Amazon's Growing Grocery Market Share Is Sending a Cold Shock to Walmart

Walmart’s market share in the food and grocery space is about seven times that of Amazon, according to PYMNTS data. However, Amazon’s continued pursuit has put pressure on Walmart, which is facing rising costs and shrinking profits.

In the first quarter earnings call this year, Walmart CEO Doug McMillon said: "In dry grocery and consumable categories such as paper products, we continue to see high single-digit to low double-digit cost inflation. We all need these prices to come down. Continued high inflation in these categories is weighing on American families. High inflation in dry grocery and consumables is one of the challenges Walmart faces in the second half of this year as it affects consumer spending in discretionary categories."

Unlike Walmart, Amazon's grocery business is performing well. The wide selection of products in Amazon's online marketplace is more attractive to customers than in physical grocery stores, and the Prime membership subscription program has helped it win customer loyalty.

“Our grocery business is actually pretty strong,” Amazon CEO Andy Jassy said on an earnings call last month. “It’s an unusual business for Amazon, where shoppers are flocking to grocery stores like they did 25, 30 years ago and choosing items that are not temperature controlled. … In the current environment where consumers are cautious about their spending and looking for discounts everywhere, our grocery category has been holding up very strongly.”

A PYMNTS survey of nearly 2,700 U.S. consumers last month found that 61% of U.S. consumers currently subscribe to Amazon Prime and 26% subscribe to Walmart+.

The survey also found that American consumers are turning to e-commerce channels to get the goods they previously purchased in supermarkets, which is a very good trend for Amazon. Now, consumers prefer to buy health and cleaning products, personal care and health products online. As for fresh, perishable foods such as fruits and vegetables, as well as meat, chicken and fish, most consumers choose to continue shopping in stores.

Walmart's first-quarter earnings report may draw investors' attention to profit challenges caused by the current inflationary environment, but the bigger threat to the retail giant's core business comes from the rise of Amazon.

Editor ✎ Nicole/

Disclaimer: This article is copyrighted and may not be reproduced without permission.