Walmart Is Expanding Its Grocery Lead During The Coronavirus Shutdown

In a normal time, Amazon’s shopping app is the most popular shopping download. But according to data from AppAnnie, a mobile data and analytics site, the Walmart grocery shopping app is now the number one download among all shopping apps.

This is important for several reasons:

• Walmart is already the largest grocer in the almost $800 billion U.S. grocery market and it has to defend its market position.
• Transitioning to online is a matter of survival for grocers. If a substantial number of consumers make the shift to online, which most industry observers believe is inevitable, it changes the economics for traditional supermarket real estate. When 20% or more of consumers stop showing up in stores, the cost of operating physical stores will make a lot less sense and many of them will close. We will see dark supermarkets just as we have seen dark stores in virtually every mall and shopping street in America.
• Prior to the shutdown, consumers shopping for grocery online were about 4% of the market. The expectation according to Fabric, a grocery micro-fulfillment company, was that online would reach 6% by the end of this year. But the shutdown has accelerated that expectation and Fabric now expects online grocery to reach 10% of the market by the end of 2020 and continue to grow from there. That means the race to be #1 in online grocery has accelerated rapidly and the non-Walmarts in the market are falling farther behind in that race.
• Many grocery retailers hoped that they would be able to gain market share as that transition happens and assumed they had more time. Amazon particularly has to succeed in grocery because it needs to add revenue to maintain its stock price; online grocery is one of the last large product classes available for growth as bricks and mortar customers transition to online. Losing the top app position is a setback for Amazon’s grocery ambitions.

Walmart is not the only winner in the Covid-19 grocery sweepstakes. According to Fabric, Instacart, the grocery shopping and delivery service, saw an increase in app download of 218% from February 1 to March 15.

Many consumers are trying online grocery for the first time during the shutdown. Their willingness to try will undoubtedly show many consumers the advantages of online grocery, just as it did in so many other consumer items. There’s no doubt that some consumers will become permanent online grocery shoppers when the shutdown ends and capturing those consumers now will be an advantage to holding market share in the future.

Succeeding in online grocery is hard and expensive because it requires a retailer to learn new skills. Among other things, grocery retailers have to be able to hire and train employees to pick, pack and deliver or load groceries without raising the cost to consumers. In a business like grocery that has very thin profit margins, that requires a willingness to lose money until the technology improves to make the business profitable. That’s a big investment and not all the largest market participants have been willing to put as much into it as Walmart has. The uncertainty created by Coronavirus makes a willingness to invest that much harder and Walmart’s lead all the more important.

Not everyone believes the shift to online grocery is inevitable. The CEO of a leading grocery retail technology company has bet me a can of Campbell’s tomato soup and a bottle of single malt scotch that online grocery retail penetration will be under 20% by October 2025. The news about Walmart’s app download is a signal that time is running out for grocers to adapt. I believe that online grocery adoption will be higher that 20% by the end of 2025 and I have my shot glasses ready.