Is Amazon’s Food Stamp Program Off-target?

We need to watch just what happens this summer -- that is, unless the new administration decides to make changes in the Supplemental Nutrition Assistance Program (SNAP) program,which last year provided more than $66 billion in help to 44.2 million Americans, in New York, New Jersey and Maryland. In addition to Amazon, FreshDirect, Safeway and ShopRite are also joining SNAP, making this the first time it has accepted online payment for groceries. The USDA 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?
• 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 there are secure areas for Amazon to deliver to. Many have no doormen, are working multiple jobs and live in areas where a box left at the front door may not be there when they get home. Amazon will need to customize a SNAP app for this group of consumers to make it easy to select the groceries that are SNAP-qualified as well as to execute 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 as well as 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 that had provided the USDA with monthly records of food items bought in 2011 by more than 26 million households, about 3 million of them food stamp recipients. Those data and the grocery chain in queston identified and tracked SNAP households by their use of SNAP benefit cards at checkout. 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 USDA report also found that the SNAP households spent slightly less money on nutritious foods, including fruits and vegetables, beans, eggs, nuts, and seeds.

Overall, the report found that 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 and 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.