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Amazon dominates online grocery market, reports strong growth rate in Q2

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Amazon (AMZN: NYSE) is a power player in the online grocery scene, with sales growing at a rate of 40 percent year-over-year. The online retail giant’s U.S. grocery sales totaled $650 million in the second quarter of 2018, according to a report published by One Click Retail.

Amazon captured 18 percent of online grocery sales, double the share of its closest competitor, in 2017. While most of Amazon’s grocery categories are seeing sales growth, the retailer has beverages to thank for much of its success.

“Since the beginning, coffee, bottled water and energy drinks have made up a majority of the company’s grocery market, and that trend shows no sign of changing,” the report reads. “Coffee has been at the top of Amazon’s food chain. Not only does it sell much more than any other single product type in the grocery group, but it continues to grow by 40+ percent annually.”

Coffee brought in $135 million during Q2, and coffee pods took up seven spots on Amazon’s top 10 best selling grocery items list. The fact that all the most popular coffee was sold in pod form points to the wider consumer trend toward speed and convenience, according to the report.

Amazon introduced a new line of coffee pods under its private Solimo label at the beginning of the second quarter. The product is still in its initial growth phase, but it brought in about $60,000 in weekly sales and climbed into the top 25 coffee pod brands quickly, according to the report.

“The cold beverages category is also driven by convenience,” the report reads. “Bottled water, which has always been a major part of this category, grew by 65 percent year-over-year in the last quarter to now outrank energy drinks as the largest subcategory.”

Amazon has used grocery products as a means to gain more Amazon Prime subscribers by offering exclusive perks like access to a more convenient shopping experience through Prime Pantry and requiring membership to purchase Whole Foods brand 365 Everyday Value.

Not content with just eliminating customers’ need to trek to the grocery store, the e-commerce giant bought the online pharmacy PillPack late last month. The purchase will allow consumers to have their medication delivered by the same company that delivers their coffee, clothing and cosmetics.   

Within 24 hours of announcing its foray into the pharmacy world Amazon unveiled plans to push further into last-mile services as a way to deal with surging online sales and residential deliveries.

“For a minimum investment of $10,000, individuals can lease up to 40 Amazon-branded delivery vehicles to deliver packages,” FreightWaves reported in an earlier article. “The company estimates that an individual operating a 40-vehicle fleet could earn up to $300,000 per year under this new program.”

Amazon is continuing its existing relationship with its traditional carrier partners, at least for now. The new program will could capacity to the growing market, allowing the company to meet high delivery speed expectations.

“Still, it’s hard to ignore the threat that Amazon poses should it ever decide to completely break off relationships with existing major carriers, or in a more extreme case, actually begin delivering non-Amazon packages,” the FreightWaves article reads. “This new program may not be geared towards establishing a full-fledged Amazon delivery company, but it serves as a reminder of what could be in the long run.”

Amazon said it hopes for hundred of new partners to sign up for the program in more than two dozen states over the next 18 months.

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Ashley Coker, Staff Writer

Ashley is interested in the opportunities and issues that arise at the intersection of law and technology. She is the primary contributor to the news site content. She studied journalism at Middle Tennessee State University and worked as an editor and reporter at two daily newspapers before joining FreightWaves. Ashley spends her free time at the dog park with her beagle, Ruth, or scouring the internet for last minute flight deals.