Success on a plate for Amazon Fresh as growth in grocery sales soars

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Amazon’s grocery division reported growth of more than 50% in each of its three major markets in 2017.

There were sales of some $2bn in the US alone, fuelling growth in the wider US logistics chain.

Sales in the US grew by 59% in the year the online giant spent $13.7bn acquiring Whole Foods, while sales in the UK (£150m) and Germany (€200m) rose by 56% and 54%, respectively.

Amazon’s US sales brought it an 18% market share, which online analyst One Click Retail claims is double that of Walmart, its closest competitor in online grocery.

While these revenues have yet to pay back the huge Whole Foods investment, the analyst believes the purchase was worthwhile for Amazon.

“Food and beverage is one area in which e-commerce penetration lags, with consumers slow to embrace online grocery shopping; they prefer to touch and smell fresh food before buying,” it said.

“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, and we expect these growth rates will actually increase in 2018.”

One Click Retail added that “all-time high” US and European penetration, record Prime membership sign-ups and the Amazon Fresh roll-outs were behind its confidence in Amazon’s grocery potential.

In the two days following the Whole Foods acquisition, customer traffic spiked by 25% for both the latest member of the Amazon family and its Fresh service – despite no new product releases.

“Amazon’s acquisition of Whole Foods, meanwhile, is also helping to fuel growth in the US support and logistics industry as more grocery sales move online,” continued One Click.

“Even while Amazon continues to fine-tune the technology powering the still-in-development checkout-less Amazon Go grocery stores.”

Partner at Triangle Capital Richard Kestenbaum told The Loadstar he believes technology will break many barriers for Amazon in this market.

“Not merely because of efficiencies in delivery, but also in product handling and product selection, particularly meat, fish, produce and other perishables,” said Mr Kestenbaum.

“That will drive adoption and help growth, and I have every confidence grocery shopping will move online. If you went back to 2000 and asked people if they’d buy a shirt online most people would have said ‘no’.

“Once consumers learn the benefit, convenience and value, they switch. I see no reason for groceries to be different, with Amazon likely to succeed because it has the technology, capital and the need.”

One Click added that the Whole Foods acquisition doubled down on Amazon’s campaign to change perceptions of online groceries from non-perishables only to “high-quality, fresh, wholesome” foods.

“For brands, this will have – already has had – widespread implications, with food sales moving online in record volumes as consumer confidence soars,” it continued. “The growth potential for online sales of groceries in 2018, and fresh foods in particular, is huge, and in all likelihood, this is the tipping point we have been waiting for.”