Amazon gives food, beverage ecommerce shot of adrenaline

Double-digit annual growth realistic for company.

Online grocery shopping has begun to catch on. Now, with the one-two punch of Amazon’s AmazonFresh expansion and the etailer’s acquisition of Whole Foods, there’s little doubt that food and beverage ecommerce will receive a shot of adrenaline.

As market research firm Packaged Facts forecasts in its new study, "U.S. Grocery Market Focus: The Amazon Food Shopper," although Amazon currently garners only a small share of overall grocery sales, that share will trend upward in the coming years.

Packaged Facts estimated Amazon’s 2016 online food and beverages sales, including AmazonFresh, at $1.5 billion, and it expects them to rise to $2.3 billion in 2017, giving it a 19% share of the online market. Looking ahead, growth of 70% during 2018 and 2019 is realistic, as Amazon pivots to leverage its Whole Foods acquisition into multi-channel growth. Longer term, even average growth during 2021 and 2025 would catapult Amazon’s food and beverages sales well past $30 billion.

Importantly, while its growth curve is nothing to trifle with, Packaged Facts noted that estimated sales between 2018 and 2020 would make only minor inroads into total food-consumed-at-home sales. Realistic projections for Amazon’s market share gains hardly equate to industry ownership, and the etail titan would still trail national chains such as Walmart and Kroger.

“Will Amazon overtake the food and beverage market? No, but perhaps most importantly, Amazon’s major foray into food will surely stretch margins in an industry where they are already notoriously thin. This will, in turn, likely result in additional industry mergers and alliances geared toward managing costs, as other retailers seek to stay in the game with a competitor long known to absorb heavy losses over time in its quest for market share,” Packaged Facts research director David Sprinkle said.

Moreover, Packaged Facts also anticipates that any success Amazon has with food will also translate to strengthening its Amazon Prime value proposition, giving more shoppers more reasons to buy three times the products across categories. In this respect, food sales growth will contribute to sales growth in Amazon’s other retail categories.

TAGS: Business
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