looking stunned, and he say’s, “I have never seen anything like this, so much food.” “We have nothing like what you have in America”.

        I’ll remember that moment till the day I die. It really effected me, how lucky we are, how industrious and creative American’s are.

        As we are shopping I kept asking what he would care for to take back with us, and the kid say’s repeatedly there’s so much, I do not know how to choose. He was dead serious as a heart attack, never picked out a single item or suggested anything, until we went by a lobster tank. He stops dead and asks me what they are. I joked they are big sea bugs. “Are they good to eat?” Tell you what, if you like fish, we can go to a seafood restaurant after we get this stuff packed away at the motel. I ordered him a lobster and shellfish steam bucket, they bring it to the table and he takes one dandy of a look at the lobster and says “You eat, looks like monster” in that great Polish accent.
        We stayed a month, I think he never quite reckoned with the abundance of food American’s have.
        Every time no kidding after all these years I go to the grocery store I see that kid in my minds eye.
        Is this a great place, this country, or what?

        It was a life effecting event for me.
        We hunt, grow and raise from a half to 3/4’s of our food depending on the years bounty. We can up, dry, & freeze everything from deer meat to horseradish. And that is even more abundant a treasure than store bought for me. If I had my way and the resources, I would be eating 95% home raised.

        It is a common ritual, actually an important one of affirmation between folks here in WV to gift your tribe, kith and kin with your favorite canned “toothsome delicacies”, trade recipes, and help each other out canning up your larder.

        Good friend of mine, his wife and him was telling me yesterday so far this season they have canned 350 quarts of beans, 150 of corn, 65 beets, 225 various tomato, 100 pickles, lost track of canned venison, jellies, preserves, etc.
        Its money in the bank too. Especially as costs keep rising. Honestly I can’t imagine having to buy all our food, I don’t know how we could afford to, it would consume close to half our income to eat like we do on home raised, not that we make much in relative terms to mainstream.

        Right now I’m on a break waiting on a 10 gal pot of cukes crisping up on ice & salt, have to scoot out to the garden, pick a bunch of onions, dill, and garlic, after my regards to your comment Robert.

        I feel like I got it made! I feel so grateful to God, and my country, for my providence.

        Like

        • Boy was that a refreshing change of pace to read.

          Liked by 1 person

          • He was a nice kid. I was just starting to dry cure bacon & hams at the time. I’d brought some bacon for us to eat while we where on the road. He told how his family, who all lived on a farm, cured their hams. It is funny, because the story gives a clue to why canned hams have two flat sides. They would take 2 heavy oak planks that had lengths of threaded rods and nuts thru the ends, they put their hams between the planks and tighten down the nuts, every couple days they give the press a turn or two. It would help the cure draw out the water in the meat. That was his job beginning when he was old enough, every day he would go out to the hams hanging in their smoke house give the nuts a turn.

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