4 Reasons Amazon Is Willing To Accept Food Stamps For Grocery Delivery

This year, some Americans participating in the Supplemental Nutrition Assistance Program (SNAP, aka “Food Stamps”), will be able to pay for groceries online through Amazon, FreshDirect, and some supermarket chains. Given that food delivery services have thus far tended to cater to higher-income consumers, why are these companies — and in particular, Amazon — eager to accept SNAP payments?

Bloomberg Technology takes a good look at this question and we’ve come away from their report with the following answers:

1. Proximity Of High- & Low-Income

The first tests of online SNAP payments will occur later this year in New York, New Jersey, and Maryland. Not only is Amazon, because of its many distribution warehouses, well-situated to deliver groceries in these areas, but the urban centers in this region tend to have a wide spectrum of incomes living in close proximity to each other.

If Amazon trucks are driving through low-income neighborhoods to deliver groceries to financially better-off customers, it might as well make deliveries to those customers.

2. The Money

Last year, Americans spent more than $66 billion in SNAP funds, and all of it went to bricks-and-mortar retailers. Meanwhile, the entire U.S. grocery delivery business brought in $70 billion last year, just a small portion of the $800 billion spent on groceries annually.

In addition to grabbing a slice of the SNAP pie, these grocery deliveries could also be a low- or no-margin business that introduces Amazon’s other products to people who might have not realized that the site sells just about everything you might want to buy.

3. Price & Selection Competition

Amazon’s grocery selection may not be able to compete on price and variety with a massive suburban supermarket that has its own bakery, butcher, and other perks. However, the large majority of SNAP participants are in urban areas, and many of these people live in so-called “food deserts,” where the primary retail source of food is a convenience store or bodega.

Prices at these small stores are often much higher than you’d find at the supermarket, and the selection is often very limited. Amazon can probably offer lower prices and a wider variety of products than shoppers will find at their corner store.

As we’ve seen in the Dallas area, offers of multimillion-dollar cash payments were not enough to convince supermarkets to enter into lower-income neighborhoods, so the only hope for providing better food at a more affordable price might be to have it delivered.

4. Damage Control

Last year, Amazon received a lot of negative publicity when research showed that the company’s same-day delivery service was favoring ZIP codes with predominantly white residents, and apparently omitting some areas where residents are non-white.

The company has since taken steps to address those gaps in service, but if Amazon can actually provide better food options to the same people it so recently overlooked, it could go a long way toward improving the company’s image.

Sorry, Wal-Mart. Amazon Wants Your Food Stamp Customers As Well [Bloomberg Technology]

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