Amazon Follows Walmart in Slashing Grocery Prices to Gain Share

As Amazon looks to make a dent in Walmart’s share of consumer grocery spending, the eCommerce company is joining the list of retail giants making widespread price cuts to common food items as shoppers seek the best bargain.

The online marketplace’s Amazon Fresh grocery division is rolling out discounts of up to 30% on 4,000 items, although the specific markdowns will vary week to week, CNN reported last week.

“Increasing our weekly deals across thousands of items and expanding the reach of Prime Savings at Amazon Fresh is just one way that we’re continuing to invest in competitive pricing and savings for all of our customers — both in-store and online,” Vice President of Retail at Amazon Claire Peters told the news outlet in a statement.

The news followed Walmart CEO Doug McMillon informing analysts during the company’s latest earnings call that the retailer has reduced prices on almost 7,000 items, which is helping the company gain share from other food categories.

“We have almost 7,000 [price] rollbacks,” McMillon said. “That’s really helping. In our food categories, we see an even larger spread between eating at home, preparing meals at home, and eating out, which we think can help Walmart over the remainder of the year.”

The race to the bottom when it comes to grocery prices is not limited to the two retail behemoths. Target revealed May 20 its plans to reduce prices on approximately 5,000 commonly purchased items, such as milk, meat, bread, produce, peanut butter, coffee, diapers, paper towels and pet food.

A PYMNTS Intelligence survey of more than 1,700 U.S. consumers earlier this year found that 86% have made changes to their grocery shopping habits in response to price increases. Forty-four percent of consumers reported that they had shifted to buying from less expensive merchants, and 34% had downgraded on product quality.

Plus, PYMNTS Intelligence data from last year revealed that 44% of grocery shoppers are deal chasers, willing to go wherever they will get the best price.

Groceries have become such a strain on shoppers’ budgets that many consumers are turning to installment plans to pay for food. The PYMNTS Intelligence report “Installment Plans Becoming a Key Part of Shopper’s Toolkit” found that among the 60% of consumers who had used any type of installment plan in the previous year, 34% did so to buy groceries. Further PYMNTS Intelligence findings showed that close to 1 in 3 U.S. consumers used a credit card to make their last grocery purchase.

Amazon is experiencing slight growth in the grocery sector, whereas Walmart’s share remains relatively stable. Despite this, Walmart continues to lead by a significant margin, according to the PYMNTS Intelligence report “Whole Paycheck Report: New Consumer Spend Data Finds Amazon Way Ahead of Walmart.”

The study analyzed Amazon and Walmart’s market shares across various categories using years of earnings reports and national government data. The findings showed that by the end of last year, Walmart captured 18.9% of food and beverage consumer spending, while Amazon increased its share to 2.9% from 2.6% in the previous quarter.

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