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US Online Grocery Report

  • ID: 4733576
  • Report
  • December 2018
  • Region: United States
  • 156 Pages
  • ResearchFarm Ltd
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FEATURED COMPANIES

  • Ahold Delhaize
  • Boxed
  • DoorDash
  • Hello Fresh
  • Nuro
  • Target
  • MORE

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.

Note: Product cover images may vary from those shown
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FEATURED COMPANIES

  • Ahold Delhaize
  • Boxed
  • DoorDash
  • Hello Fresh
  • Nuro
  • Target
  • MORE

1. Executive summary: US Online grocery report 2019                           

2. Sizes & Forecast       

  • Sizes & Forecast: Online grocery USA sales 2017-2022 in $bn, penetration rates
  • Forecast 2014-2022: data, US Online grocery in $bn, sizes to more than double
  • Online grocery USA 2017: Top Ten players by sales, market shares, AOV, orders
  • Market shares, AOV, orders: Analysis (I)
  • Market shares, AOV, orders: Analysis (II)

3. Player profiles Online grocery USA 2019                                   

4. AmazonFresh and PrimeNow 2018   

  • Introduction: AmazonFresh and PrimeNow 2018
  • Amazon offer in grocery
  • How to define? A narrow view…
  • … or wide?
  • Best sellers grocery U.S. TTM 4 2018
  • Amazon 3P business, issues
  • AmazonFresh London best sellers
  • Amazon: the basket size issue
  • AmazonFresh data Seattle
  • Issues to overcome to expand AmazonFresh
  • The Whole Foods acquisition
  • Amazon: The Whole Foods acquisition and reasons for doing so
  • Turning Whole Foods into an omnichannel retailer
  • Amazon: What is happening at Whole Foods right now?

5. The experience so far

  • What has happened so far?
  • Amazon: what has happened so far in the US
  • USA - fresh pulls back

6. Challenges opportunities Fresh/PrimeNow, deep dive into the business models           

  • Fresh - opportunities/challenges
  • PrimeNow - opportunities/challenges
  • Groceries – opportunities

7. Future outlook: Amazon plans and strategy

  • Future strategy, 4 key issues to resolve
  • Connected household devices - move to voice
  • Amazon: opportunities in in & outbound, private label
  • Inbound logistics/order picking
  • The Whole Foods acquisition
  • Amazon: The Whole Foods acquisition and reasons for doing so
  • Turning Whole Foods into an omnichannel retailer
  • Amazon: What is happening at Whole Foods right now?

8. The experience so far

  • What has happened so far?
  • Amazon: what has happened so far in the US
  • USA - fresh pulls back

9. Challenges opportunities Fresh/PrimeNow, deep dive into the business models 

  • Fresh - opportunities/challenges
  • PrimeNow - opportunities/challenges
  • Groceries – opportunities

10. Future outlook: Amazon plans and strategy  

  • Future strategy, 4 key issues to resolve
  • Connected household devices - move to voice
  • Amazon: opportunities in in & outbound, private label
  • Inbound logistics/order picking
  • Outbound - from flex to drones?
  • Private label, 365
  • Amazon: Future outlook, questions to consider
  • Online grocery questions to consider
  • October 2018: Amazon Prime Now reaches more Whole Foods stores

11. Walmart   

  • Walmart: making stores and logistics set up count for online era
  • Walmart: Asda insights, 2,140 click & collect stations, Jet.com
  • Walmart: delivery models from 3P partnerships to pick up
  • Walmart: marketplace, Jet.com, free shipping, blip over the holidays
  • January 2018: Walmart to remodel dozens of Sam's Clubs to e-comm fulfillment centers
  • March 2018: Walmart expands grocery delivery
  • May 2018: Uber ends Walmart deliveries
  • July 2018: Jet.com to offer same-day grocery delivery in New York
  • October 2018: Blue Apron teams up with Jet.com

12. Instacart  

  • Instacart: the grocery retailers’ model for online, a common platform
  • Instacart: competitive advantage of the last mile delivery infrastructure
  • Instacart: the 3P player, same day delivery
  • Instacart: Instacart express – its own prime service
  • Instacart: Simplicity and the drawbacks of the model
  • Instacart: the retail partners from Kroger to Aldi
  • Instacart: pricing policy and sharing margins
  • February 2018: Instacart raises $200m
  • April 2018: Instacart raises $350m
  • July 2018: Instacart partners with Postmates for delivery pilot
  • October 2018: Instacart raises $600m to further expand in North America
  • November 2018: Instacart rolls out click & collect

