Walmart, Amazon Deals and grocery chains like ShopRite hope to tap into a lucrative new market: Food stamp recipients who want to shop for groceries online. For the first time, the US Department of Agriculture has given the green light for recipients of the Supplemental Nutrition Assistance Program, or SNAP, to use their benefits to buy groceries online and get them delivered to their homes, the agency said Thursday. The retailers are kicking off a two-year pilot in New York that will enable some of the state’s 2.7 million SNAP recipients to use their benefits for online grocery orders. ShopRite and Amazon (AMZN) will service the New York City area, while Walmart (WMT) will cover upstate locations. The USDA said FreshDirect, Safeway, Hy-Vee and Dash’s Market will join the New York pilot, and the test will eventually expand to other parts of New York, as well as Alabama, Iowa, Maryland, Nebraska, New Jersey, Oregon and Washington. It’s not yet clear which other grocery chains will be involved. This has been gen erated with the help of GSA Content Generator DEMO!
The USDA says it eventually wants the more than 38 million Americans on food stamps nationwide to be able to make online purchases, sales which will make it easier for some working moms, as well as the elderly and disabled, to buy food. But the move also opens up the market to online retailers. "People who receive SNAP benefits should have the opportunity to shop for food the same way more and more Americans shop for food - by ordering and paying for groceries online," said Agriculture Secretary Sonny Perdue. Online shopping makes up a tiny fraction of grocery purchases today, but analysts expect the market to grow. Amazon Deals, Walmart and others are trying to edge out each other as buying meat and produce online becomes more popular among both high and low-income shoppers. Tapping into the $63 billion food stamp market could give retailers a big boost in that arena.
Food stamp recipients currently buy a lot at big box stores and grocery chains. Nearly $52 billion, or 82% of all food stamp dollars, were spent at these retailers in 2017, according to the most recent USDA data. "It was only a matter of time before we saw SNAP benefits start to impact the online grocery world," said Tory Gundelach, analyst at Kantar. SNAP recipients are already an important customer for Walmart and other grocery stores. Some 4% of Walmart’s sales in the United States come from food stamp purchases, estimated UBS analyst Michael Lasser in a report last year. Walmart declined to confirm that number. Even small changes to food assistance benefits can impact retailers’ sales. During the government shutdown earlier this year, February benefits were handed out early, which lifted sales at Walmart and Dollar General. "There is a lot of money that is pumped into the food store system via SNAP, so retailers are going to try and maximize that," said Elizabeth Racine, professor of public health at the University of North Carolina Charlotte, who studies food assistance policies.
Yet Walmart and big box retailers have lost food stamp market share in recent years to convenience stores, pharmacies and dollar stores, which are rapidly opening new locations and expanding their grocery selections. Dollar General, for example, is adding produce sections to hundreds of stores in rural and urban food deserts. Walmart, Amazon and sneakers others hope that offering food stamp recipients the opportunity to buy online will help them stand out against convenience and dollar stores that don’t offer delivery. The new online shopping program has been in the works for a while. The 2014 Farm Bill called for the USDA to pilot online purchasing. The USDA is using the pilot announced Thursday to further test technical and security issues before it rolls out the program nationwide. Online purchases using food stamps require a higher level of security to prevent and detect misuse. Food stamp participants can use their benefits to buy eligible items online, but not for delivery or services charges.