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Amazon Prime Day started on 15th July this year, and lasted for 48 hours, the longest Prime Day so far. The event was the largest sales day in Amazon history, with more than one million exclusive deals for Prime members.

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Amazon is described as the “everything store” but food and consumer goods are particularly important to it. With shoppers on average conducting 24 grocery shopping trips a month, Amazon wants to benefit from the high frequency of purchase to drive traffic to its websites. This will help it to attract more vendors, increase its selection, intensify competition and provide a better customer experience. Grocery can therefore help Amazon to sell all its other products and services.

There are five ways in which Amazon is planning to win in grocery.

1. Increase choice

To offer a competitive grocery assortment, Amazon is partnering with traditional retailers. In May, Amazon announced that it was collaborating with Life supermarket in Japan to sell fresh foods in parts of Tokyo. In June, we heard that Morrisons in the UK would roll out its home delivery partnership to cover more cities, such as Glasgow and Portsmouth.

Amazon will also differentiate its grocery proposition by offering unique, exclusive products demonstrated during this year’s Prime Day. There were several celebrity collaborations, such as the exclusive launch of Lady Gaga’s Haus Laboratories beauty brand and there were limited-edition product launches, from brands such as Oreo and Maggi.

In food and drink it’s partnering with smaller specialists, such as Gail’s Artisan Bakery and the East London Brewer Company in the UK. It’s also using Marketplace by helping producers and manufacturers sell directly to consumers with differentiated offers. For instance, in June, BIC launched an Amazon exclusive direct-to-consumer brand called Made For YOU, in the US. Last year, Amazon France launched a shop-in-shop, La boutique des producteurs, selling high quality, locally- sourced, delicatessen products and fresh produce.

Its private label offer is evolving, and it appears to be prioritising ambient products, that are easy to ship, higher value, purchased consistently and frequently.  For instance, in March, it launched the skincare brand Belei. In the future, it’s likely to use data and its understanding of shoppers to improve product development. This data-driven product development or consumer-to-business (C2B) model would follow Alibaba and its successes working with Mars and Colgate in China.


Source: Amazon

2. Price discounts      

Amazon offers competitive prices through its pricing algorithm and Marketplace, as third-party sellers compete to win the buy button. However, it’s also been investing to reduce prices. In December, Amazon Australia cut the price for a number of favourite FMCG brands, offering products 50% cheaper than key rivals.

In recently launched markets, Amazon is discounting the price of Prime membership to acquire customers (the discount might also reflect the benefits available). Prime drives loyalty and results in shoppers spending more. For instance, in Australia, Prime costs the equivalent of €36, whilst in Germany it’s €69. Prime shoppers also benefit from additional price discounts. For instance, in the US, members shopping at Whole Foods Market are benefiting from exclusive promotions, an additional 10% off promotional prices and another 5% cash back if they make a purchase using a Prime Rewards Visa Card.  

Amazon Prime membership is the gateway to Amazon’s channels such as Pantry, Fresh and Prime. Once shoppers are Prime members, it’s incentivising the trial of the channels with discounts, such as in the UK, save 25% on Prime Now for first-time customers or get free delivery on Amazon Pantry.

In the future, Amazon can use data and expertise in artificial intelligence to differentiate by providing shoppers with helpful, relevant, personalised promotions.


Source: IGD Research

3. Making grocery shopping more convenient

Amazon continues to launch in new markets and expand its convenient online offer. In January, it started selling groceries in Brazil and in the US, rolled out pickup and Prime Now from Whole Foods Market stores.

Amazon will differentiate through its speedy fulfilment and in July launched AmazonFresh in Las Vegas, offering delivery in one and two hours. In the US, it has rolled out free next day delivery to more than 10 million products for Prime members.

Convenience isn’t just about speed and Amazon’s removing friction from ordering through to returns. In March, it enabled shoppers to consolidate multiple orders to arrive on a self-selected day, with its Amazon Day service. It’s made collection points available at high street stores, such as Next in the UK. It’s also made its after sales service more convenient. For instance, in the US, shoppers can return products at Kohl’s department stores with its Amazon Counter service.

Shoppers expectations of convenience will only increase, and Amazon is well prepared. For instance, voice ordering (Alexa) or unattended deliveries (its already delivering to fridges, garages and cars with its Amazon Key service).


Source: kohls.com

4. Open stores

Stores are a key part of Amazon’s grocery strategy and the acquisition of Whole Foods Market could be a test for more acquisitions in the future. The stores help drive credibility and awareness of its grocery offer. As mentioned, Amazon is using the stores to acquire new Prime members and sell its devices. They also act as mini fulfilment centres and support rapid deliveries.

Amazon is testing store formats to find a differentiated offer that can be scaled up. It currently has 11 checkout-free Amazon Go stores. In 2017, it launched AmazonFresh Pickup, and Amazon Instant Pickup, both offering rapid click and collect.

Amazon will offer seamless online and offline shopping. Using its app and data, it could provide offline shoppers with personalised recommendations and promotions. This will remove the friction from offline shopping, helping shoppers quickly find products, access product information and make payment. Its stores will offer collection, returns and acts as efficient fulfilment centres for grocery and non-food items.


Source: IGD Research

5. Supply chain as a competitive advantage

Amazon is investing in developing technologies to establish a competitive advantage in the supply chain.

It continues to recruit for highly-skilled engineers, software developers, data scientists and machine learning experts. In the first half of 2019, it’s invested in self-driving forklift trucks through Balyo, driverless technology through Dispatch, in robotics through Canvas Technologies and electric vehicles through Rivian. It’s also been investing in drone technology through the Prime Air service and in June committed to make its first drone delivery within months.


