August 14, 2024
iStock.com/Michael Vi | ©cyano66 via Canva.com
Is Walmart Building a Moat in E-Grocery?
Walmart captured a record 37% of the U.S. online grocery market during the second quarter of 2024, steadily expanding its share in recent years as traditional supermarkets lose ground, according to the latest Brick Meets Click/Mercatus Grocery Shopping Survey.
Since the second quarter of 2021, Walmart’s e-grocery share has surged 880 basis points while supermarkets’ share has shrunk 700 basis points, ending the quarter at 27.3%.
According to the survey, “Walmart’s sales share sales (excluding Sam’s Club) began gaining on supermarkets in early 2022,” driven by the end of the expanded child tax credit, rising food-at-home inflation, and higher interest rates, which led consumers to seek out better deals.
“Walmart’s reputation for low prices helped to attract households that wanted both the convenience of shopping online and ways to save money in this market,” said David Bishop, partner at Brick Meets Click, in a statement. “The execution of its omnichannel strategy, plus the operational efficiencies aided by incredibly high order demand, has enabled Walmart to consistently deliver the type of experiences that customers expect and to lower its cost to serve online orders at the same time.”
Meanwhile, Target, with an online grocery share of 7% as of Q2 2024, has generated more moderate sales share gains over the last several years, with strong execution, especially in fulfilling pickup orders, and prices between supermarkets and Walmart helping the chain compete in e-grocery.
In grocery delivery, Walmart saw a nearly 8 percentage point jump in share as it’s benefiting from emphasizing first-party delivery services, in part to support the Walmart+ subscription program. Overall, the mass channel captured nearly half of all delivery sales in Q2 2024, up nearly 10 points versus supermarket share.
For in-store or curbside pickup, mass, led by Walmart, claimed a nearly 58% share in Q2 2024 against only 28% share for supermarkets. Pickup continues to be the preferred method for e-commerce grocery sales in the U.S. with a 45.5% share, down 110 basis points year over year.
Insider Intelligence last November predicted that Walmart’s share lead of the online grocery market would increase to 26.9% in 2024 versus Amazon’s 18.5%, again with Walmart gaining significant traction in recent years.
“Increasing inflation has led to more deal-seeking and trade-down behaviors from consumers, which favor Walmart over its competitors such as Target and grocery delivery platforms,” said Brian Lau, forecasting analyst at Insider Intelligence. “Of course, having a store within 10 miles of 90% of U.S. households has also helped fuel Walmart’s grocery sales, both offline and online, because it means the company has more curbside and in-store pickup locations available.”
Lau said that although Amazon has “the most rounded out logistics network” to support online grocery, Whole Foods “lacks mass appeal” and the pause on expansion at Amazon Fresh shows that “Amazon is still trying to figure out how to compete with Walmart in the grocery space, both online and offline.”
In the first quarter of fiscal 2025, Walmart’s U.S. online sales grew 22% and e-commerce losses continued to narrow, with net delivery cost per order in the U.S. improving nearly 40%. In the U.S., over the last 12 months, 4.4 billion items were delivered the same or the next day, with about 20% of those delivered in under three hours.
Walmart CEO Doug McMillon said on an analyst call, “Delivery times are getting faster and the cost to delivery is coming down at the same time.”
BrainTrust
Carol Spieckerman
President, Spieckerman Retail
Scott Benedict
Founder & CEO, Benedict Enterprises LLC
John Hennessy
Retail and Brand Technology Tailor
Recent Discussions
Discussion Questions
What’s been the biggest contributor to Walmart’s acceleration of its online grocery growth?
Has Walmart built up a commanding lead over competitors in online grocery?
Is Amazon still Walmart’s biggest competitive threat in online grocery, or are Target and/or traditional supermarkets better positioned?
