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Amazon has dreamed of cracking Walmart's lock on groceries for decades, with limited success. A massive same-day shopping expansion could change that
Amazon has dreamed of cracking Walmart's lock on groceries for decades, with limited success. A massive same-day shopping expansion could change that

Yahoo

time17 hours ago

  • Business
  • Yahoo

Amazon has dreamed of cracking Walmart's lock on groceries for decades, with limited success. A massive same-day shopping expansion could change that

At a large press event last fall, a top Amazon executive stood onstage in front of hundreds of journalists and took a swipe at the company's largest retail massive product selection, and plans for the company to more closely integrate groceries into its main online shopping experience, Amazon VP Anand Varadarajan boasted that the tech giant was building a version of a 'supercenter that's actually super to shop at,'—a not-so-subtle dig at Walmart, inventor of the U.S. supercenter model and a force in the online grocery market as well. 'The average consumer visits between four and five different retailers for groceries every single month,' the executive said in front of a smaller group of reporters later that day. What Amazon was doing, the executive claimed, was creating a one-stop shop that all customers crave. The obvious implication was that Walmart, the historical one-stop retail option, was not delivering on the promise. On Wednesday, Amazon announced progress on what it believes is one important leg in that mission: the rollout to 1,000 U.S. cities of a same-day shopping capability where customers can buy fresh, perishable groceries, alongside regular non-grocery merchandise in a single order. The company says the service should be available in 2,300 U.S. cities by the end of 2025, making it possible for Amazon customers to order milk and fruit alongside, say, batteries or a camera—in a single delivery that arrives that very same day. Such an order wouldn't carry a delivery fee for Prime members as long as it totaled at least $25 in 'most cities,' the company said. Orders below that threshold will carry a $2.99 delivery fee. Amazon customers who aren't Prime members will pay a $12.99 delivery fee regardless of the order size. Walmart's stock dropped more than 2% on the news, and shed more than $15 billion from its market cap. The stock price of grocery delivery firm Instacart plummeted 11%. 'The reason this announcement is so significant,' Wedbush Securities' Scott Devitt wrote in a research note on Wednesday, 'is that Amazon has yet to displace incumbents in the grocery category, at least for perishables. Grocery is the biggest retail category and still relatively untouched by the internet.' Indeed. In an interview for my book, Winner Sells All, about the Amazon/Walmart rivalry, the current CEO of Amazon's core consumer business, Doug Herrington, explained the appeal of the grocery category. 'Selling a book or a TV is great and super helpful, [but] how many times do I buy a book or TV each week versus how many times do I buy a packaged goods item, or some toilet paper or some food?' In short, if Amazon can start making a real dent in the grocery delivery market, customers will likely shop even more frequently at the internet giant. In fact, the company previously said that was the behavior it witnessed among customers in test markets last year. 'This deepens AMZN's customer engagement by strengthening a high-frequency purchase category into the Prime ecosystem, increasing stickiness and customer lifetime value,' Evercore's Mark Mahaney wrote of the same-day grocery rollout in a research note to clients on Wednesday. He said the service could pose a threat to Instacart as well as Walmart's same-day delivery membership program, Walmart+. A history of launches, pivots, and setbacks The path to the grocery aisle has been a long and sometimes bumpy one for Amazon, with this week's announcement marking the latest in a string of grocery-related launches, failures, and pivots over the past two decades. For those who've closely followed the company's efforts in this area, Wednesday's announcement might even feel like déjà vu. Amazon once ran a service called Prime Now that offered two-hour delivery on a limited selection of general merchandise, along with fresh and frozen groceries in around 100 U.S. metro areas. It was discontinued in 2021, with the company saying at the time that it was being folded into the main Amazon shopping platform. Amazon also offers the Amazon Fresh grocery delivery service, geared toward larger grocery orders, which it actually began testing all the way back in 2007. The service has gone through countless business model tweaks over the years as leadership has attempted to strike a balance between a price that's attractive to enough customers while still supporting a cost structure that is economically sustainable. Amazon also runs a chain of dozens of Amazon Fresh grocery stores, which has a gone through phases of retrenchment and expansion itself. And of course, Amazon made its biggest grocery splash in 2017 when it spent nearly $14 billion to acquire the brick-and-mortar grocer Whole Foods, which now counts more than 500 locations. Amazon offers unlimited grocery delivery from both Amazon Fresh and Whole Foods grocery chains at a cost of $9.99 a month on top of the core Prime membership fee. Along the way, Amazon has seemed intent in recent years on dispelling the notion that it has failed in the grocery space. At the press event in the fall, an Amazon executive said, 'What most people don't realize is we already have a huge established grocery business online … Most of the selection today are things like pantry items and household goods or what we call everyday essentials.' And on recent earnings calls, Amazon executives including CEO Andy Jassy have hammered home the messaging that this 'everyday essentials' business is already a major player in the nonperishable grocery space. Company leaders recently disclosed that Amazon sold more than $100 billion in groceries and household, or everyday, essentials in 2024, not counting what sold through its Amazon Fresh and Whole Foods divisions. Now, with this latest initiative, Amazon is moving on to the type of fresh, perishable foods that customers really think of when they hear the word 'grocery.' And it's doing it in a way, thanks to years of cost-cutting under Jassy, that it believes is finally sustainable. This story was originally featured on

