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Investing.com -- Early tests of U.S. grocery delivery platforms show Amazon and Walmart significantly undercutting third-party delivery providers, according to Wells Fargo in a note on Friday.
Analysts said, “Early tests show Amazon & Walmart grocery delivery significantly undercutting pricing for 3P delivery platforms CART, DASH and UBER.”
The Wells Fargo study examined a 10-item basket across three markets. New Jersey, California, and Arizona, on two separate days.
“Our test of US grocery delivery platforms reveal Amazon and Walmart are by far the lowest cost providers; 3P delivery platforms / in-store pricing 57% / 20% higher on average,” the analysts wrote.
Even at a SKU level, the bank said third-party platforms were the most expensive options, with in-store prices averaging 20% above Amazon and Walmart.
Amazon is said to have emerged as the most aggressive on grocery pricing, while Walmart’s total pricing was “at 21% premium to Amazon or 7% premium ex-tip/fees.”
Wells Fargo noted the difference in tipping policies as a factor: “Notably, Amazon does not have a tipping option for same-day grocery delivery, while Walmart (similar to 3P delivery platforms) prompts consumers before checkout. We assume a $5 tip (~10% total price), accounting for 13-pts of pricing difference btw Amazon & Walmart.”
Within third-party providers, CART consistently had the highest total prices, 8% above DASH, which offered the lowest total 3P price.
“On a SKU-level (before tip/fees), UBER had the lowest prices, with CART / DASH at an 8% / 1% premium. However, UBER had higher service and other fees relative to DASH,” said Wells Fargo.
The bank highlighted the risk to third-party delivery growth, noting, “See Amazon Prime entry, and the continued aggressive competitive stance of Walmart, as risks to areas of strong growth for the 3P delivery services providers,” and warned that “retailers may have tougher decisions to make and margin risk over time.”