Poll
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Walmart has something of a moat in online grocery. This is down to three main factors. First, Walmart has a very focused and comprehensive grocery proposition which, along with its strong reputation in this area, makes it a go-to for consumers in a way that Amazon cannot match. This is especially so among those who want to do full grocery shops as opposed to grabbing a few bits and bobs. Second, Walmart has always had brilliant logistics, including its stores, which are vital parts of a cost-effective fulfillment operation. Third, Walmart’s strong rating for low prices are very helpful in securing it new online shoppers right now. The final factor may fade in the coming years, but the first two will remain hard to beat.
I’d add one more to your excellent list, Neil. Walmart has the reach nationally that outside of Amazon, no one else has, and coupled with the items you outlined, does indeed give them somewhat of a moat in online grocery.
The question seems a little pedantic: if WalMart truly has a 37% share, then, obviously, it has a big lead; the more important question is “what, if anything, does this matter?” While market leadership normally conveys benefits in price leadership and buying power, it should be remembered that online grocery is really a subset of grocery overall; and since WM already has a large share of that, I’m not sure this really adds many advantages. As for who is the biggest threat, grocery is a great example of how Amazon’s heft can be overrated: many – most? – lists rank Amazon as the second largest “food retailer”, not because it actually sells that much, but because it’s the second largest retailer overall, and some of those sales are in food; the same sleight of hand that pumps up the likes of CVS and Walgreens in rankings.
E-grocery is a sleeping giant. Shopping for groceries is a chore that e-grocery makes a lot easier. However, unlike most e-commerce, you still don’t get what you order when placing an e-grocery order. Substitutions and out of stocks hurt the shopper experience.
Walmart is taking steps to improve. They have larger stores with more inventory. They have invested in automated fulfillment systems which create dedicated, trackable inventories.
E-grocery should be like ATMs. No reason to go into the store. The first one to get the order filled as ordered and do so profitably will go all in. Walmart is nearly there. And since they are not a supermarket, they are less worried about harming in store grocery sales. They’ll just take more of the pie by executing better than everyone else.
For several decades, Walmart has been the undisputed leader in the retail industry. As some of us may recall, some industry observers and regulators believed that the company had too much power and urged its dissolution.
In 2022, Amazon surpassed Walmart in terms of gross merchandise volume (GMV). Alot had to do with the pandemic but it seems able to sustain itself. Amazon is poised to capture even more retail market share.
Amazon’s business model focuses heavily on e-commerce and cloud services, allowing it to reach a global audience with minimal physical infrastructure. In contrast, Walmart relies on its extensive network of brick-and-mortar stores, which cater primarily to local and regional customers. This fundamental difference has enabled Amazon to scale rapidly and adapt to changing consumer behaviors more efficiently.
Amazon’s business model focuses heavily on e-commerce, cloud computing services, and a diverse range of subscription services like Amazon Prime. In contrast, Walmart has traditionally relied on its extensive network of physical stores and its ability to offer low prices through efficient supply chain management.
While Amazon leverages technology and logistics to deliver products quickly, Walmart has been expanding its online presence to compete in the digital marketplace. Db
Walmart’s overall success in grocery, combined with easy access to its national store network, reputation for low prices, and relatively late 2020 launch of Walmart+, give the company an enviable grocery moat—online and offline.
The competition for online grocery market share will come down to Walmart and Amazon, with the latter still working on how to compete more effectively with Walmart in the physical grocery space. Post-Covid, consumers are attuned to delivered prices for essential goods and groceries. They desire convenience but at a reasonable price. The traditional supermarket model continues to focus on in-store visits and relies on center-store products.
Walmart has ubiquitous access and enviable reach. Consumers are familiar with the Walmart’s value proposition, assortment, and consistency. These factors are more than speed bumps as other retailers vie to gain share; they are indeed a chasm that for many is too wide to traverse. As it is often said in the sports world, it is Walmart’s game to lose and I don’t foresee their operational excellence giving way to a competitor.
Walmart has been the sector leader for a long time. Two factors are changing the game, I believe. First, there are significant and noticeable improvements in private label. Walmart has always been the low-price leader thanks to extraordinary efficiency in their logistics and distribution network. By improving private label, both quality and branding, they’re able to double down on the value prop.