Amazon wins green praise for brown-bag packaging
Amazon wins green praise for brown-bag packaging

Reuters

time3 days ago

  • Business
  • Reuters

Amazon wins green praise for brown-bag packaging

Aug 13 (Reuters) - Environmentalists cheered when Amazon's recent sustainability report, opens new tab showed a 16% decline in the company's shipments with single-use plastic, to 74,137 metric tons last year. That's significant, especially as many companies adjust to new priorities from U.S. President Donald Trump. But activists also were puzzled. Amazon has resisted shareholder resolutions asking for reports on the topic, so why would it bring down the metric so much? Pat Lindner, Amazon's VP of mechatronics* and sustainable packaging, says the main answer is simple: customers find paper easier to recycle. "That's what's been driving use of plastics to use of paper-based packaging, because while plastic can be technically recycled, it's often an inconvenience" requiring a trip to a drop-off facility, Lindner told me in a recent interview. Other advantages of paper include that it protects items better and can be easier to open, he said. "The number-one thing we have to deliver for customers is an item that's undamaged," he said. Amazon has also reduced use of plastic air pillows, opens new tab as protective padding inside cardboard boxes. Monitoring social media feedback helps Amazon understand customer preferences, he said, analyzed with the help of artificial intelligence. Lindner declined to discuss cost figures with me but acknowledged paper typically is heavier than plastic, which would add to shipping costs. It has invested in "right-sizing" the boxes it ships, reducing weight and transit expenses. He also mentioned Amazon's "Ships in Product Packaging" program where it does not add material around vendors' own custom packaging, and new machines that do a better job wrapping products with paper, opens new tab. I ran this all past Matthew Littlejohn, senior vice president of ocean conservation nonprofit Oceana. Littlejohn said he was pleased by Amazon's explanation although the company did not say it was motivated to save the planet. "For us the good news is they're reducing plastic, and they're doing it because they think their business requires them to do so. That's fantastic news because it means they'll continue with it, as it's good news for their business," Littlejohn said. PAPER RECYCLING > PLASTIC RECYCLING Amazon's recycling strategy matters amid global efforts to cut plastic waste. U.N-backed talks in Geneva aim to produce a global treaty to cut plastic pollution, but opposition from the Trump administration and leaders of other nations has dimmed hopes for a diplomatic solution. The American Forest & Paper Association says the 2023 U.S. recycling rate, opens new tab for paper was around 67%, and around 74% for cardboard. In contrast, only 5% of U.S. waste plastic, opens new tab was recycled in 2019, according to one widely cited report. Less than 2%, opens new tab of "film and flexible" plastic like that used by Amazon is recycled, according to trade group the Recycling Partnership. Littlejohn cited a report last year by allied environmental groups that found little of the plastic packaging that customers dropped off made it to recycling centers, opens new tab. Amazon says plastic still has a role such as for shipping food, and that it is working on improving plastic recycling, opens new tab. But at least for now, Lindner said plastic has enough disadvantages that it makes sense to shift to paper where possible to create packages that ship undamaged, are easy to open, and easy to recycle. "When you get those things right, it's a win for all of us," he said. (* yes, the "mechatronics, opens new tab" term in Lindner's title is a real word, I looked it up.)

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