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Could Amazon’s Grocery Expansion in Mexico Threaten Walmart?

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Amazon expands in Mexico

Recently, Amazon (AMZN) has decided to sell food and drinks online in Mexico, including coffee, tea, liquor, wine, cooking ingredients, vitamins and supplements, and non-perishable snacks. The new endeavor is expected to augment its online presence into a new market and help attract customers to its Amazon Prime program.

Amazon’s Mexico site was launched in 2015, and the latest online grocery expansion in Mexico is expected to intensify competition with Walmart (WMT), which sells groceries through its subsidiary Walmart de México. Walmart plans to deliver groceries to more than 40% of US households by the end of 2018.

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Amazon’s expansion strategy

Amazon has been consistently making efforts to expand in the booming online grocery space and has employed strategies such as free two-day and one-day deliveries for Amazon Prime members. Prime members get an added advantage of ultrafast grocery delivery in dozens of cities through Prime Now. Delivery is free if the order arrives in a two-hour window, while a one-hour delivery costs $7.99. Customers can also buy online and then choose the pickup option.

After Amazon’s $13.7 billion acquisition of Whole Foods Market in August 2017, the grocery store has been offering customers lower prices and exclusive deals for its natural and organic foods. Amazon has been relying on its Echo devices, cloud business, advertising revenues, and Whole Foods Market stores for revenue growth. In the second quarter, the e-commerce giant posted revenue growth of 39.3% YoY, which decelerated after five consecutive quarters of accelerating growth.

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