The other game-changer, in my opinion, has been Walmart+. For the first time, there is credible alternative to Amazon. Walmart+ may just be how Walmart is able to finally win business in higher income demographics because those customers aren’t fond of the store experience. That was always one differentiator their competition has been able to leverage. As Walmart’s delivery expands its scope, I think there is only an upside to this growth, especially in exburbs and affluent rural neighborhoods.
The tailwinds of Inflation have also helped bring new customers to Walmart. Now we’re seeing their competition react with delivery services of their own. Will the competition be able to breach the moat that Walmart has built? It will be tough.
Walmart thinks about business differently than other supermarket operators. They approach business from an operation point of view and have since Day One. Supermarket retailers are generally weak in operations. Walmart knows the worst way to fill an online order is to have labor go up and down the aisle to pick the very same items that they have the same labor stock on the shelves.
I remember when Walmart first started selling groceries. The consensus was they wouldn’t make it. Then, in what seemed like a blink of an eye, their share was over 25%. (The same story can be told when they decided to open pharmacies.)
Regarding the Walmart/Amazon challenge, the companies are in different businesses. Walmart will continue to be the winner in grocery online shopping, while Amazon will take everything else and be pleased about it.
If Walmart didn’t have the largest share in e-grocery, I’d be sorely disappointed in their ability to prioritize investments in new technology for e-comm, including the continued improvement to their mobile apps and web. I’ve been fortunate to have consulted with Walmart and visited their massive David Glass Technology Center. It’s where an army of IT specialists work every day to refine, polish and bring new technology (like AI/ML) to its consumer facing applications to make the experience more seamless and delightful. With $648 Billion in top line revenue and over $100 Billion in e-commerce (2024 Walmart Annual Report), it should not surprise anyone that the moat is definitely being expanded.
The biggest contributor to deepening Walmart’s grocery moat? One word: Convenience. Years ago, Walmart made a huge mindshift when it owned the potential for its stores to become omnichannel assets, not albatrosses. From there, as its competitors were wringing hands over which convenience options consumers would favor without killing profits, Walmart went all-in on choice. Walmart built a staggering convenience arsenal early-on and has been refining it ever since. Shoppers who swore they would never shop at Walmart for groceries were lured into its ecosystem by its irresistible convenience and value proposition. Although Walmart has at times lamented the resulting imbalance between grocery and higher-margin categories, overall, the grocery-as-bait strategy has worked wonderfully.
Okay. I suspect that a fair amount of this growth is based on consumers shopping on line who either don’t like the in-store shopping experience OR do not want to be seen or associated with WalMart.
Prices are great, and that is where it ends for many consumers.
Real estate still matters. Their e-commerce success and dominance is built on the back of an extensive store network. That solves the last mile issue. That extensive store network is the same lever they have used to drive price down from their vendors. Like it or not, the catbird seat has a Walmart logo on it.
Building out a truly omnichannel shopping experience is a competitive advantage that others, including Amazon, can’t match. Seamless shopping is key for younger consumers, and using data to personalize the product offer and delivery experience is key. Walmart’s recent report on Adaptive Retail is a “must read” in my view.
https://corporate.walmart.com/content/corporate/en_us/news/2024/07/23/walmart-releases-first-annual-state-of-adaptive-retail-report.html
Walmart’s prices combined with its accessibility make it a winner, especially in this time. It’s been smart of them to focus on constantly improving their grocery offering to meet consumer demands and desires.
Online shopping (both delivery and bopis) is tailor made for Walmart as it emphasizes their strength (pricing) while eliminating their biggest weakness (in-store shopping experience). Some of this will abate as inflation subsides but may also sharpen pricing pressure on supermarkets as customers remember how easy online is.
Walmart’s affordable, accessible e-grocery offerings align with consumers’ need for value and convenience. Now that more people are back at the office, the option to skip the store is more enticing to time-starved shoppers.
