Walmart vs. Amazon: Who's winning the online grocery battle?

 

In fact, the retail giant may surpass Amazon as the top online grocery business in the U.S. this year.

 

Deutsche Bank upgraded Walmart’s stock to Buy from Hold due to expected gains in the online grocery market. Walmart currently holds the No. 2 spot behind Amazon among the online grocery sellers with the highest market share – a group that also includes Kroger, Target, Blue Apron and Peapod. Walmart’s share of the market stood at roughly 11 percent last year. Amazon accounted for 12.5 percent of total sales, matching Instacart. By the end of 2018, Walmart could rank as the largest seller of online groceries as it rolls out more pickup locations, Deutsche Bank predicted.

 

Walmart is “reaping returns on the many years of investment in e-commerce and customer service,” and the company’s online grocery business is poised to accelerate growth, Deutsche Bank said in a research note to clients.

 

“Importantly, our view is supported by our thesis that the food retail landscape is rapidly changing due to high adoption rates of convenience/online grocery and market share is meaningfully bubbling to the top.”

The bank also raised its price target for Walmart shares to $113 from $89. The stock rose more than 2 percent Tuesday, climbing above $96 a share.

E-commerce players including Amazon, Walmart and Target have invested in expanded delivery options and online ordering for grocery items. Amazon has integrated Whole Foods offers into its Prime subscription service following the company’s acquisition of the healthy grocer. Walmart introduced free two-day grocery deliveries in 2017, and the Arkansas-based retail chain has added hundreds of stores as pickup locations. By the end of the year, Walmart plans for its grocery delivery service to reach 40 percent of U.S. households through partnerships with Postmates and other companies.

Walmart’s recent growth in grocery sales is “particularly noteworthy” as traditional food retailers posted more modest gains last quarter, Deutsche Bank noted.

“We believe [Walmart] has positive momentum with robust underlying trends in the core business, and an expanding online platform (including both walmart.com and jet.com) that positions the company as a legitimate contender against [Amazon] in the long-term,” the bank said.

Through 2025, Walmart and Amazon are projected to boost online grocery sales to more than $25 billion apiece, with the e-commerce company retaking the No. 1 spot. Deutsche Bank sees Amazon building a 20.7 percent share of a $142.5 billion market in a best-case scenario. Instacart, which counts Amazon’s Whole Foods among its investors, is expected to keep pace. Walmart could account for 18.5 percent of sales, Deutsche Bank said.