Amazon’s Food Stamp Program May Be Off Target

The Lempert Report
February 15, 2017

Lots of talk about how Amazon accepting food stamps will hurt Walmart and other retailers’ business – I don’t think so

Yes we need to watch just what happens this summer, that is unless the new administration decides to make changes in the SNAP program which last year provided more than $66 billion of help to 44.2 million Americans - in New York, New Jersey and Maryland. In addition to Amazon, FreshDirect, Safeway and ShopRite are also joining the Supplemental Nutrition Assistance Program-the first time SNAP has accepted online payment for groceries. The U.S.DA has said access to online groceries is a benefit to urban and rural residents with limited shopping options.   

Here are my questions: how many current Amazon customers are on SNAP? And how many use their mobile devices as their primary way to access the Internet? And how can Amazon sell the foods that SNAP recipients buy? 

There is no doubt that Amazon’s network can serve this population – as long as they have secure areas for Amazon to deliver to. Many have no doorman, are working two or three jobs and live in areas where a box left at their front door may not be there when they get home.  

Amazon will need to customize a SNAP app for this population to make it simple and easy to select the groceries that are SNAP qualified as well as the payment process. 

There is no doubt that Amazon has an opportunity to prosper with its enormous selection and low prices. And talking about selection – the new USDA report showed that the No. 1 purchases by SNAP households (and the general population by the way) are soft drinks, which accounted for 5 percent of the dollars they spent on food. The category of ‘sweetened beverages,’ which includes soft drinks, fruit juices, energy drinks and sweetened teas, accounted for almost 10 percent of the dollars they spent on food. So how can Amazon make money selling soda, which is already under fire with declining sales and a highly price promoted category? 

The report, which has come under scruitiny, was based on data from an unnamed, nationwide grocery chain, which provided the U.S.D.A. with monthly records of food items bought in 2011 by more than 26 million households, about three million of them food stamp recipients. The grocery chain identified and tracked SNAP households by their use of SNAP benefit cards at the checkout aisle. One limitation of the report was that it could not always distinguish when SNAP households used their benefits, other money or a combination of the two to pay for transactions. 

The U.S.D.A. report found that the SNAP households spent slightly less money on nutritious foods, including fruits and vegetables, beans, eggs, nuts and seeds.

Over all, the report found, SNAP households spent about 40 cents of every dollar at the grocery store on “basic items” like meat, fruits, vegetables, milk, eggs and bread. Another 40 cents of every dollar was spent on “cereal, prepared foods, dairy products, rice and beans.” Lastly, 20 cents of each dollar was spent on a broad category of junk foods that included “sweetened beverages, desserts, salty snacks, candy and sugar.”

Selling and delivering soda, fruits, vegetables, perishable foods to those areas not covered by Amazon Fresh will be a challenge. My bet? Chains like ShopRite and Safeway will win this battle.