Online food retailers face new risks as Amazon digests Whole Foods. A new report by Internet Retailer sizes up the online food industry, and reports on key players driving big growth.

Food is fast becoming one of the hottest areas of online retailing. In 2016, online food sales in the U.S. grew 31.5% to $22.1 billion, Internet Retailer estimates, double last year’s growth in e-commerce as a whole.

The online food market is far from reaching the level of e-commerce penetration seen in other sectors, such as apparel and computers and electronics. But the stakes are much higher in food since the market for groceries is so huge—more than $700 billion, according to the U.S. Commerce Department and nearly $800 billion by other estimates. Even a small slice of that pie means big money.

And, as Amazon.com Inc. continues to integrate Whole Foods, the e-commerce giant not only has the potential to expose online food buying to more customers, it also shakes up what was already a fast-growing, fast-changing market.

Those are just some of the conclusions of the just-released 2017 Online Food Report. Amazon’s newly acquired store network gives the e-commerce giant a chance to be an omnichannel competitor with the likes of Kroger Co. and Wal-Mart Stores Inc.—at least in some markets. That could be a long-term problem for store-based retailers, which typically leverage their stores as a strategic advantage.

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However, Amazon has some catching up to do if it wants to be a serious omnichannel player in the grocery market. Walmart offers pick-up of groceries bought online at 1,000 locations in the United States. Kroger Co., meanwhile was offering buy online, pick up in store at 640 U.S. locations as of earlier this year. In each case, that is more stores than the entire footprint of Whole Foods, which has just 448 U.S. stores.

Given the large physical and presence of retailers like Walmart, Kroger and other store-based chains, Amazon, too, is taking on a significant amount of risk by making such a big commitment to groceries. Amazon is No. 1 in the Internet Retailer 2017 Top 500, Walmart is No. 3 and Kroger is No. 88.

The 2017 Online Food Report includes:

  • Key data for the 47 largest online food merchants in North America,
  • 2016 web sales, market share and growth rates of America’s top 10 food e-retailers, including Amazon and Walmart.
  • A breakdown of online food sales by type of merchant type.
  • Age and income demographics of the online food shopper.

Click here for more information.

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