The ecommerce giant has taken aim at the grocery's digital shelf in the UK amidst an ongoing prices war between supermarkets.
While the service may be geographically limited for now, Amazon has
set out its stall by offering an assortment that includes over 130,000 items and prompt delivery – including one-hour delivery time slots. The online retailer has said it will also compete on price, and on day one it included more than 2000 items priced at £1 or less. The launch is not only a challenge for existing supermarkets, but also for brands who most adapt to the new reality of online grocery.
AmazonFresh Shoppers Primed for Convenience
But price is only one area where Amazon is likely to shake up the grocery trade. The UK market is already relatively mature when it comes to grocery's digital shelf – at least in terms sales value. However, in terms of shopping experiences some UK retailers have been slow to truly embrace online store capabilities needed to drive engagement. Amazon is the leader when it comes to executing customer experiences that delight, and its deep experience with logistics certainly will help Amazon deliver on the distribution complexities inherent in the fresh grocery category. Amazon’s prospects as a new entrant will ultimately hinge on how well it manages the supply chain and door-to-door service. Winning consumer trust and getting it right first time are key to success, and Amazon is acknowledging this by starting small in terms of geographic footprint.
Amazon also may be looking to drive deeper engagement with the its ecosystem. To access AmazonFresh, shoppers must pay a £6.99 monthly fee on top of their £79 AmazonPrime yearly subscription charge. By some estimates, Prime customers spend twice as much per year on average than non-Prime customers, and spend even more the longer they've been a subscriber.
Competition Heats Up for Grocery's Digital Shelf in the UK
Pioneers of online grocery--rivals Tesco, Sainsbury’s and Asda--with almost nationwide coverage in the UK have an advantage over Amazon, for now. But to stay ahead they will need to be ready to optimise their own ecommerce solutions to appeal to wider audiences, especially those important "early adopter" audiences that Amazon tends to capture.
In addition pure-play online retailer Ocado has struggled recently, despite its sophisticated grocery distribution technology. The launch of AmazonFresh will only make it harder for the firm to compete for grocery's digital shelf. To pour more salt in Ocado's wounds, Morrisons will be one of Amazon's main suppliers, despite it's pre-existing partnership with Ocado. These challenges are spurring predictions of an Amazon acquisition of Ocado.
Incumbent players also need to be open to working more closely with suppliers to address the basics of eCommerce as well as reducing delivery charges to help drive sales and improve the overall experience. This will also help position the mainstream grocers more favourably against German discounter Aldi, which has also set up as a rival for the online shopper.
How Brands Can Optimise Grocery's Digital Shelf
With AmazonFresh now in play, brands can expect increased consumer demand for online grocery, even in a relatively mature market like the UK. Retailers, pure-play and omnichannel alike, are best enhanced by an optimised portfolio range that keeps costs down and improves product availability. Similarly, strong inventory management that limits out-of-stocks will retain shopper loyalty and prevent lost sales opportunities. Lastly, a clear and simple promotion strategy can help speed the shopper's path to purchase. To learn more about online grocery and managing the digital shelf, download our on-demand webinar: Dispelling the Four Myths of Online Grocery Shopping
