US Online Grocery Report 2019
US Online Grocery Report 2019
Abstract
The sector is going to witness an epic four way battle between Amazon, Walmart, Instacart and in future Kroger.
(I)
Amazon is betting on rapid delivery with Prime Now. This means Amazon’s online grocery business will be all about Whole Foods. The bricks and mortar retailer, champion of the organic movement, was a perfect fit for Amazon but also a very opportunistic acquisition. The retailer will provide Amazon with the trust levels and brand strengths and the full grocery proposition, so it should actually raise basket sizes at Amazon. This has been the perennial problem of Amazon Fresh’s offer.
As the company goes for a rapid delivery in the Prime Now mould and a focus on convenience and speed and have less of an emphasis on Amazon Fresh in future, this means very challenging low basket sizes going forward.
Apart from the marketplace, and its other online grocery businesses (from pantry to Alexa, Ring, Nest etc), Amazon also operates the Go stores and of course the drive locations. Undoubtedly, Amazon will launch other verticals in this space and throw new models into the mix. How they then all sit and fit together is a very different question.
The prime benefits and discounts will be key. Many more shoppers are likely to begin online grocery shopping now that it is offered via Amazon Prime. And prime drives repeat shopping.
(II)
To catch up, Walmart will need to sweat its assets and really make its drive option work hard. Its drive stations will need to handle 8m deliveries a year to make a meaningful contribution.
For Walmart to add $500m to its online grocery sales would mean that each of its click & collect points would need to serve 10 orders a day at an average basket size of around $70. If the retailer wants to catch up to Amazon its home delivery service, Jet.com and any other future initiatives will need to fire on all cylinders too.
Obviously even the double (20 orders per day) would not be an operational hurdle at all, the question is rather whether the demand will be there as anticipated by Walmart management. In the UK Asda’s big bet on click & collect famously did not come off.
Moreover, taking half a billion USD in sales off competitors in a mature grocery market will not be easy. It would imply a significant market share shift and the loss of many smaller b&m independents we believe.
(III)
Instacart looks like a brilliant model for smaller grocers. They will be able to share the same logistics platform, online capabilities, delivery drivers etc through Instacart. Sharing front to back end and especially the expensive last mile enables grocers to launch their e-commerce activities without the huge upfront investments and sunk costs otherwise required. In this sense Instacart has become a shared infrastructure for grocery retailers as they defend against Amazon.
FMCG on the other hand view Amazon as a welcome route to market that bypasses the big retailers and their private labels and negotiating power. But arguably, such a marketplace should have been set up by the FMCG players rather than giving all the business to Amazon.
One way of looking at the sector in future posits Instacart versus Amazon, or retailers versus FMCG, as their preferred platform and route to market of choice.
In effect this could mean, that Amazon will become the platform the FMCG players will want to push as a counterweight to (physical) retail. On the other hand Instacart will be the platform the established bricks and mortar grocery retailers use to gain a foothold in online grocery.
(IV)
That said, there is a contradiction to the Instacart model. Pick from stores is actually outdated, especially when viewed from an efficiency standpoint and when looking at cost. But the model is being saved by enabling rapid deliveries from central locations.
The most efficient solution will be the robot warehouses as pioneered by Ocado and now sold to Kroger. After all Ocado is the only player profitable on an operational level in the UK. This tie up with Kroger should not be underestimated and Kroger could well be a big surprise in online grocery going forward.
What is holding back the Kroger and Ocado model is despite the speed the robots provide, the huge out-of-town sheds needed for online grocery picking make a rapid delivery very challenging, just because of the drive time from out of town to shoppers’ homes. Also if click & collect/pick up becomes more of the norm in US online grocery shopping, then Instacart become less of an attractive partner for smaller grocers.
