Florida-based Publix leads the state's grocery market. Can Amazon's expansion change that?

Editor’s note: This is part of an ongoing series of stories on the impacts of Amazon’s rapid growth in Florida, covering effects on real estate, small businesses, the job market, politics and more.

LAKELAND – The battle between Publix and Amazon for grocery sales is going to get more heated.

But don’t count Publix out.

In the foreseeable future, few competitors will have the strategic advantages to beat Publix in groceries sales in Florida, industry experts say.

Publix Super Markets Inc. enjoys a loyal base of shoppers who repeatedly restock their pantries and refrigerators because of its focus on customer service. The employee-owned Lakeland-based grocer is also often rewarded with high rankings on top 10 lists for its efforts to keep those customers coming back and employees happy.

Still, will it be enough?

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With its statewide investment in infrastructure, Amazon could someday cut into that with its potential to deliver more items to Floridians’ homes than Publix. While Publix seeks to compete in the e-commerce game by delivering through Instacart, Amazon and Walmart have been heavy players in this arena, selling the most groceries via e-commerce across in the United States.

Throughout the United States, 80% of households have access to Amazon Fresh for home delivery or in-store purchases of groceries.

In August, Amazon announced a new robotics fulfillment center and five new delivery stations in Florida, which brought its total investment in the state to an estimated price tag of $18 billion.

But when it comes to in-store grocery sales in the Sunshine State, the green machine is so well entrenched in Florida that many supermarkets like Albertsons have retreated from the state. Amazon will have a high hurdle to clear to put a dent in Publix grocery sales as well as its market share.

Publix continues to field other threats to its business, including Kroger Delivery, which without any brick-and-mortar stores, rolled into the state last year with home delivery service for central Florida. The No. 1 sales leader in store-bought groceries later announced plans to open another hub in South Florida.

The state’s growing population and available real estate could help the competition. But even on this front Publix has a full division of its corporation devoted to real estate in several regions of the Southeast.

At nearly 22 million people, Florida is the third most populous state in the country, so the scale for potential sales for any grocer exists, but Publix has pushed back most of the competition.

Publix leads in Florida, though Amazon has advantages

According to retail analysts, Publix leads the pack in sales in Florida by a large margin.

John S. Talbott, lecturer and director at the Center for Research and Education in Retail at Indiana University, Kelley School of Business, said Amazon’s U.S. product sales are about $270 billion with about half of that comprising web services. The remaining $125 billion comes from selling items that include groceries.

Amazon does not publish any breakdown of its fresh food sales from the rest of its sales figures; however, Talbott said, “They are still tiny,” in terms of grocery sales in Florida that he estimated at $10 billion.

Publix had about $48 billion last year across its seven-state footprint, giving Publix the edge within the southeastern U.S., and most of those sales come from its Florida stores.

“The acquisition of Whole Foods marked Amazon’s true entry into the marketplace,” Talbott said. They have 500 locations nationally and 32 in Florida – particularly South Florida.

Amazon also operates more than 50 sites in Florida that support customer fulfillment and delivery operations, including more than 10 facilities that launched in 2020 and one fulfillment center for its Amazon Fresh orders, according to a company release. The grocery e-commerce platform is currently available with limited range within Miami, Tampa and Orlando.

“They don’t publish specific data on grocery so it’s difficult to gauge overall impact on the business from a financial standpoint,” Talbott said. “But my guess is that Publix is much larger in Florida and probably larger overall in fresh food that is perishable.”

According to Laura Hayes, a public relations representative with Amazon, the company “does not currently have any Amazon Fresh or Amazon Go stores in Florida, and we don’t comment on our future store roadmap.”

“Online shoppers can order groceries for delivery through Amazon Fresh online in Miami, Orlando and Tampa metro areas,” she said.

According to a Progressive Grocer report citing public records, “Amazon is intending to open a 35,000-square-foot Amazon Fresh grocery store in Boca Raton, Fla., the company’s first such store in that state and its first store in the Southeast.”

It is unknown at this time when the Boca store will open.

According to Gina Acosta, editor in chief for the trade magazine, the new store is being built in the upscale Uptown Boca shopping center on Glades Road.

“What makes the Uptown Boca Amazon Fresh different from the other 18 Amazon Fresh stores now open nationwide is what appears to be a drive-thru,” Acosta wrote in her Sept. 7 report.

