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Why Is Amazon Struggling in the US Grocery Space?

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Amazon’s struggle in the grocery market

Retail e-commerce giant Amazon (AMZN) acquired Whole Foods for $13.7 billion in June 2017 amid efforts to gain market share in the US grocery space, which is dominated by Kroger (KR)reportedly the world’s largest US supermarket chain in terms of annual revenue. However, despite the acquisition, which stirred the US grocery landscape, Amazon has been struggling to grow its Whole Foods business amid stiff competition from Walmart (WMT), Kroger, and Costco Wholesale (COST) in grocery sales.

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Amazon competing with peer grocers to gain market share

Amazon has been trying to add more Whole Foods stores and boost its Prime Now service to expand in the grocery space. Amazon Prime members crossed 100 million in the US in 2018, up from 54 million members in 2015.

The company, through its free two-hour deliveries, also attracts Prime members in more than 60 cities. However, the company aims to make the service available at nearly all of its 475 Whole Foods stores plus new shops.

In late-December 2018, Amazon planned to expand Whole Foods stores across US cities to offer the benefit of two-hour delivery service to more customers. Giant grocers such as Walmart, Kroger, and Target (TGT) have also rolled out delivery and in-store pickup options.

Though Amazon is aggressively expanding its grocery, delivery, and pickup services to more cities across the United States, it still lags behind Walmart, Kroger, and Target, as they have more stores, which in turn adds more customers. Reportedly, there are about ten Walmart stores in the US for every Whole Foods store.

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