Content
Executive summary: US Online grocery report 2019p10
Sizes & Forecastp15
Sizes & Forecast: Online grocery USA sales 2017-2022 in $bn, penetration ratesp16
Forecast 2014-2022: data, US Online grocery in $bn, sizes to more than doublep17
Online grocery USA 2017: Top Ten players by sales, market shares, AOV, ordersp18
Market shares, AOV, orders: Analysis (I)p19
Market shares, AOV, orders: Analysis (II)p20
Player profiles Online grocery USA 2019p21
AmazonFresh and PrimeNow 2018p22
Introduction: AmazonFresh and PrimeNow 2018p23
Amazon offer in groceryp24
How to define? A narrow view…p26
… or wide?p28
Best sellers grocery U.S. TTM 4 2018p30
Amazon 3P business, issuesp32
AmazonFresh London best sellersp34
Amazon: the basket size issuep35
AmazonFresh data Seattlep36
Issues to overcome to expand AmazonFreshp37
The Whole Foods acquisitionp39
Amazon: The Whole Foods acquisition and reasons for doing sop40
Turning Whole Foods into an omnichannel retailerp42
Amazon: What is happening at Whole Foods right now?p44
The experience so far p45
What has happened so far?p46
Amazon: what has happened so far in the USp48
USA - fresh pulls backp49
Challenges opportunities Fresh/PrimeNow, deep dive into the business modelsp50
Fresh - opportunities/challengesp51
PrimeNow - opportunities/challengesp55
Groceries – opportunitiesp58
Future outlook: Amazon plans and strategyp60
Future strategy, 4 key issues to resolvep62
Connected household devices - move to voicep63
Amazon: opportunities in in & outbound, private labelp64
Inbound logistics/order pickingp65
The Whole Foods acquisitionp39
Amazon: The Whole Foods acquisition and reasons for doing sop40
Turning Whole Foods into an omnichannel retailerp42
Amazon: What is happening at Whole Foods right now?p44
The experience so far p45
What has happened so far?p46
Amazon: what has happened so far in the USp48
USA - fresh pulls backp49
Challenges opportunities Fresh/PrimeNow, deep dive into the business modelsp50
Fresh - opportunities/challengesp51
PrimeNow - opportunities/challengesp55
Groceries – opportunitiesp58
Future outlook: Amazon plans and strategyp60
Future strategy, 4 key issues to resolvep62
Connected household devices - move to voicep63
Amazon: opportunities in in & outbound, private labelp64
Inbound logistics/order pickingp65
Outbound - from flex to drones?p66
Private label, 365p67
Amazon: Future outlook, questions to consider p68
Online grocery questions to considerp69
October 2018: Amazon Prime Now reaches more Whole Foods storesp70
Walmartp71
Walmart: making stores and logistics set up count for online era p72
Walmart: Asda insights, 2,140 click & collect stations, Jet.comp73
Walmart: delivery models from 3P partnerships to pick upp74
Walmart: marketplace, Jet.com, free shipping, blip over the holidaysp75
January 2018: Walmart to remodel dozens of Sam's Clubs to e-comm fulfillment centersp76
March 2018: Walmart expands grocery delivery p77
May 2018: Uber ends Walmart deliveriesp78
July 2018: Jet.com to offer same-day grocery delivery in New Yorkp79
October 2018: Blue Apron teams up with Jet.comp80
Instacartp81
Instacart: the grocery retailers’ model for online, a common platformp82
Instacart: competitive advantage of the last mile delivery infrastructurep83
Instacart: the 3P player, same day deliveryp84
Instacart: Instacart express – its own prime servicep85
Instacart: Simplicity and the drawbacks of the modelp86
Instacart: the retail partners from Kroger to Aldip87
Instacart: pricing policy and sharing marginsp88
February 2018: Instacart raises $200mp89
April 2018: Instacart raises $350mp90
July 2018: Instacart partners with Postmates for delivery pilotp91
October 2018: Instacart raises $600m to further expand in North Americap92
November 2018: Instacart rolls out click & collectp93
Krogerp94
Kroger: from Instacart to Ocado, how to leverage partnershipsp95
Kroger: Kroger Pickup and Harris Teeter ExpressLane, Walgreensp96
March 2018: Boxed rejects Kroger's $400 million purchase offerp97
May 2018: Kroger buys into Ocadop98
May 2018: Kroger plans to pay $200 million to buy Home Chefp99
June 2018: Kroger launches self-driving grocery delivery vehicles, Kroger Shipp100
October 2018: Kroger, Ocado set terms for e-commerce partnershipp101
November 2018: Kroger, Ocado first robot warehousep102
Peapodp103
Peapod: all the data, profitable in mature markets, stable basket sizes p104
Peapod: the back end from warerooms to warehouses and beyondp105
Peapod: various online grocery models, sharper pricing profilep106
Peapod: basket size and shopper datap107
January 2018: Peapod Digital Labs opens at Chicago headquartersp108
February 2018: partners with Campbell’s, Kraft Heinz, Barilla for Fresh Meal Kitsp109
November 2018: Peapod steps up e-grocery service on Long Islandp110
Othersp111
Costcop112
Costco: online grocery only shelf stable or Instacartp113
FreshDirectp114
FreshDirect: starting to face competition from Amazon, Instacart and jet.comp115