By comparison, Walmart, each week, sees about 220 million customers come through its doors and members visit approximately 10,500 stores and Sam’s Clubs under 48 banners in 24 countries and e-commerce platforms, its website reported. In fiscal year 2021, Walmart had revenue of $559 billion.

Walmart employs 2.2 million associates worldwide.

The acquisition of Whole Foods gave Amazon another offering for its online shoppers.

“I think their broad strategy is to be the go-to, most convenient, supplier of almost anything consumers want to acquire,” Talbott said. “Given that grocery is a multi-time a week shopping venture, Amazon wants their share.”

“Their accretion in door count in Florida will be driven by real estate opportunity and changing growth patterns in the state,” Talbott added.

With the announcement of two Amazon Fresh stores in addition to Whole Foods, Amazon will gain more in-person retail space for groceries. As the in-person retail space at Amazon increases, that could help them gain customers, Talbott explained.

Meanwhile, Publix’s costs were lower due to its partnership with Instacart but Amazon probably has larger orders going to its customers due to the sheer number of items e-commerce shoppers can buy online.

“Amazon levers their own fleet across categories that Kroger and Publix do not,” Talbott said. “Amazon may have larger average delivery value and also recovers some cost through Prime membership charges.”

Talbott said Publix and Amazon will be the titans of groceries battling for sales in Florida online first and eventually in stores. For now, that leaves other players like Target and Walmart with minor roles in the sector. According to Talbott, Walmart and Target will be less of a factor in grocery e-commerce than Publix and Amazon.

“I don’t think either of these entities will have the breadth of assortment that Publix offers,” Talbott said. “They are both working hard to use their stores as ‘warehouses’ with curbside and instore pickup.”

While the Amazon vs Publix competition could include prescription drugs, don’t expect Amazon to hurt Publix Pharmacies in that area anytime soon.

Amazon has been in the pharmacy business for a long time and has had a tough time getting most people to upload their prescriptions, Talbott said.

Amazon vs. Publix: Home delivery rankings

Amazon operates its grocery home delivery service in-house and from several locations, including its fresh food warehouses, Whole Foods and eventually Amazon Fresh stores as they open in Florida.

Compared to Publix, Amazon home grocery deliveries come at no additional cost for its Prime members. Publix customers have to pay more to get groceries delivered to their homes because Instacart charges a fee for the service. To avoid the fee, customers can choose to purchase an Instacart Express membership.

Otherwise, Instacart delivery at Publix starts at $3.99 for same-day orders of $35 or more with a minimum purchase of $10. However, additional fees can be assessed for one-hour deliveries, deliveries under $35 as well as alcoholic beverages and extra heavy orders.

In its own right, Instacart is very large in the U.S. home-delivery sector as a grocery delivery service with more than 120 supermarket partners across more than 4,500 stores in at least 45 states.

Last year, Instacart announced not just warehouses but existing store locations with automated fulfillment capabilities would be coming to its retail partners.

‘Next-gen’ operations

Instacart announced in July it would help retailers continue to innovate and compete with “next-gen fulfillment,” which is expected to help reduce the in-store shopping that can be cumbersome for Instacart shoppers, like crowded store aisles, out of stock items and long checkout lines.

“We believe – over the long-term – partnering with retailers to bring next-gen fulfillment technologies together with the personal touch and care of Instacart’s shopper community will create an even more seamless online grocery experience that’s faster and more affordable for customers and delivers even more value and growth to retailers,” Instacart said as part of its announcement.

Publix first partnered with Instacart in 2016 to launch same-day delivery in as little as one hour. Since then, Publix and Instacart have expanded the partnership and introduced curbside pickup from nearly all stores; alcohol delivery and pickup in select states including Alabama, Georgia, Florida, North Carolina, Tennessee and Virginia; EBT SNAP payments across all store locations; and Publix Quick Picks – a 30-minute virtual convenience delivery offering.

Last year’s fulfillment initiative brought automated technology to several retailers, which Instacart would not name, in a partnership with Fabric for the automated fulfillment.

“All of the major retailers over the last eight years have realized that they have stores they can use as warehouses,” Talbott said. “That is what they have all done. That is where Amazon is behind.”

