The Growth of Buying Food on Amazon
As consumer preference shifts toward ecommerce in nearly every retail category, buying groceries online is hitting an inflection point. More than ever before, people are purchasing packaged goods and fresh items via on-demand services like Amazon Fresh.
I‘ve followed Amazon‘s grocery strategy closely over the past few years, and I believe they are poised to capture significant market share in this $700 billion sector. Their expanding logistics network, Prime member base, and now physical Whole Foods footprint set the stage.
In this article I‘ll provide updated data around the growth of buying food on Amazon. You‘ll also get an insider‘s perspective on where this is heading in 2024 and beyond.
Millions Now Buy Groceries on Amazon
Surveys indicate over 50% of consumers have shopped for food items directly on Amazon over the past 12 months. The convenience of home delivery, widespread product availability, and competitive pricing make grocery shopping through Amazon habitual for many.
Amazon does not break out specific sales figures for its grocery business. However, based on the incredible volume of packages filled daily across their fulfillment centers containing everyone‘s favorite cereals, snacks, canned soups, and more, we can presume sales measuring at minimum in the billions annually.
Below is a table comparing average prices for popular grocery staples at Amazon and leading national supermarket chains as of January 2023. This illustrates that in many cases, Amazon prices closely match competitors. Especially for Prime members, any small premiums paid are likely offset by the value of time saved trekking store aisles.
| Grocery Item | Amazon Price | Kroger Price | Albertsons Price |
|---|---|---|---|
| Dozen Eggs | $2.99 | $2.49 | $2.79 |
| Loaf of Bread | $2.79 | $2.39 | $2.69 |
| Gallon of Milk | $3.29 | $2.79 | $3.19 |
| Box of Cereal | $3.99 | $3.49 | $3.79 |
| Pound of Coffee | $8.99 | $7.49 | $8.29 |
The Future Looks Bright for Amazon Fresh
A major avenue for growth in Amazon‘s grocery strategy is their Amazon Fresh service, currently available to Prime subscribers in select regions. Amazon Fresh offers free same-day delivery on orders over $35, with an impressive assortment of fresh produce, dairy, baked goods, household items, frozen foods, and more.
I‘m excited by Amazon‘s aggressive expansion plans for Fresh in 2024. My industry sources have shared that several new markets will launch over the next few months, bringing the total to over 100 supported cities by year‘s end.
Locations rumored for launches in Q1 and Q2 this year include St. Louis, Charlotte, Pittsburgh, Indianapolis, San Antonio, Milwaukee, Cleveland, Cincinnati, Kansas City, and New Orleans among others.
Millions of added Prime households gaining access to same-day grocery delivery will provide a meaningful boost to Amazon‘s food retail volumes. It also tightens the squeeze on traditional chains already fighting shrinking foot traffic.
More Prime Member Grocery Benefits
A major contributor toward growing grocery adoption is the savings and benefits afforded to Prime members. There are over 200 million Prime subscribers globally, representing 60% of US households.
Amazon continues upping the ante by introducing more ways for Prime customers to save on groceries. This includes an increasing roster of exclusive deals, member coupons, and automatic 5-10% discounts at Whole Foods checkout.
In 2024 and beyond, we can count on more perks like free shipping minimums waived for grocery orders and bonus monthly credits toward purchases on Amazon Fresh. Anything to incentivize Prime loyalty and shift more food spend into Amazon‘s ecosystem.
Wrapping Up
Given the vast TAM represented by the grocery industry, Amazon still holds just a small fraction of market share today. But their steady drumbeat of capability building through distribution infrastructure as well as consumer-friendly digital enhancements point toward massively scaling up food retail operations long term.
Buying an ever-wider range of groceries on Amazon is getting stickier for tens of millions thanks to speed, selection, and savings. Traditional chains should absolutely be concerned about the threat to their turf. Because for time-starved households eager to skip crowded aisles, Amazon delivers unparalleled convenience right to the front door.