FreshDirect: recipe bags and CSA boxes, tight cost control p116
FreshDirect: inventory management, the business model’s secretp117
July 2018: FreshDirect opens Bronx warehousep118
Fresh Direct: benefits of new facility, takeover interest?p119
FreshDirect: the Bronx facility, picturep120
Albertsonsp121
Albertsons: delivery options, Instacart, proprietary, Platedp122
October 2018: Albertsons Digital Marketplace goes livep123
October 2018: Albertsons eyes its own e-commerce infrastructurep124
Targetp125
Target: realising the importance of e-commerce at lastp126
Target: delivery from stores, Shipt, Drive Upp127
Target: Curbside app and relaunching free delivery thresholdsp128
December 2017: Target buys Shipt p129
Strategy - Meal Kitsp130
Strategy: Meal kits – threat or opportunity?p131
Strategy: Meal kits – retailers are getting involvedp132
Strategy: Meal kits – HelloFresh drives consolidation to catch up with Blue Apron p133
Strategy – Drives/Pick Up/Click & collectp134
France: E.Leclerc store format pictures, drive pieton, drive, expressp135
France: the country of the drives, but home delivery is comingp136
France: the non food marketplaces integration and opportunitiesp137
Strategy - Robot picking and warehousingp138
Automation in DCs: general benefits and Amazon statsp139
Robots: the AI transformation of backend and logisticsp140
Amazon: online grocery on the backend, Fresh operation bottlenecksp141
Amazon: a solution to high wastage?p142
Ocadop143
Ocado: the MHE solutionp144
Ocado: productivity and fulfilment benefits, highly modular and flexible designp145
Ocado: embracing automation from the beginningp146
Ocado: the Monoprix dealp147
Ocado: list of benefits of the hive solutionp148
Outlookp149
Sourcesp152
Chart 1: Forecast 2014-2022: data, US Online grocery in $bn, sizes to more than doublep17
Chart 2: Amazon grocery business verticalsp26
Chart 3: Amazon business verticalsp28
Chart 4: AmazonFresh London best sellersp34
Chart 5: AmazonFresh data Seattlep36
Chart 6: Amazon private label universe – groceryp67
Table 1: Sizes & Forecast: Online grocery USA 2017-2022 in $bn, growth & penetration ratesp16
Table 2: Online grocery USA 2017: Top Ten players by sales, market shares, AOV, ordersp18
Table 3: Best sellers grocery U.S. TTM 4 2018p30
(I)
Amazon is betting on rapid delivery with Prime Now. This means Amazon’s online grocery business will be all about Whole Foods. The bricks and mortar retailer, champion of the organic movement, was a perfect fit for Amazon but also a very opportunistic acquisition. The retailer will provide Amazon with the trust levels and brand strengths and the full grocery proposition, so it should actually raise basket sizes at Amazon. This has been the perennial problem of Amazon Fresh’s offer.
As the company goes for a rapid delivery in the Prime Now mould and a focus on convenience and speed and have less of an emphasis on Amazon Fresh in future, this means very challenging low basket sizes going forward.
Apart from the marketplace, and its other online grocery businesses (from pantry to Alexa, Ring, Nest etc), Amazon also operates the Go stores and of course the drive locations. Undoubtedly, Amazon will launch other verticals in this space and throw new models into the mix. How they then all sit and fit together is a very different question.
The prime benefits and discounts will be key. Many more shoppers are likely to begin online grocery shopping now that it is offered via Amazon Prime. And prime drives repeat shopping.
(II)
To catch up, Walmart will need to sweat its assets and really make its drive option work hard. Its drive stations will need to handle 8m deliveries a year to make a meaningful contribution.
For Walmart to add $500m to its online grocery sales would mean that each of its click & collect points would need to serve 10 orders a day at an average basket size of around $70. If the retailer wants to catch up to Amazon its home delivery service, Jet.com and any other future initiatives will need to fire on all cylinders too.
Obviously even the double (20 orders per day) would not be an operational hurdle at all, the question is rather whether the demand will be there as anticipated by Walmart management. In the UK Asda’s big bet on click & collect famously did not come off.
Moreover, taking half a billion USD in sales off competitors in a mature grocery market will not be easy. It would imply a significant market share shift and the loss of many smaller b&m independents we believe.
(III)
Instacart looks like a brilliant model for smaller grocers. They will be able to share the same logistics platform, online capabilities, delivery drivers etc through Instacart. Sharing front to back end and especially the expensive last mile enables grocers to launch their e-commerce activities without the huge upfront investments and sunk costs otherwise required. In this sense Instacart has become a shared infrastructure for grocery retailers as they defend against Amazon.
