Early tests show Amazon and Walmart are price leaders in grocery delivery

A Wells Fargo study reveals that Amazon and Walmart are significantly undercutting third-party grocery delivery platforms like Instacart, DoorDash, and Uber Eats, with 3P services and in-store pricing averaging 57% and 20% higher, respectively, compared to the e-commerce giants. Amazon emerged as the most aggressive on pricing, posing a material risk to the growth prospects and margins of third-party delivery providers and creating tougher strategic decisions for retailers.

Analysis

A Wells Fargo study highlights a significant pricing advantage for Amazon (AMZN) and Walmart (WMT) in the U.S. grocery delivery market, posing a material threat to third-party (3P) platforms. The analysis of a 10-item basket across three states found that 3P providers like Instacart (CART), DoorDash (DASH), and Uber (UBER) were, on average, 57% more expensive than the retail giants. Amazon has emerged as the most aggressive price leader, with Walmart's total pricing at a 21% premium, a gap largely attributable to tipping policies. Notably, Amazon's exclusion of a tipping option for same-day grocery delivery accounts for 13 percentage points of the price difference with Walmart, which prompts for tips similar to 3P platforms. Within the 3P space, Instacart (CART) was the most expensive provider, while Uber had lower item-level prices but higher fees compared to DoorDash. Wells Fargo explicitly identifies Amazon Prime's entry and Walmart's competitive stance as risks to the growth outlook and margins for an important segment of the 3P delivery business, creating a challenging strategic environment.

Key Decisions for Investors

• Investors in third-party delivery platforms (CART, DASH, UBER) should scrutinize grocery segment growth and margins, as the aggressive, structurally lower pricing from Amazon and Walmart presents a significant headwind to market share and profitability.
• Amazon and Walmart's demonstrated pricing power in grocery delivery reinforces their competitive moats, and this should be viewed as a key catalyst for market share consolidation and a strengthening of their broader consumer ecosystems.
• The substantial price disparity suggests investors could consider relative value trades, favoring long positions in AMZN or WMT against short positions in the third-party delivery basket to capitalize on this widening competitive gap.
• Monitor consumer sensitivity to service fees and tipping, as Amazon’s price advantage is significantly amplified by its no-tip policy, representing a structural risk for competitors reliant on such variable costs.