13. Kroger   

  • Kroger: from Instacart to Ocado, how to leverage partnerships
  • Kroger: Kroger Pickup and Harris Teeter ExpressLane, Walgreens
  • March 2018: Boxed rejects Kroger's $400 million purchase offer
  • May 2018: Kroger buys into Ocado
  • May 2018: Kroger plans to pay $200 million to buy Home Chef
  • June 2018: Kroger launches self-driving grocery delivery vehicles, Kroger Ship
  • October 2018: Kroger, Ocado set terms for e-commerce partnership
  • November 2018: Kroger, Ocado first robot warehouse

14. Peapod  

  • Peapod: all the data, profitable in mature markets, stable basket sizes
  • Peapod: the back end from warerooms to warehouses and beyond
  • Peapod: various online grocery models, sharper pricing profile
  • Peapod: basket size and shopper data
  • January 2018: Peapod Digital Labs opens at Chicago headquarters
  • February 2018: partners with Campbell’s, Kraft Heinz, Barilla for Fresh Meal Kits
  • November 2018: Peapod steps up e-grocery service on Long Island

15. Others                                                   

16. Costco 

  • Costco: online grocery only shelf stable or Instacart

 17. FreshDirect 

  • FreshDirect: starting to face competition from Amazon, Instacart and jet.com
  • FreshDirect: recipe bags and CSA boxes, tight cost control
  • FreshDirect: inventory management, the business model’s secret
  • July 2018: FreshDirect opens Bronx warehouse
  • Fresh Direct: benefits of new facility, takeover interest?
  • FreshDirect: the Bronx facility, picture

18. Albertsons  

  • Albertsons: delivery options, Instacart, proprietary, Plated
  • October 2018: Albertsons Digital Marketplace goes live
  • October 2018: Albertsons eyes its own e-commerce infrastructure

19. Target  

  • Target: realising the importance of e-commerce at last
  • Target: delivery from stores, Shipt, Drive Up
  • Target: Curbside app and relaunching free delivery thresholds
  • December 2017: Target buys Shipt

20. Strategy - Meal Kits   

  • Strategy: Meal kits – threat or opportunity?
  • Strategy: Meal kits – retailers are getting involved
  • Strategy: Meal kits – HelloFresh drives consolidation to catch up with Blue Apron

21. Strategy – Drives/Pick Up/Click & collect       

  • France: E.Leclerc store format pictures, drive pieton, drive, express
  • France: the country of the drives, but home delivery is coming
  • France: the non food marketplaces integration and opportunities

22. Strategy - Robot picking and warehousing   

  • Automation in DCs: general benefits and Amazon stats
  • Robots: the AI transformation of backend and logistics
  • Amazon: online grocery on the backend, Fresh operation bottlenecks
  • Amazon: a solution to high wastage?

23. Ocado

  • Ocado: the MHE solution
  • Ocado: productivity and fulfilment benefits, highly modular and flexible design
  • Ocado: embracing automation from the beginning
  • Ocado: the Monoprix deal
  • Ocado: list of benefits of the hive solution

24. Outlook                                                   

25. Sources                                                   

  • Chart 1: Forecast 2014-2022: data, US Online grocery in $bn, sizes to more than double
  • Chart 2: Amazon grocery business verticals
  • Chart 3: Amazon business verticals
  • Chart 4: AmazonFresh London best sellers
  • Chart 5: AmazonFresh data Seattle
  • Chart 6: Amazon private label universe – grocery
  • Table 1: Sizes & Forecast: Online grocery USA 2017-2022 in $bn, growth & penetration rates
  • Table 2: Online grocery USA 2017: Top Ten players by sales, market shares, AOV, orders
  • Table 3: Best sellers grocery U.S. TTM 4 2018
Note: Product cover images may vary from those shown
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  • Ahold Delhaize
  • Albertsons
  • Aldi
  • Amazon
  • Asda
  • Auchan
  • Barilla
  • Blue Apron
  • Boxed
  • Campbell ’s
  • Carrefour
  • Casino
  • Cdiscount
  • Costco
  • CVS Health Corp.
  • Deliv
  • DoorDash
  • eBay
  • Eleclerc
  • FreshDirect
  • Google
  • Green Chef
  • H-E-B
  • Harris Teeter
  • Hello Fresh
  • Home Chef
  • Instacart
  • Jet. com
  • Kraft Heinz
  • Kroger
  • Loblaw
  • Lyft
  • Nuro
  • Ocado
  • Peapod
  • Postmates
  • Publix
  • Sam’s Club
  • Shipt
  • Sprouts
  • Target
  • Toogooodtogo
  • Trader Joe’s
  • Uber
  • Walgreens
  • Walmart
  • Wegmans
  • Whole Foods
Note: Product cover images may vary from those shown
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