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Walmart has something of a moat in online grocery. This is down to three main factors. First, Walmart has a very focused and comprehensive grocery proposition which, along with its strong reputation in this area, makes it a go-to for consumers in a way that Amazon cannot match. This is especially so among those who want to do full grocery shops as opposed to grabbing a few bits and bobs. Second, Walmart has always had brilliant logistics, including its stores, which are vital parts of a cost-effective fulfillment operation. Third, Walmart’s strong rating for low prices are very helpful in securing it new online shoppers right now. The final factor may fade in the coming years, but the first two will remain hard to beat.
I’d add one more to your excellent list, Neil. Walmart has the reach nationally that outside of Amazon, no one else has, and coupled with the items you outlined, does indeed give them somewhat of a moat in online grocery.
The question seems a little pedantic: if WalMart truly has a 37% share, then, obviously, it has a big lead; the more important question is “what, if anything, does this matter?” While market leadership normally conveys benefits in price leadership and buying power, it should be remembered that online grocery is really a subset of grocery overall; and since WM already has a large share of that, I’m not sure this really adds many advantages. As for who is the biggest threat, grocery is a great example of how Amazon’s heft can be overrated: many – most? – lists rank Amazon as the second largest “food retailer”, not because it actually sells that much, but because it’s the second largest retailer overall, and some of those sales are in food; the same sleight of hand that pumps up the likes of CVS and Walgreens in rankings.
E-grocery is a sleeping giant. Shopping for groceries is a chore that e-grocery makes a lot easier. However, unlike most e-commerce, you still don’t get what you order when placing an e-grocery order. Substitutions and out of stocks hurt the shopper experience.
Walmart is taking steps to improve. They have larger stores with more inventory. They have invested in automated fulfillment systems which create dedicated, trackable inventories.
E-grocery should be like ATMs. No reason to go into the store. The first one to get the order filled as ordered and do so profitably will go all in. Walmart is nearly there. And since they are not a supermarket, they are less worried about harming in store grocery sales. They’ll just take more of the pie by executing better than everyone else.
For several decades, Walmart has been the undisputed leader in the retail industry. As some of us may recall, some industry observers and regulators believed that the company had too much power and urged its dissolution.
In 2022, Amazon surpassed Walmart in terms of gross merchandise volume (GMV). Alot had to do with the pandemic but it seems able to sustain itself. Amazon is poised to capture even more retail market share.
Amazon’s business model focuses heavily on e-commerce and cloud services, allowing it to reach a global audience with minimal physical infrastructure. In contrast, Walmart relies on its extensive network of brick-and-mortar stores, which cater primarily to local and regional customers. This fundamental difference has enabled Amazon to scale rapidly and adapt to changing consumer behaviors more efficiently.
Amazon’s business model focuses heavily on e-commerce, cloud computing services, and a diverse range of subscription services like Amazon Prime. In contrast, Walmart has traditionally relied on its extensive network of physical stores and its ability to offer low prices through efficient supply chain management.
While Amazon leverages technology and logistics to deliver products quickly, Walmart has been expanding its online presence to compete in the digital marketplace. Db
Walmart’s overall success in grocery, combined with easy access to its national store network, reputation for low prices, and relatively late 2020 launch of Walmart+, give the company an enviable grocery moat—online and offline.
The competition for online grocery market share will come down to Walmart and Amazon, with the latter still working on how to compete more effectively with Walmart in the physical grocery space. Post-Covid, consumers are attuned to delivered prices for essential goods and groceries. They desire convenience but at a reasonable price. The traditional supermarket model continues to focus on in-store visits and relies on center-store products.
Walmart has ubiquitous access and enviable reach. Consumers are familiar with the Walmart’s value proposition, assortment, and consistency. These factors are more than speed bumps as other retailers vie to gain share; they are indeed a chasm that for many is too wide to traverse. As it is often said in the sports world, it is Walmart’s game to lose and I don’t foresee their operational excellence giving way to a competitor.
Walmart has been the sector leader for a long time. Two factors are changing the game, I believe. First, there are significant and noticeable improvements in private label. Walmart has always been the low-price leader thanks to extraordinary efficiency in their logistics and distribution network. By improving private label, both quality and branding, they’re able to double down on the value prop.
