Amazon, Walmart in online grocery pilot in NY involving food stamps - CNBC

Food stamp recipients will be able to use online delivery services such as Amazon and Walmart to buy groceries under a two-year pilot program that just launched in New York state.

The program will be expanded to include a handful of other states. It could give Amazon a bigger shot at a lucrative $65 billion market now dominated by supermarkets and superstores such as Walmart.

The pilot program could benefit recipients of the Supplemental Nutrition Assistance Program who may have trouble getting fresh food from brick-and-mortar stores. About 20% of SNAP participants are either elderly or disabled and face challenges getting healthy food from grocery stores, according to the U.S. Department of Agriculture, which administers the food stamp 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 USDA Secretary Sonny Perdue. "As technology advances, it is important for SNAP to advance, too, so we can ensure the same shopping options are available for both non-SNAP and SNAP recipients."

The government's pilot program will focus initially on the Empire State, before expanding to Alabama, Iowa, Maryland, Nebraska, New Jersey, Oregon and Washington in coming years, according to USDA.

Overall, SNAP received more than $65 billion in government funding last year and helped some 40 million people. In New York state alone, nearly 3 million people participate in the program, or about 13% of the state's total population, according to the Center on Budget and Policy Priorities.

Participants in the pilot program won't be allowed to use their food stamp benefits to pay for service or delivery fees.

Amazon is allowing SNAP participants to obtain free delivery on AmazonFresh orders on purchases $50 or more or to place smaller orders and pay under $10 for shipping. Also, to get free delivery on Prime Pantry orders, the online giant requires purchases of $35 or more or the option of $5.99 shipping for smaller orders.

Regardless, food stamp recipients won't need to pay for a Prime membership to use their benefits on Amazon as part of the pilot.

"As we expand participating areas throughout the life of the pilot, Amazon believes the program will dramatically increase access to food for more remote customers and help to mitigate the public health crisis of food deserts," Kristina Herrmann, an Amazon director in charge of the company's participation in the USDA pilot, wrote in a blog last week.

In 2017, supermarkets and superstores redeemed 82% of all SNAP benefits, according to the USDA. Walmart already generates just under 5% of its domestic revenue from purchases made using SNAP benefits, according to industry analyst estimates.

"We are excited to be part of the USDA's pilot program and to be able to make our grocery pickup and delivery service available to more and more people, regardless of their payment method," Walmart spokesperson Molly Blakeman said in an email statement. "Access to convenience and to quality, fresh groceries shouldn't be dictated by how you pay. This pilot program is a great step forward, and we are eager to expand this to customers in other states where we already have a great online grocery business."

SNAP participants in states participating in the pilot will be able to order groceries online and pick them up at Walmart locations. A Walmart official said the retailer giant is making nearly 275 grocery pickup stores in the states eligible for the pilot.

According to USDA, Walmart is providing online service in upstate New York while Amazon and ShopRite are giving service to SNAP recipients in the New York City market. Additional retailers will be added to the government's pilot program in the coming months, the agency said.

Back in 2017, another online grocery trial program was launched by the government in a handful of states and involved Amazon, Safeway and ShopRite. Experts point out that some of the same challenges exist today for the pilot program, including underserved populations in some areas having limited access to the internet.

Families that are SNAP participants sometimes live in "food swamps," or places where fast food is often more accessible than healthier foods, such as fresh produce, according to Lisa David, president and CEO of Public Health Solutions, a server of food for the needy in New York City area.

"One of the things this does as a game changer is it allows any SNAP participant to have access to good, fresh produce, dairy, as well as high-quality protein sources," said David. She also said there are "isolated seniors" who could benefit from the pilot online grocery program.

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