Source: Amazon

Keep up to date with developments at Amazon

In September you can hear from Amazon’s UK and German senior leadership team, by booking tickets for the IGD Amazon UK Vendor Leadership Day in London on 10 September or our new IGD Amazon.de Vendor Leadership Day in Munich on 12 September.

IGD Retail Analysis subscribers can see the latest Amazon news here and you can learn more from our Amazon Strategic Outlook presentation.

Simon Mayhew

Simon Mayhew Head of Online Retail Insight

10 September 2019, London
Hear directly from the Amazon UK leadership team and learn about how you can grow your business with them.

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12 September 2019, Munich

Hear directly from the Amazon.de leadership team and learn how you can grow your business with them.

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The Competition and Markets Authority (CMA) has said it will look into the details of Amazon’s significant investment in food courier service Deliveroo.

$575m funding round

In May, Amazon became the biggest investor in a $575m investment round in Deliveroo, with the exact amount Amazon spent unknown. Deliveroo said the new investment will contribute to expanding its London based engineering team, reaching new customers through international expansion of its delivery reach, and new innovations in the food sector.

Today, the CMA has issued an enforcement order against the companies while it considers whether a full merger inquire is required. No deadline has been set as to whether the CMA will launch a full inquiry, but any deal between Amazon and Deliveroo has been paused for now. Meanwhile, the enforcement order sets out how both companies must interact during this period.

In the document, the CMA states that is has “Reasonable grounds for suspecting that it is or may be the case that Amazon.com, Inc (Amazon) and Roofoods Ltd, trading as Deliveroo (Deliveroo), have ceased to be distinct; and/or that arrangements are in progress or in contemplation which, if carried into effect, will result in Amazon and Deliveroo ceasing to be distinct”.

If the CMA decides any deal between the two companies could create an unfair advantage and reduce choice for consumers, it has the power to block this deal.

Deliveroo operates in over 500 towns and cities across 14 markets, including Australia, Belgium, France, Germany, Hong Kong, Italy, Ireland, Kuwait, Netherlands, Singapore, Spain, Taiwan, United Arab Emirates and the UK. Many of which, are where Amazon has a Global Marketplace. In the UK, the company delivers throughout 100 towns and cities, partnering with over 8,000 restaurants to deliver food to customers ordered on the website or Deliveroo app.

A spokesperson for Deliveroo commented:

"Deliveroo and Amazon have been working closely with regulators to obtain regulatory approvals. There are a number of major companies within the restaurant food delivery sector and this investment will enable Deliveroo to expand, innovate and, we believe, will enhance competition. This investment will help create jobs, help restaurants to grow their businesses and will improve choice for consumers”.

 

For more information on Amazon, see our Strategic outlook for Amazon report here.

See how shoppers are using online rapid delivery and how manufacturers from across the world, can meet the opportunity in our Rapid delivery report.       

IGD Amazon Vendor Leadership Day 2019

10 September, London

Hear directly from the Amazon UK leadership team and learn about how you can grow your business with them.

Find out more »

Amazon has announced it has expanded its AmazonFresh service to offer one- and two- hour delivery in Las Vegas across a range of products.

Rapid delivery on thousands of products

Amazon has rolled out its AmazonFresh service to Las Vegas, where Prime members can now shop thousands of products across multiple categories. These categories include fresh groceries and everyday essentials, beauty products, household goods, and Amazon devices and electronics.

Prime members can access delivery across the product range in one and two hours through AmazonFresh at a cost of $14.99 per month as an add-on to their Prime membership. Amazon customers can also use Amazon Alexa to conveniently order products based on past purchases or a top result popular with customers. Alexa will also remember a customer’s favourites to make the shopping experience fast and simple.

Amazon continues to expand its market position for convenience shopping and household goods, directly challenging traditional retailers.

Stephenie Landry, vice president, AmazonFresh and Prime Now, commented:

“We’re thrilled to introduce AmazonFresh to Prime members in Las Vegas. Prime members tell us they want their stuff even faster. We're happy to deliver on that ask and can’t wait for customers in Las Vegas to take advantage of one- and two-hour delivery from AmazonFresh”.

 

For more information on Amazon’s strategy, its results and the opportunities for manufacturers, Retail Analysis subscribers can read our Strategic outlook for Amazon report here.

IGD Amazon Vendor Leadership Day 2019

10 September, London

Hear directly from the Amazon UK leadership team and learn about how you can grow your business with them.

Find out more »

Presentations

18/07/2019
We review Amazon Prime Day 2019, how the event has evolved over the years, and the opportunities for manufacturers and retailers. This report covers: • The history of Prime Day • Examples from this year’s event including key categories and how brands are using Prime Day • How competitors are responding • Implications for suppliers and retailers
08/07/2019
An essential summary of trading priorities, latest developments and other key commercial insights for Amazon
03/07/2019
We visited the first of Amazon’s new Clicks and Mortar pop-up store concept, aimed at helping up-and-coming online brands grow their offline presence, reinvigorating high street shopping, whilst demonstrating how Amazon’s Marketplace supports new and innovative businesses.
View all presentations

Key presentations

We look at Amazon's strategy, its results and the opportunities for manufacturers.

This in-depth guide to the USA explores the key trends in grocery retail and the growth strategies of the leading retailers in the country.

An essential summary of trading priorities, latest developments, and other key commercial insights for Amazon.

10 September 2019, London
Hear directly from the Amazon UK leadership team and learn about how you can grow your business with them.

In this one-day workshop, you'll discover the key opportunities of online retailing and how to activate them as part of your overall category strategy.

We've developed a single, universal methodology for calculating food and consumer goods retail data, supported by our programme of primary and secondary research. This makes Retail Analysis the most reliable and robust source available for data of this type. 

We've grouped all the latest North American retail news, store visits, retailer profiles and downloadable presentations together in one place.