Amazon Grocery Sales Grew by 50% in Q1 of 2018

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Amazon Grocery is firing on all cylinders according to their recent quarterly report and data collected from One Click Retail. The supermarket giants have been watching Amazon closely over the past few years, but it appears they should watch even closer. In just the first quarter of 2018, Amazon sold an estimated $650 million worth of online groceries. How will traditional grocery compete with Amazon’s rise in the market?

How is Amazon Grocery Growing?

Amazon’s online grocery sales increased by over 50% in the first quarter compared to Q1 in 2017. So how are they doing it? Beverages are currently the top selling items on Amazon. They make up nine of the top ten best-selling grocery products on the site. Coffee represents the most growth in the beverage category with 44% year-over-year sales growth. Cold packaged beverages also represented a large chunk of growth with 40% year-over-year sales. Cold drinks and coffee represented around $285 million of the $650 million in sales in Q1 for Amazon Grocery. Snacks were the next highest performer for Amazon as they had growth of 38% with over $70 million in sales.


How Will Whole Foods Play Into Amazon Grocery Efforts?

While Amazon Pantry and AmazonFresh growth have slowed, the acquisition of Whole Foods last year has everyone in the grocery industry on their heels. Amazon believes Whole Foods can help them get the full shopping basket with perishables like meat, milk, etc. that most consumers want to buy in a store. With Whole Foods and Amazon’s distribution centers, they are slowing rolling out same day shipping to customers around the U.S. A full rollout of this service will completely change the grocery game.

Walmart Will Not Go Down Without a Fight

The biggest challenger for slowing down Amazon Grocery growth is Walmart. They currently offer store pickup at all of their stores and plan to bring grocery delivery to over 100 markets in the U.S. by the end of 2018. Walmart is making it incredibly easy to shop online and then pick up in the store which meshes well with consumer shopping norms.

It will be quite intriguing to watch Walmart and Amazon duke it out over the future of grocery retail. How do you think traditional supermarket chains will compete with these e-retail giants?

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Brick-And-Mortar Stores Still Here to Stay Amid Online Grocery Platforms

In the digital age, people have the luxury of buying whatever they need online. However, there are still many consumers who prefer to shop the traditional way. In a report released by The NPD Group, only 7% of consumers in the United States shop online for their groceries.

The Rise of Online Shopping Platforms

Consumers are not willing to adopt the online grocery shopping platform for various reasons, and one of them is that they want to pick out fresh items by themselves. There remains a significant number of the US population who prefer shopping in brick-and-mortar stores.


For instance, Amazon recently purchased the popular grocery chain Whole Foods to extend the online shopping experience of their Amazon Prime members. The acquisition is a big step for online shoppers including young professionals and urban consumers. The NPD Group predicts that online shopping will also expand faster due to the convenience factor appreciated by most shoppers.

In the same study, around 20 million of consumers who are new to online grocery shopping increased their virtual shopping activities, particularly on foods and beverages. The reason for this is that many online groceries offer a variety of unique products that traditional grocery stores do not carry. The diversity of products is another selling point of online grocery stores. But even if this is the case, it is a far cry to the hundreds of millions who still prefer to shop at brick-and-mortar grocery stores.

Why Are Traditional Grocery Stores Still Popular?

So why are brick-and-mortar stores here to stay? While one of the strongest points of online shopping is the convenience, there are still many barriers that they need to address. Aside from the fact that many people want to check and pick out food themselves, many people report the nostalgia that shopping in brick-and-mortar grocery stores provides. Another barrier to shopping for food online is higher costs.

amazon online grocery shopping

Most consumers believe that online stores do not maintain high overhead costs so they can offer lower prices. However,  it is the consumers who have to suffer from paying delivery charges or even membership fees. Consumers, in a nutshell, simply want to get their food fresh and now!

What Should Brick & Mortar Grocery Do?

While online grocery stores are becoming popular among the millennials, brick-and-mortar stores are here to stay. But to improve the shopping experience for their customers, they need to step up their strategies. According to Darren Seifer, industry analyst of the NPD Group, B&Ms need to market unique needs of consumers so that they can compete with online groceries that are offering a wider variety of products that brick-and-mortar stores do not usually carry.  By doing so, they can keep up with the pressure of time and the demands of their customers.

