The AmazonFresh rollout both in the US and the EU has been completely overhyped. The press raised expectations that the company simply could not meet, especially as Amazon is rolling out the service in a very careful and considerate manner. In any geography, the company targets a tightly bound geographic footprint first. This means that initial sales volumes cannot be of an order that would cause significant market share shifts. But on the other hand it’s still early days, one should not be dismissive just yet.
The rollout of the full AmazonFresh/PrimeNow offer has shaken up the consensus about online grocery business models. Over the years, online grocery picking has moved from in-store to semi-automated distribution centres and in the case of Ocado to fully automated robot operated warehouses. However due to space requirements, robot-operated warehouses need to be in vast out-of-town locations. This creates a problem for rapid, one hour or two hour deliveries. These out of town sheds are simply too far away from the city centre to fulfil the one or two hour promise. Hence we are seeing a return to the pick in store (Instacart/PrimeNow) model – even though there are clear economic challenges. (The Whole Foods acquisition obviously provides a real growth fillip to PrimeNow with many great central store locations)
Amazon has also challenged the consensus about average online basket sizes. Just two years ago it was still a common view that online grocery orders needed to have an average baskets size of at least £100 (US$150 or €130 or so) for companies to be able to realise a profit. And yet, the shift towards one/two hour deliveries has caused basket sizes to decline considerably.
AmazonFresh has never managed to get its average basket size to the same level as the more successful multichannel grocers. AmazonFresh’s average baskets sizes have always tracked considerably lower. (The PrimeNow baskets are even lower and do not have the additional Fresh subscription fees to offset costs.) To us it looks like Amazon is trying to turn this weakness into a strength.
This, we believe, shows two things. First, it shows how committed Amazon are to cracking online grocery. Second, to us at least, it suggests that the company is going to be in for a long, hard slog. Amazon will not be able to crack online groceries in the same way as the company dominates other categories such as books, music and video, consumer electronics or clothing any time soon.
Amazon offer in grocery
How to define? A narrow view…
… or wide?
Why is Amazon targeting fresh?
5 reasons, applying the Amazon way to online grocery
1 - Unrivalled selection
2 - significant raising of the bar for delivery speeds.
3 - A revolutionary new loyalty experience.
4 - The platform approach
5 - Price leadership.
Amazon: Fresh pricing snapshot vs competitors, UK 2017
Best sellers grocery U.S. TTM 4 2018
Amazon 3P business, issues
AmazonFresh London best sellers
Amazon: the basket size issue
AmazonFresh data Seattle
Issues to overcome to expand AmazonFresh
The Whole Foods acquisition
Amazon: The Whole Foods acquisition and reasons for doing so
Turning Whole Foods into an omnichannel retailer
Amazon: What is happening at Whole Foods right now?
The experience so far (US/UK/DE/FR)
What has happened so far?
Amazon: what has happened so far in the US
USA - fresh pulls back
Amazon: what has happened so far in the UK
UK - no major impact yet
Amazon: what has happened so far in Germany
Germany - underwhelming so far
France - a different challenge
Challenges opportunities Fresh/PrimeNow, deep dive into the business models
Fresh - opportunities/challenges
PrimeNow - opportunities/challenges
Groceries – opportunities
Future outlook: Amazon plans and strategy
Future strategy, 4 key issues to resolve
Connected household devices - move to voice
Amazon: opportunities in in & outbound, private label
Inbound logistics/order picking
Outbound - from flex to drones?
Private label, 365
Amazon: Future outlook, questions to consider
Online grocery questions to consider
Amazon: expansion abroad
Roll out to Australia? How Amazon proceeds
Conclusion & recommendations
FMCG tactics, our recommendations
Amazon: what should FMCG players do?
Retailer tactics, our recommendations
Amazon: what should retailers do?
Chart 1 Amazon grocery business verticals
Chart 2 Amazon business verticals
Chart 3 AmazonFresh London best sellers
Chart 4 AmazonFresh data Seattle
Chart 5 Amazon private label universe – grocery
Table 1: Amazon: Fresh pricing snapshot vs competitors, UK 2017
Table 2: Best sellers grocery U.S. TTM 4 2018