Amazon tests food stamps, another breach of Wal-Mart territory
SAN FRANCISCO — This summer, Amazon will begin accepting food stamps to pay for online grocery orders as part of a pilot program along with six other companies.
The two-year program by the U.S. Department of Agriculture could help alleviate what are known as food deserts, areas where residents have little access to fresh food and groceries, while also relieving some of the stigma of using food aid.
Five national stores are taking part in the USDA pilot, including Amazon, FreshDirect in New York, Safeway in Maryland, Oregon and Washington, ShopRite in Maryland, New Jersey and Pennsylvania and Hy-Vee in Iowa. Plus two smaller companies in New York state, Hart's Local Grocers and Dash's Market, will participate.
The program could represent an opportunity for Amazon, which has typically ceded the lower-income food market to Walmart. Amazon shoppers in Maryland, New Jersey and New York will be eligible to take part.
Grocery items can be ordered on Amazon by paying a delivery fee. Free delivery requires a Prime membership (typically $99 a year) or a $49 per order minimum. To get perishable items such as fresh produce, dairy and meat, Prime members must additionally pay $14.99 per month to be part of Amazon Prime Fresh. Food assistance won't cover delivery or membership fees.
Amazon may feel the need to position itself to cover the full gamut of grocery customers, not just the higher end. Walmart is still the nation's largest seller of groceries and coming soon are two European discount grocery chains, Aldi and Lidl, both of which are looking to expand in the United States, said Phil Lempert, a food marketing expert.
While a potential new market, selling to this demographic may also require a slightly different marketing push, said Lempert.
"For those who are on food stamps, their primary 'computer' most likely is their smart phone - so Amazon will have to have an education effort for these shoppers to download the Amazon app to buy their groceries," he said.
Amazon said it was excited to participate in the SNAP program and is committed to making food accessible through online grocery shopping by offering all customers the lowest prices possible.
Whether SNAP users will be able to get home delivery or pick up at a more central isn't yet known. One thing is clear: Prime membership can't be paid for with food stamps. SNAP funds can only be used to purchase eligible items online, not to pay for service or delivery charges.
The Supplemental Nutrition Assistance Program (SNAP), distributed $66 billion in food aid to 43 million low-income Americans, half of them children and 10% people over 60, according to USDA.
Actual stamps are no longer involved. Today recipients are given an electronic debit card rather than actual coupons that they hand to the checkout clerk.
The program has been working to innovate and expand dietary choices for its users in recent years. Today SNAP to be used at farmers markets and in a pilot program, money spent on fruits and vegetables goes further.
This will be the first time SNAP has accepted online payment for groceries, though SNAP has been experimenting with programs to allow grocery delivery to homebound elderly and disabled people.