Kroger also scored high among the pure-play grocers in terms of its online grocery positioning compared with e-commerce giant Amazon, particularly as it related to pricing. But at the bottom of the list was Whole Foods Market.
Citi looked at the potential winners and losers in the online grocery space using a five-point analysis that looked at factors such as profitability, brick-and-mortar pricing, online pricing, exposure to Seattle-based Amazon, as well as any early adopter advantage.
"Based on our analysis, we determined that Wal-Mart was the winner (low exposure to Amazon Fresh/Prime Now markets and low EPS impact from exposure to those exposed markets)," Citi said in the 43-page report. "Whole Foods Market came in last place overall in our
analysis, largely due to their urban store exposure, which overlaps highly with Amazon Fresh and Prime Now, as well as their higher price points."
Online grocery shopping could grow five-fold over the next decade, with American consumers spending upwards of $100 billion on food-at-home items by 2025, according an forecast released earlier this year by Food Marketing Institute and Nielsen.
While many of the large grocers are still testing and investing in different formats to see which one works best, there's no denying the changing demographics and rise of millennials weaned on digital technologies supports the case for significant future growth in online grocery spending.
Amazon's growing presence in the grocery space with different approaches highlights how much profit potential it sees in capturing spending from food and beverage sales. Amazon's grocery operating margin potential could be about 3 percent, or roughly comparable to North American retail industry margins, according to Citi. The estimate assumes inclusion of revenue from membership fees.
Amazon's prices on grocery items tend to be higher than Wal-Mart, which accounts for about 20 percent of grocery sales domestically. Citi's research found the price gap between Wal-Mart's store pick-up prices relative to AmazonFresh was an average of 30 percent.
Wal-Mart has been rapidly expanding its online grocery business and concentrating on the so-called click-and-collect model, which allows consumers to pickup orders at stores. A spokesman for the retailer told CNBC the retailer has expanded pickup to more than 100 markets in the U.S. last year and now has more than 600 locations offering the service.