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How Brands Can Compete with Amazon’s CPG Subscriptions

With technology at our fingertips, consumers all over the globe have experienced many conveniences–one in the form of online shopping. In a study conducted a few years ago, it noted that the e-commerce of consumer packaged goods rose by 42%. In fact, Amazon accounted for more than 20% of all the CPG growth.

Scott Galloway from New York University said that Amazon is dominating the retail industry and is undoubtedly evolving. But what makes Amazon the epitome of the retail industry? Simply put, the company delivers its products fast and simple. The brown packaging contains exactly what the clients ordered – no frills and flair involved.

The preference of people to get consumer packaged goods from Amazon has caused fierce competition for the smaller retailers. Although this may spell impending doom to Amazon’s competitors, there are still ways to compete with Amazon, and the secret lies heavily on owning the contact information of their customers so they can build their database and analyze purchase behavior analysis. Creating a competitive subscription service is the key, but, how can this be done?

Create A Dedicated Subscriptions Channel

Dedicate a subscription channel that can handle and connect with consumers. Customer service is critical. For bigger companies, look for a younger yet promising employee who exhibits management skills and IT skills to man the subscription channel. By doing so, they will be in-charge of making real-time reactions to different market conditions and make decisions based on what the customer wants and needs.


Do A Trial Run

Before introducing a subscription, it is important to perform a trial run. The test size for the trial run should be sizable enough that it is statistically significant. It should be marketed on different digital channels and must be done in different variations so that management can determine the best product offering. This means that the trial should involve many (even hundreds) of subscription orders to be able to pinpoint which one justifies the cost per order and the scalability of the campaign. Once the specific subscription has been identified, it is important to do continuous testing as digital channels are always evolving, what works today might not work tomorrow.

Partner with A Subscription-Focused Vendor

Launching a subscriptions campaign requires constant research. Smaller companies can take advantage of hiring technology vendors to create programs for e-commerce, analytics, as well as customer service. While creating a program in-house is easy, the systems necessarily do not communicate with one another and they are not scalable. Partnering with a vendor can provide experienced people who can work on a fully integrated solution, resulting in a faster transaction, better customer experience, and accurate data. Smaller companies can benefit from subscription channels but having their own in-house team to manage can be difficult, so partnering with experienced vendors provides the best solution.

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Amazon Plans to be a Top 5 Grocery by 2025

Amazon, the infamous online retailer, is finally embarking on building physical stores with the aim of dominating the grocery industry.

Why Are Brick And Mortar Stores Elusive For Amazon?

But before Amazon can embark in the traditional food retail business, the company has experienced a few problems. First, the company has inflexible policies when it comes to selling food items.  Unlike conventional grocery stores, they cannot mark down products that are nearing their expiration dates.  Instead, they throw these products out. Second, they also have poorly-trained staff and quality inspectors that do not understand quality when it comes to the food that they are selling. This is the main reason why they have complaints especially when they ship fresh food items to customers.

According to Kurt Jetta, CEO of the consumer product firm TABS analytics,  online grocery is something that e-commerce companies have yet to master. Moreover, only a small portion of online buyers shop for food items with only 4.5% of all online shoppers buying food. Another problem is that while online stores guarantee convenience, consumers love doing their grocery shopping the traditional way.

Amazon Planning To Build The Biggest Brick And Mortar Grocery Store

With this knowledge, Amazon CEO Jeff Bezos realizes that the company cannot succeed with their online grocery alone, so they are planning to build the biggest brick-and-mortar store in the world. The physical store will be located in Seattle. The company is planning to build three stores.

The company aims to provide traditional experiences to its shoppers so they can check out their products with their senses. While Amazon wants to deliver a great shopping experience to their consumers, they have also incorporated innovative technology that makes them different from other brick-and-mortar stores. Currently, they are testing the idea of mixing in-store and online shopping by creating the concept of Amazon Go where people can shop and pay for items automatically without the need to visit the check-out counter. They are also testing the idea of creating robot-run supermarkets thus there is a need for fewer people to operate the store.

With these innovations, Amazon is aiming to be one of the top grocery retail companies by the year 2025. This means that they have to make more than $30 billion concerning their annual sales of food and beverage starting this year. To be able to achieve this,  they will need to launch more stores and warehouses all over the country.

A stronger grocery business could land Amazon in a position as the biggest wholesale food distributor in the world. But before this can even come to fruition, the company must overcome many things, and this includes finding ways to convince people to shop at Amazon whenever they are thinking of restocking their fridge and pantries.

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