Big news is in the offing for Walmart, Amazon and other chains that offer grocery ordering online – they have gotten a formal “green light” from the USDA to offer that service to recipients of the Supplemental Nutrition Assistance Program (SNAP). Customers in the program will now be able to purchase their groceries online and have them delivered to their homes.
As of today (April 18), Walmart and Amazon will kick off a two-year New York pilot that will plug 2.7 million New Yorkers who are beneficiaries of the program to apply the benefits to online grocery shopping.
ShopRite and Amazon will service the New York City area, while Walmart will cover upstate locations. Reports indicate other retailers will join the program next month. The pilot itself will also extend beyond New York's borders: Alabama, Iowa, Maryland, Nebraska, New Jersey, Oregon and Washington are all slated for tests.
The long-term goal, according to a USDA release, is to open up digital grocery to the 38 million Americans currently enrolled in the SNAP program.
"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. "As technology advances, it is important for SNAP to advance, too."
Food stamp users spend roughly $63 billion per year on groceries, according to CNN, and those dollars today flow nearly entirely to big-box chains and grocery stores. About $52 billion of food stamps were spent in those locations in 2017, or about 82 percent.
"It was only a matter of time before we saw SNAP benefits start to impact the online grocery world," said Tory Gundelach, an analyst at Kantar.
And SNAP customers are important to big firms’ bottom lines. Walmart derives about 4 percent of its U.S. sales from food stamp purchases, according to UBS Analyst Michael Lasser – though Walmart has neither confirmed nor denied that figure. Earlier this year, when food stamps were handed out early as a response to the government shutdown, their effects were felt powerfully in the market. Sales at Walmart and Dollar General lifted accordingly.
"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.
The new program has been in the works since the 2014 Farm Bill called upon the USDA to create an online purchasing pilot for SNAP recipients. The newly announced pilot is designed to test technical and security issues before it rolls out nationwide. Food stamp participants can use their benefits to buy eligible items online, but not for delivery or service charges.
Walmart, independent of the USDA, had been testing its own system to allow food stamp holders to purchase groceries online and pick them up in store with something similar to a COD model. That is available at 40 U.S. locations, but does not include delivery as an option.
In the newly announced New York pilot, Amazon is waiving its Prime membership fee for food stamp customers who want to shop for groceries and household staples through AmazonFresh and Prime Pantry.
"What we're trying to get out of it is furthering our commitment to making food accessible," said Kristina Herrmann, who oversees Amazon's participation in the USDA pilot.