If you miss the days of going to smaller, specialized stores in search of groceries, brace yourself because they are probably over.
Going to several shops for your different food needs — a butcher, a cheese shop, a wine shop, a farm stand for fresh produce, and a fish market — might sound quaint and European. But it's just not how most of the U.S. operates anymore.
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Larger corporations and big-box stores have swallowed up smaller competition, either acquiring them or driving them out of town entirely.
Most of these larger stores also do billions of dollars in revenue across multiple segments, and they have more pricing power to make goods cheaper and thereby more appealing to the average customer.
When you're a small mom-and-pop corner shop competing against Walmart (WMT) , for example, survival is hard. That's especially so when Walmart also sells countless other items the average shopper might need, like pet supplies, medications, outdoor equipment, and more.
Online grocery is more popular
It can be even harder to compete with a company that offers online grocery shipping and delivery, something the largest companies have been working on in recent years.
Thanks to the rise of online shopping, it's only natural to want to buy everything from the convenience of your home, including your weekly food staples.
Image source: Walmart
And when covid hit, buying online became more widely adopted, out of necessity more than convenience. If you're one of the people who wore a mask to the store and sanitized all your bags and packages before bringing them inside, chances are you utilized one of these delivery or drive-up services.
Walmart vs. Amazon: the battle of the century
It comes as no surprise that one of the fiercest competitors in the grocery space is Walmart. With a location within 10 miles of 90% of the population, Walmart is the largest U.S. grocery chain, and it has been using its brick-and-mortar stores as fulfillment warehouses to get orders to shoppers quicker.
Amazon (AMZN) , which acquired Whole Foods in 2017, has been trying to swipe 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 grocery foothold.
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In April, Amazon said it would launch a $9.99-per-month grocery-subscription tier, ideally to supplement its Prime membership, whereby customers can get unlimited groceries delivered for free on orders of $35 or more. This is progress, but the company's still got a long way to go.
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"We've worked very hard on the profitability trajectory over the last 18 months and like the way [that] has taken shape," Amazon Chief Executive Andy Jassy said on the Q1 earnings call on Monday. "You have to have a perishables business and a mass physical presence. And that's what we've been working on with Amazon Fresh."
Amazon currently operates fewer than 50 Amazon Fresh grocery locations. But Amazon is hoping its delivery efforts may take off faster.
"It's a very valuable offering for our Prime members, and it's off to a great start. So, in my opinion, we have lots of ways that we can continue to help customers satisfy their grocery needs," Jassy continued.
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"And we have some building blocks that I think might also change how people split up their grocery orders over time. But I continue to be optimistic that that's going to continue to grow for us."
Jassy added he was "optimistic" about Amazon's efforts, but some analysts have their misgivings.
“Grocery, I would argue, has been Amazon’s nemesis,” Jason Goldberg, chief commerce strategy officer at Publicis Groupe, said following the report. “Amazon’s got to invent a value proposition for grocery, and I don’t think we’ve seen it from them yet.”
“Walmart and Instacart are doing much better at the perishable, fresh and frozen side of grocery,” he added. “It’s totally believable to me that 35% of Amazon’s customers put a grocery item in their last order, but I can guarantee you it’s probably a paper towel and not a banana.”
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