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This Is One Area Online Where Amazon Is Still Not No. 1

There’s at least one area it’s still playing catchup.

December 22, 2016

Amazon is the undisputed market leader when it comes to US digital retail sales, but there’s one area it’s still playing catchup: digital grocery delivery sales.

US Millennial vs. Nonmillennial Digital Buyers Who Have Ordered from Digital Grocery Delivery Services, Feb 2016 (% of respondents in each group)

Amazon’s grocery delivery sales trail that of fresh-grocery delivery rivals FreshDirect, Peapod and Instacart, according to a 1010data Market Insights Grocery Delivery Report, which analyzed data from January to October this year.

Among the four grocery delivery players, FreshDirect held the largest share of their combined grocery delivery sales, at 47%. It was followed by Peapod, a unit of grocery chain Stop & Shop parent Ahold Delhaize, at a 23% share. Instacart had a 21% share, followed by Amazon Fresh’s 9%. To be fair, Amazon Fresh got its start later than either FreshDirect or Peapod, and every company has different expansion and market strategy.

Still, while Amazon may lag in total grocery delivery sales, the study showed it’s gaining some ground on several other fronts. While FreshDirect and Peapod’s grocery delivery sales each rose 7% between August and October from a year earlier, Amazon Fresh saw a 43% jump in sales. Instacart, which pitches grocery deliveries in one hour for retailers such as Whole Foods, saw an even faster increase, at 72%.

“Amazon is doing well and growing quickly,” Samir Bhavnani, area vice president of consumer insights at 1010data, told eMarketer. “They are small compared to the other three and that’s largely because Amazon has taken a very cautious and measured approach to grocery. It’s still available in limited markets.”

He said the company’s move to cut delivery fees likely has paid off in contributing to the recent sales growth.

Amazon also is ahead of some rivals on its ability to retain customers. More than half, or 54%, of its customers ordered again within 30 days of their first order in January through October, outpacing Peapod and Instacart. Only FreshDirect led Amazon with a 58% retention rate.

There was one metric that Amazon has taken the lead. Amazon Fresh’s customers place orders every 13.2 days on average, beating FreshDirect’s 14.3 days, Instacart’s 16.4 days and Peapod’s almost 20 days. The discrepancy could be because both Amazon Fresh and FreshDirect customers don’t pay a delivery fee per order, the study showed, adding that could also help explain why Amazon Fresh has the smallest average transaction size of $84. In comparison, customers spend on average $147 per transaction at Peapod, which charges a $7.95 delivery fee for spending over $100 but $9.95 for basket size under $75, according to the study.

“Online grocery delivery is an emerging industry that is continuing to expand its reach across the country as popularity amongst consumers grows,” the study showed, adding industry sales have grown 55% since 2014 and continue to climb. “The average number of days between orders across delivery services is relatively low and indicates that users are big fans of grocery shopping online.”

Millennials appear to once again be the leading demographic driving the trend. The 2016 UPS Pulse of the Online Shopper report, developed with comScore, showed 11% of millennials said they’ve ordered from a grocery delivery service such as Peapod in the past year, versus 6% of non-millennials.

—Andria Cheng

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