Bernstein breaks down the battle for e-grocery delivery

Bernstein highlights intensifying competition in U.S. same-day grocery delivery, driven by Amazon's expanded perishable offerings. Walmart leverages its extensive store footprint for a structural advantage, reaching 93% of the U.S. population within three hours, and despite in-house fulfillment costs of $13-$19 per $75 order, is strategically using the service as a loss leader to bolster Walmart+ memberships and its retail media business, projected to reach $10 billion by 2030. While third-party operators like Instacart offer labor cost efficiencies at approximately $9 per order, they contend with product mark-ups and imperfect inventory visibility. Bernstein rates Walmart, Amazon, Instacart, DoorDash, and Uber as "outperform," citing significant growth opportunities in online grocery penetration and retail media across both integrated and 3P models.

Analysis

According to a Bernstein report, the U.S. same-day grocery delivery market is undergoing intensified competition, with distinct strategies shaping the landscape. Walmart is identified as having a structural advantage, leveraging its physical store footprint to reach 93% of the U.S. population within three hours. Although its in-house fulfillment model is costlier than third-party (3P) platforms, with an estimated cost of $13–$19 per $75 order, Bernstein notes this is a strategic loss leader. The primary goal is to drive Walmart+ memberships and scale its retail media business, which is projected to become a $10 billion operation by 2030. In contrast, 3P operators like Instacart, DoorDash, and Uber compete on labor cost efficiency—with Instacart's base shopper earnings estimated at a more economical $9 per order—and broad retailer selection. However, these platforms face inherent challenges such as product mark-ups and imperfect inventory visibility. Amazon is also escalating its efforts by expanding perishable offerings and lowering its free delivery threshold for Prime members, though its decision to keep this service separate from Whole Foods and Fresh may create consumer confusion. Despite these competitive dynamics, Bernstein maintains an "outperform" rating on all key players, citing significant runway for growth in overall online grocery penetration and the potential for retail media to bolster profitability across both integrated and 3P business models.

Key Decisions for Investors

• Given Bernstein's bullish outlook on the entire sector, investors could consider broad exposure to same-day delivery, as both integrated (Walmart) and third-party (Instacart, DoorDash, Uber) models are projected to benefit from market growth.
• For investors in Walmart (WMT), it is crucial to assess the same-day delivery service not as a standalone profit center but as a strategic asset for acquiring and retaining Walmart+ members and growing its high-margin retail media business.
• Investors should monitor Amazon's (AMZN) execution in grocery delivery, specifically tracking customer adoption and whether the separation of its new service from Whole Foods and Fresh creates the potential consumer friction highlighted by the report.
• When evaluating third-party platforms like Instacart (CART), weigh their labor cost advantages against their ability to overcome structural challenges like product mark-ups and inventory management, which are key differentiators against integrated players.