ONE CLICK RETAIL | In 2017, Amazon attained a market share of 18% of online grocery sales in the US, double the share held by its closest competitor Walmart. But the estimated $2 billion in food and beverage sales is only a fraction of what Amazon paid in the $13.7 billion acquisition of Whole Foods, itself only the latest move in the company’s ongoing efforts to disrupt the lucrative grocery market. One Click Retail has looked back on a year of grocery sales to see how Amazon’s investment in this space is paying dividends, and where the company is likely to go from here.
2017 Estimated Grocery Sales
|Total Grocery US||$2B||59%|
|Total Grocery UK||£150M||56%|
|Total Grocery DE||€200M||54%|
|Amazon Fresh US||$350M||N/A|
|365 Everyday Value||$11M||N/A|
The food and beverage sector is one area where e-commerce penetration lags. Consumers are slow to embrace online grocery shopping as they prefer to touch and smell fresh food before buying. To this end Amazon created the Amazon Fresh service, investing heavily in making same-day delivery available to more customers, in an effort to build consumer confidence. These are just some of the factors driving growth rates north of 50% in the company’s three biggest markets, the US, UK and Germany, and we expect these growth rates will actually increase in 2018 owing to numerous drivers:
- Amazon’s penetration is at an all-time high in both North America and Europe and it is increasingly valued by young professionals, busy with their careers and/or raising young families, as a one-stop-shop where they can do all of their shopping, including groceries.
- Sign-ups for Prime membership, which includes access to Amazon’s Prime Pantry grocery items, were taking place in record numbers during the 2017 holiday season.
- Amazon Fresh continues to be available to more zip codes throughout the US, UK, Germany, Japan, and soon Australia.
Perhaps the biggest growth driver of late 2017, which will inevitably have a major influence on sales well into 2018 and beyond, is Amazon’s acquisition of Whole Foods. The impact of the mid-2017 purchase of the 470-store US brick-and-mortar chain has been felt primarily – but not exclusively – in the US. Customer traffic in Whole Foods locations spiked by 25% in the first two days after the acquisition, and Amazon Fresh also experienced a strong increase in sales after the announcement, even before any new products were released on Amazon.com:
In reality, the impact could have been even greater if Amazon had been better prepared for the popularity of the Whole Foods brand 365 Everyday Value, which in the first week sold out of over 90% of the roughly 2000 products listed on Amazon. Despite these shortages, 365 Everyday Value still consistently sold as the #2 bestselling brand among Amazon’s private labels (second only to AmazonBasics) since its launch in late August, earning an estimated $11M in sales by the end of 2017.
When it comes to purchasing foodstuff online, consumer reticence varies by category. Beverages sell better than other categories by a wide margin. Cold Beverages (driven by bottled water and sports/energy drinks) and Coffee (driven by disposable coffee pods) earned more than double the next leading categories; Cold Beverages grew at an impressive 65% YoY. The remaining top categories, Snack Food, Breakfast Foods and Candy & Gum, show how non-perishables continue to dominate Amazon’s grocery sales.
To take a glass-half-full approach, this shows how much room for growth still exists for brands selling on Amazon. Case in point: weekly sales of Amazon Fresh more than doubled over the course of the year, climbing from approximately $3 million in January to over $7 million by the end of 2017 to reach an estimated $350 million in total sales. Dairy drew the highest sales by value, estimated at $85 million, while most of the top Fresh items were fruit and vegetables. “Organic” proved to be a key search term, with roughly 25% of all Amazon Fresh sales going to items which had the word “organic” in the title, including eight of the top 20 bestselling items of 2017.
|Of the Top 20 Amazon Fresh Items in the US:|
|“Organic” in the Title:||8|
|Top Item:||Bananas, 1 bunch|
* Amazon 1st-party sales only.
Internationally, beverages dominate to a similar degree, representing at least 18 of the top 20 grocery items in the US, UK and Germany, though in the latter two countries a significant portion of sales were in alcoholic beverages. Beer, Wine & Spirits is the largest grocery category in both of those countries, at least doubling the size of the #2 category and growing at a very rapid rate – 96% in the UK and 230% in Germany YoY. Coffee is also a top category across all three countries, with 12 of the top 20 items in the UK. In Germany, uniquely, Baby/Infant Milk is a major category, responsible for each of the top eight grocery items of 2017 and generating an estimated €30M in sales – though experiencing negligible YoY growth.
International Amazon Comparison
|UK Top Grocery Categories 2017||Germany Top Grocery Categories 2017|
|Category||Est. Sales||Growth||Category||Est. Sales||Growth|
|Beer, Wine & Spirits||£60M||96%||Beer, Wine & Spirits||€80M||230%|
|Coffee||£30M||17%||Baby & Infant||€30M||<1%|
|Snacks & Desserts||£15M||18%||Coffee||€25M||19%|
|Condiments, Spreads & Cooking||£10M||10%||Snacks & Desserts||€25M||23%|
|Baking Supplies||£10M||21%||Condiments, Spreads & Cooking||€15M||37%|
*Estimates reflect Amazon 1st-party sales only.
The grocery space is undergoing a major disruption. Amazon Fresh is helping to drive consumer confidence and increase the retailer’s grocery penetration throughout the US, UK and Germany, while German grocer Lidl is concurrently undergoing a major brick-and-mortar expansion in the US and putting more pressure on Walmart and Kroger. Amazon’s acquisition of Whole Foods, meanwhile, is helping to fuel growth in the US support and logistics industry as more grocery sales move online, even while Amazon continues to fine-tune the technology powering the still-in-development checkout-less Amazon Go grocery stores.
The Amazon and Whole Foods partnership is a perfect match, doubling down on the campaign begun by Amazon Fresh to change consumer perceptions of online grocery sales from “non-perishables only” to high quality, fresh, “whole”-some foods. For brands, this will have – and already has had – widespread implications, with food sales moving online in record volumes as consumer confidence soars. The growth potential for online sales of groceries in 2018, and fresh foods, in particular, is huge. In all likelihood, this is the tipping point we have been waiting for.
By Nathan Rigby
One Click Retail is the industry’s most accurate source of sales data for the world’s top eCommerce marketplaces. Using a combination of website indexing, machine learning and proprietary software, OCR estimates weekly online sales figures with market-leading accuracy in order to deliver the best insights, analytics and strategies to their brand manufacturer clients. To catch a glimpse of how OCR gives brands the critical edge on online platforms with our unique data and expertise, subscribe to our weekly eCommerce insights blog, and follow us on Twitter and LinkedIn.
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