FMCG on the other hand view Amazon as a welcome route to market that bypasses the big retailers and their private labels and negotiating power. But arguably, such a marketplace should have been set up by the FMCG players rather than giving all the business to Amazon.
One way of looking at the sector in future posits Instacart versus Amazon, or retailers versus FMCG, as their preferred platform and route to market of choice.
In effect this could mean, that Amazon will become the platform the FMCG players will want to push as a counterweight to (physical) retail. On the other hand Instacart will be the platform the established bricks and mortar grocery retailers use to gain a foothold in online grocery.
(IV)
That said, there is a contradiction to the Instacart model. Pick from stores is actually outdated, especially when viewed from an efficiency standpoint and when looking at cost. But the model is being saved by enabling rapid deliveries from central locations.
The most efficient solution will be the robot warehouses as pioneered by Ocado and now sold to Kroger. After all Ocado is the only player profitable on an operational level in the UK. This tie up with Kroger should not be underestimated and Kroger could well be a big surprise in online grocery going forward.
What is holding back the Kroger and Ocado model is despite the speed the robots provide, the huge out-of-town sheds needed for online grocery picking make a rapid delivery very challenging, just because of the drive time from out of town to shoppers’ homes. Also if click & collect/pick up becomes more of the norm in US online grocery shopping, then Instacart become less of an attractive partner for smaller grocers.
Sizes & Forecastp15
Sizes & Forecast: Online grocery USA sales 2017-2022 in $bn, penetration ratesp16
Forecast 2014-2022: data, US Online grocery in $bn, sizes to more than doublep17
Online grocery USA 2017: Top Ten players by sales, market shares, AOV, ordersp18
Market shares, AOV, orders: Analysis (I)p19
Market shares, AOV, orders: Analysis (II)p20
Player profiles Online grocery USA 2019p21
AmazonFresh and PrimeNow 2018p22
Introduction: AmazonFresh and PrimeNow 2018p23
Amazon offer in groceryp24
How to define? A narrow view…p26
… or wide?p28
Best sellers grocery U.S. TTM 4 2018p30
Amazon 3P business, issuesp32
AmazonFresh London best sellersp34
Amazon: the basket size issuep35
AmazonFresh data Seattlep36
Issues to overcome to expand AmazonFreshp37
The Whole Foods acquisitionp39
Amazon: The Whole Foods acquisition and reasons for doing sop40
Turning Whole Foods into an omnichannel retailerp42
Amazon: What is happening at Whole Foods right now?p44
The experience so far p45
What has happened so far?p46
Amazon: what has happened so far in the USp48
USA - fresh pulls backp49
Challenges opportunities Fresh/PrimeNow, deep dive into the business modelsp50
Fresh - opportunities/challengesp51
PrimeNow - opportunities/challengesp55
Groceries – opportunitiesp58
Future outlook: Amazon plans and strategyp60
Future strategy, 4 key issues to resolvep62
Connected household devices - move to voicep63
Amazon: opportunities in in & outbound, private labelp64
Inbound logistics/order pickingp65
The Whole Foods acquisitionp39
Amazon: The Whole Foods acquisition and reasons for doing sop40
Turning Whole Foods into an omnichannel retailerp42
Amazon: What is happening at Whole Foods right now?p44
The experience so far p45
What has happened so far?p46
Amazon: what has happened so far in the USp48
USA - fresh pulls backp49
Challenges opportunities Fresh/PrimeNow, deep dive into the business modelsp50
Fresh - opportunities/challengesp51
PrimeNow - opportunities/challengesp55
Groceries – opportunitiesp58
Future outlook: Amazon plans and strategyp60
Future strategy, 4 key issues to resolvep62
Connected household devices - move to voicep63
Amazon: opportunities in in & outbound, private labelp64
Inbound logistics/order pickingp65
Outbound - from flex to drones?p66
Private label, 365p67
Amazon: Future outlook, questions to consider p68
Online grocery questions to considerp69
October 2018: Amazon Prime Now reaches more Whole Foods storesp70
Walmartp71
Walmart: making stores and logistics set up count for online era p72
Walmart: Asda insights, 2,140 click & collect stations, Jet.comp73
Walmart: delivery models from 3P partnerships to pick upp74
Walmart: marketplace, Jet.com, free shipping, blip over the holidaysp75
