Analysts love Amazon’s same-day grocery expansion
“Grocery is the biggest retail category and still relatively untouched by the internet.”
Amazon’s expansion into free same-day grocery delivery nationwide for Prime members sent the stock up 1.5% yesterday. It’s up more than 2% again today in early trading.
Meanwhile, a number of competitors fell on the news yesterday, including Instacart and Target, which are continuing declines in early trading. Compared with similar grocery subscription models, Amazon’s has a lower free delivery threshold.
Analysts seem to love it.
Bank of America’s Justin Post said grocery is an “important vertical for Amazon” and moving more grocery purchases online could represent an “incremental $90bn revenue opportunity.”
“With better grocery capabilities, Amazon should see important customer frequency benefits and potential lock-in with weekly grocery shopping not achievable in other verticals,” he added.
Wedbush Securities’ Dan Ives called the move the “shot heard round the warehouse” and an “important step forward” for the company in a market where it has struggled historically.
“The reason this announcement is so significant is that Amazon has yet to displace incumbents in the grocery category, at least for perishables,” he wrote. “Grocery is the biggest retail category and still relatively untouched by the internet.”
Evercore ISI’s Mark Mahaney noted that the expansion is a “significant strategic move into one of retail’s most competitive and high-retention categories.”
“This deepens AMZN’s customer engagement by strengthening a high-frequency purchase category into the Prime ecosystem, increasing stickiness and customer lifetime value,” he wrote. “The deeper integration of groceries with AMZN’s vast general merchandise offering positions AMZN more aggressively against competitors like Instacart, Walmart+. By setting a relatively low free-delivery threshold of $25, AMZN applies pricing pressure that may challenge rivals’ ability to compete on convenience and cost.”
Morgan Stanley’s Brian Nowak called groceries “the most important (and largest) remaining bucket of offline US consumer spend” and said the move opens up a huge new revenue opportunity for Amazon.
“We believe AMZN’s first party inventory and logistics model (with growing automation), leading first party data sets and GenAI capabilities (for agentic commerce) position the company to win,” Nowak wrote.
JPMorgan’s Doug Anmuth doesn’t expect Amazon’s grocery expansion “to drive meaningful margin headwinds,” due to regionalization, inventory placement, and accelerated robotics/automation deployment. “Combined with low prices, leading assortment/scale, and fast delivery speeds, we believe the expansion of Same-Day delivery for fresh perishable groceries will support Amazon’s continued share gains across US e-commerce despite increased competition from Walmart, retailers, and e-commerce marketplaces,” he said.
He added that he thinks Amazon could raise the price of US Prime $20 — which would drive about $3 billion in annualized net sales — without churn thanks to the enhanced customer value the same-day grocery provides.
