As we discussed in Part 1 of this series, Amazon (AMZN) recently launched a new service that delivers hot food in less than an hour in Seattle. Amazon has been actively promoting its one-hour delivery service, called Prime Now, in its hometown. The company rolled out a program called Amazon Flex, which utilizes a network of independent contractors.
These on-demand contractors deliver products to customers by signing up for shifts through an app. Interested people can sign up via this mobile app for a shift of two or three hours. These independent contractors can then start picking up packages from Amazon’s warehouses to deliver to customers’ homes within a one-hour timeframe.
Online food delivery market
Amazon’s move into the online food delivery market should create competitive issues for the leader in this space, GrubHub (GRUB). GrubHub has been trying to grow in this market by acquiring smaller companies in this space. It acquired leading online food aggregator Seamless in 2013, and it more recently acquired smaller companies such as DiningIn and Restaurants on the Run.
Amazon aims to leverage the massive food retail market
Amazon already offers its AmazonFresh service for delivering groceries in select cities in the United States. Through these initiatives, Amazon is clearly looking to leverage the huge US food retail market. According to a report from Euromonitor International and as the chart above shows, Walmart (WMT) and Kroger (KR) lead the US grocery retail market with shares of 20% and 8%, respectively.
For diversified exposure to Walmart, you can invest in the Consumer Staples Select Sector SPDR ETF (XLP), which invests about 6% of its holdings in Walmart.