January 2018: Walmart to remodel dozens of Sam's Clubs to e-comm fulfillment centersp76
March 2018: Walmart expands grocery delivery p77
May 2018: Uber ends Walmart deliveriesp78
July 2018: Jet.com to offer same-day grocery delivery in New Yorkp79
October 2018: Blue Apron teams up with Jet.comp80
Instacartp81
Instacart: the grocery retailers’ model for online, a common platformp82
Instacart: competitive advantage of the last mile delivery infrastructurep83
Instacart: the 3P player, same day deliveryp84
Instacart: Instacart express – its own prime servicep85
Instacart: Simplicity and the drawbacks of the modelp86
Instacart: the retail partners from Kroger to Aldip87
Instacart: pricing policy and sharing marginsp88
February 2018: Instacart raises $200mp89
April 2018: Instacart raises $350mp90
July 2018: Instacart partners with Postmates for delivery pilotp91
October 2018: Instacart raises $600m to further expand in North Americap92
November 2018: Instacart rolls out click & collectp93
Krogerp94
Kroger: from Instacart to Ocado, how to leverage partnershipsp95
Kroger: Kroger Pickup and Harris Teeter ExpressLane, Walgreensp96
March 2018: Boxed rejects Kroger's $400 million purchase offerp97
May 2018: Kroger buys into Ocadop98
May 2018: Kroger plans to pay $200 million to buy Home Chefp99
June 2018: Kroger launches self-driving grocery delivery vehicles, Kroger Shipp100
October 2018: Kroger, Ocado set terms for e-commerce partnershipp101
November 2018: Kroger, Ocado first robot warehousep102
Peapodp103
Peapod: all the data, profitable in mature markets, stable basket sizes p104
Peapod: the back end from warerooms to warehouses and beyondp105
Peapod: various online grocery models, sharper pricing profilep106
Peapod: basket size and shopper datap107
January 2018: Peapod Digital Labs opens at Chicago headquartersp108
February 2018: partners with Campbell’s, Kraft Heinz, Barilla for Fresh Meal Kitsp109
November 2018: Peapod steps up e-grocery service on Long Islandp110
Othersp111
Costcop112
Costco: online grocery only shelf stable or Instacartp113
FreshDirectp114
FreshDirect: starting to face competition from Amazon, Instacart and jet.comp115
FreshDirect: recipe bags and CSA boxes, tight cost control p116
FreshDirect: inventory management, the business model’s secretp117
July 2018: FreshDirect opens Bronx warehousep118
Fresh Direct: benefits of new facility, takeover interest?p119
FreshDirect: the Bronx facility, picturep120
Albertsonsp121
Albertsons: delivery options, Instacart, proprietary, Platedp122
October 2018: Albertsons Digital Marketplace goes livep123
October 2018: Albertsons eyes its own e-commerce infrastructurep124
Targetp125
Target: realising the importance of e-commerce at lastp126
Target: delivery from stores, Shipt, Drive Upp127
Target: Curbside app and relaunching free delivery thresholdsp128
December 2017: Target buys Shipt p129
Strategy - Meal Kitsp130
Strategy: Meal kits – threat or opportunity?p131
Strategy: Meal kits – retailers are getting involvedp132
Strategy: Meal kits – HelloFresh drives consolidation to catch up with Blue Apron p133
Strategy – Drives/Pick Up/Click & collectp134
France: E.Leclerc store format pictures, drive pieton, drive, expressp135
France: the country of the drives, but home delivery is comingp136
France: the non food marketplaces integration and opportunitiesp137
Strategy - Robot picking and warehousingp138
Automation in DCs: general benefits and Amazon statsp139
Robots: the AI transformation of backend and logisticsp140
Amazon: online grocery on the backend, Fresh operation bottlenecksp141
Amazon: a solution to high wastage?p142
Ocadop143
Ocado: the MHE solutionp144
Ocado: productivity and fulfilment benefits, highly modular and flexible designp145
Ocado: embracing automation from the beginningp146
Ocado: the Monoprix dealp147
Ocado: list of benefits of the hive solutionp148
Outlookp149
Sourcesp152
Chart 1: Forecast 2014-2022: data, US Online grocery in $bn, sizes to more than doublep17
Chart 2: Amazon grocery business verticalsp26
Chart 3: Amazon business verticalsp28
Chart 4: AmazonFresh London best sellersp34
Chart 5: AmazonFresh data Seattlep36
Chart 6: Amazon private label universe – groceryp67
Table 1: Sizes & Forecast: Online grocery USA 2017-2022 in $bn, growth & penetration ratesp16
Table 2: Online grocery USA 2017: Top Ten players by sales, market shares, AOV, ordersp18
Table 3: Best sellers grocery U.S. TTM 4 2018p30
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