As consumers have shifted their food spending towards grocery over the past 14 months, major industry players have taken the opportunity to invest in their grocery offerings, and the space has grown increasingly competitive. A leaked memo from Walmart shows that while the retailer remains ahead of the pack for now, executives are beginning to sweat.
A leaked 100-page memo obtained by Recode, which Walmart distributed to advertisers in February, read, “Grocery, the growth engine of the business, is losing share rapidly. More than ever, Walmart shopper[s] are choosing the competition.”
This phrase was printed next to the logos of Publix, Target and Albertsons, among others, paired with data showing that consumers have been choosing competing grocers more often and choosing Walmart less often. Another page of the document reads, “Walmart is not first and preferred. Must elevate quality assortment + value!”
These competitors are indeed growing more quickly than Walmart. In the fourth quarter of 2020, Walmart’s U.S. comp sales grew 8.6 percent and its U.S. eCommerce sales grew 69 percent. Meanwhile, Publix’s comp sales for the quarter grew 13.4 percent, Target’s grew 20.5 percent and its digital sales grew 118 percent, and Albertsons’ identical sales grew 11.8 percent and its digital sales grew 282 percent.
Similarly, recent PYMNTS research finds that competitor Amazon is positioned to outgrow Walmart three-to-one over the next five years, with the former projected to bring in $315 billion in additional sales by 2025 and the latter only $100 billion. However, in the food and beverage space, Walmart maintains the lead. Data from last month’s PYMNTS Whole Paycheck Tracker Report found that Walmart maintains a 10x margin advantage over Amazon, with the category accounting for 55 percent of Walmart’s gross sales, totaling $245 billion in revenue. Furthermore, since 2018, Amazon’s food and beverage business has added $2.8 billion in incremental revenue, an order of magnitude smaller than the $20 billion by which Walmart’s food and beverage sales grew in 2020 alone.
One of the issues highlighted in the leaked memo is the difficulty that Walmart has had retaining customers for its Walmart+ subscription program, which includes online delivery, in-store deals and more. In fact, since the circulation of the memo, Walmart+ has been slowly but noticeably gaining on Amazon Prime, recently bringing on eight million new paid subscribers, while Amazon Prime’s subscriber base has actually seen a slight dip in recent months. This focus on the subscription program is key, with recent earnings reports showing that subscription services continue to bring in new members as brick-and-mortar sales growth slows.
As it looks to grow its lead in grocery, Walmart has been expanding its InHome service, by which the retailer will not only deliver groceries to consumers’ homes, but directly to their refrigerators, whether consumers are at home or away. The goal of this service is to provide an e-grocery solution that will remain relevant even after consumers have returned to the office. Walmart is also growing its pet food offerings, investing in speeding up its order fulfillment capabilities and investing in autonomous delivery solutions.
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