The other game-changer, in my opinion, has been Walmart+. For the first time, there is credible alternative to Amazon. Walmart+ may just be how Walmart is able to finally win business in higher income demographics because those customers aren’t fond of the store experience. That was always one differentiator their competition has been able to leverage. As Walmart’s delivery expands its scope, I think there is only an upside to this growth, especially in exburbs and affluent rural neighborhoods.
The tailwinds of Inflation have also helped bring new customers to Walmart. Now we’re seeing their competition react with delivery services of their own. Will the competition be able to breach the moat that Walmart has built? It will be tough.
Walmart thinks about business differently than other supermarket operators. They approach business from an operation point of view and have since Day One. Supermarket retailers are generally weak in operations. Walmart knows the worst way to fill an online order is to have labor go up and down the aisle to pick the very same items that they have the same labor stock on the shelves.
I remember when Walmart first started selling groceries. The consensus was they wouldn’t make it. Then, in what seemed like a blink of an eye, their share was over 25%. (The same story can be told when they decided to open pharmacies.)
Regarding the Walmart/Amazon challenge, the companies are in different businesses. Walmart will continue to be the winner in grocery online shopping, while Amazon will take everything else and be pleased about it.
If Walmart didn’t have the largest share in e-grocery, I’d be sorely disappointed in their ability to prioritize investments in new technology for e-comm, including the continued improvement to their mobile apps and web. I’ve been fortunate to have consulted with Walmart and visited their massive David Glass Technology Center. It’s where an army of IT specialists work every day to refine, polish and bring new technology (like AI/ML) to its consumer facing applications to make the experience more seamless and delightful. With $648 Billion in top line revenue and over $100 Billion in e-commerce (2024 Walmart Annual Report), it should not surprise anyone that the moat is definitely being expanded.
The biggest contributor to deepening Walmart’s grocery moat? One word: Convenience. Years ago, Walmart made a huge mindshift when it owned the potential for its stores to become omnichannel assets, not albatrosses. From there, as its competitors were wringing hands over which convenience options consumers would favor without killing profits, Walmart went all-in on choice. Walmart built a staggering convenience arsenal early-on and has been refining it ever since. Shoppers who swore they would never shop at Walmart for groceries were lured into its ecosystem by its irresistible convenience and value proposition. Although Walmart has at times lamented the resulting imbalance between grocery and higher-margin categories, overall, the grocery-as-bait strategy has worked wonderfully.
Okay. I suspect that a fair amount of this growth is based on consumers shopping on line who either don’t like the in-store shopping experience OR do not want to be seen or associated with WalMart.
Prices are great, and that is where it ends for many consumers.
Real estate still matters. Their e-commerce success and dominance is built on the back of an extensive store network. That solves the last mile issue. That extensive store network is the same lever they have used to drive price down from their vendors. Like it or not, the catbird seat has a Walmart logo on it.
Building out a truly omnichannel shopping experience is a competitive advantage that others, including Amazon, can’t match. Seamless shopping is key for younger consumers, and using data to personalize the product offer and delivery experience is key. Walmart’s recent report on Adaptive Retail is a “must read” in my view.
https://corporate.walmart.com/content/corporate/en_us/news/2024/07/23/walmart-releases-first-annual-state-of-adaptive-retail-report.html
Walmart’s prices combined with its accessibility make it a winner, especially in this time. It’s been smart of them to focus on constantly improving their grocery offering to meet consumer demands and desires.
Online shopping (both delivery and bopis) is tailor made for Walmart as it emphasizes their strength (pricing) while eliminating their biggest weakness (in-store shopping experience). Some of this will abate as inflation subsides but may also sharpen pricing pressure on supermarkets as customers remember how easy online is.
Walmart’s affordable, accessible e-grocery offerings align with consumers’ need for value and convenience. Now that more people are back at the office, the option to skip the store is more enticing to time-starved shoppers.