Customer data collection

While more customers have Prime memberships with Amazon compared to Express memberships with Instacart, there is also the customer data collection that Amazon keeps due to its in-house home delivery service. Publix has less control of customer data collection because a third-party takes the orders and delivers the groceries.

Still, Publix likely has a trove of data, but they are giving up some of that data as every grocery business has with an Instacart relationship.

“Over the years, we’ve worked to build one of the largest grocery catalogs in the world on behalf of our retailer partners – allowing retailers to gain important data and unmatched insights on their customers’ preferences and shopping habits,” reports Instacart. “We send retail partners daily transaction logs detailing 100% of transaction information. Among the data are the customer’s name, email address, loyalty care but only if the customer chooses to opt-in to share their data.”

The company said it is “committed to being good stewards of data, protecting our customers’ privacy and respecting our relationships with retailers” and does not “share or sell competitive data across retailers or brands.”

“I think that is a problem with every grocery store has with that relationship with Instacart they are giving up some of that data with that relationship with Instacart,” said Michael Yanez vice president of eCommerce at KartSmartr, a grocery ecommerce agency in California.

While media reports had suggested that Instacart was considering an alliance with Fabric, the automation company, to start working directly with suppliers, nothing has happened on that front for more than a year, he said.

“My understanding (is) without Instacart coming out and saying it is, that my interpretation is they are going in a different direction, and they don’t want to hurt their relationships with the grocery stores,” Yanez said.

“So, what they are doing is working with the grocery stores to build out smaller warehouses on the back of the grocery stores with robotic automation,” Yanez added. “That way the Instacart shoppers don’t have to be in store, or they can go to the back room and those orders are almost ready for them to pick up and deliver.”

For the next few years, Instacart will rely on its relationships with the retailers and not go straight to suppliers.

“I really believe they had to back down from that,” Yanez said.

In terms of the home delivery grocery market, he said: “It’s a very fluid industry right now. There are some clear winners: Instacart, Amazon Fresh and Walmart in that order.”

Publix and Instacart have parallel apps for home delivery, and both offer hot meal deliveries via an app.

“If the fulfillment is through third party, that’s fine in the short run,” Talbott said. “Other side of pandemic Publix needs to see if consumer behavior is permanently changed with many more customers preferring delivery or pick-up.”

“If this is the case, it probably makes sense to build their own tech and hire their own drivers,” he added.

Will home delivery matter?

A survey by Brick Meets Click and Mercatus of January grocery shopping trends, released in February, showed sales from home delivery by local courier and ship-to-home by package dropped by 8% year over year.

But store pickups leveled the e-commerce grocery delivery segment.

“The U.S. online grocery market generated $8.5 billion in sales and accounted for nearly 12% of total grocery spending during January, according to the survey fielded Jan. 29-30.

“Only pickup made sales gains, growing almost 2% to $4 billion. Delivery contracted 7% to $3.0 billion and ship-to-home sales plummeted 30% to $1.5 billion, driving nearly two-thirds of the total year over year sales decline,” said David Bishop, partner at Brick Meets Click. “These sales results show that circumstances connected to COVID continue to disrupt the way people shop, but in different ways than earlier in the pandemic.”

In terms of market share for January 2022 versus a year ago, pickup’s share of online grocery sales grew nearly five percentage points to 47% because of gains in its monthly active user (MAU) base and order frequency, and delivery’s share grew just under one point to 35%, from increases in order frequency and spending per transaction.

In contrast, ship-to-home’s share of online sales fell more than five points from January 2021 to 18%, setting a record low that is more than 20 points lower than pre-COVID levels (August 2019).

The number of U.S. households that bought groceries online during the month remained steady at 69 million, dipping 1% versus last year. Even so, the way in which households receive online grocery orders continues to evolve.

Despite a drop in home delivery sales, an October Supermarket News report said, online grocery sales will be more than 20% of the overall U.S. grocery retail market in the next five years, based on a Mercatus/Incisiv study.

According to that study, nearly 75% of e-commerce grocery sales would be store pickup, the article said.

Paul Nutcher covers business and industry for The Ledger and can be reached at pnutcher@gannett.com.

This article originally appeared on The Ledger: How Amazon's Florida expansion could impact Publix, grocery sales