The world is now contending with the unprecedented health crisis of COVID-19 and what it means for our lives and industries. In many areas of the U.S., all non-essential businesses have been shuttered and most of the workforce is confined to their homes. One business deemed absolutely essential is grocery stores, because no matter how large-scale this virus becomes, people must eat. Amazon has been working to establish themselves as a name in grocery but has had trouble gaining ground on more established companies in the space. As COVID restricts consumers to their homes, Amazon may be able to leverage their well-oiled ecommerce infrastructure to attract new customers to their grocery business.
Over the past few years, Amazon has been building inroads into grocery. In 2017, the company purchased Whole Foods. In October of 2019, they removed the $15 fee from theironline grocery shopping option Amazon Fresh, making it widely available and free of charge to anyone who has a Prime subscription. And late last year, news outlets began reporting that Amazon will launch a second, lower-priced grocery store chain to appeal to customers outside of the Whole Foods crowd.
Pre-COVID, online grocery accounted for just 3% of total grocery sales, but it is projected to be the fastest-growing ecommerce category. Winning that consumer base is a sizable prize, and Amazon wants to be the go-to online grocery source. To date, the company has struggled to keep up with Walmart, whose competitive prices and pickup or delivery options have allowed them to build on their already-successful grocery business. Their success has given them a head start over Amazon; In the past week of COVID-19 shopper activity, Amazon saw just 14% of orders from new online grocery shoppers compared to Walmart’s 58%.
So what else is standing in the way for Amazon? Seemingly, only logistics. Breakdowns and delays in their supply and delivery network have forced them to temporarily prioritize six essential categories in their online marketplace, including household staples and medical supplies. Nevertheless, news outlets report that the company is forging ahead with expansion plans for their brick and mortar grocery network and offering workers a pay increase to shift from Amazon.com warehouses to packing and shipping groceries for Fresh and Whole Foods. Amazon has been forced to make on-the-fly decisions in order to best serve their customers during this crisis. Reallocating their labor force to grocery during social distancing restrictions will give them the manpower they need to make significant progress and meet increased demand.
As we move into a post-COVID future, Amazon’s commitment to developing cashierless stores may prove to be more useful than anyone expected. The company’s proprietary technology is the functional centerpiece of their Go convenience stores and has plans to grow much larger than that. Just last month, Amazon opened its largest Go store in Seattle,boasting a footprint of 10,400 square feet. Reports have said that the company is also courting Walmart and Target to adopt the technology, but neither company has been keen.Now that COVID has introduced a collective focus on avoiding contact with others, the other retailers may be more eager to collaborate and explore systems that remove human-to-human contact from the shopping process.
If Amazon can satisfy the rapidly increasing demand for online grocery prompted by COVID-19, they could gain unprecedented ground on their competitors in this race. One thing we know about Amazon is that they don’t settle for second place, and the time has never been more pertinent for them to show customers the value of online grocery.