- Jeff Bezos released his annual letter to shareholders in which he referred to Amazon as a “small player” in the retail sector. Whilst some may point towards politics and discussion of breaking up Amazon as a reason for why he may have made the statement in his letter, others see it as insight into his growth ambitions for the company, particularly in groceries.
- Whilst Amazon accounts for 30% of online grocery shopping, the company and Whole Foods only account for 4% of the entire market.
- Growth is likely to come from four different sources; 1) frictionless checkout & Amazon Go, 2) a new grocery chain that targets a wider range of consumers, 3) expansion of Whole Foods passed its 500 stores, and 4) continuing innovation, such as Amazon Go, Amazon Fresh Pick-Up and Amazon Scout.
Analysis & Comments
- There are a number of moving parts in how you should think about where Amazon goes next. In Food Retail, all online retailers are finding that making money selling food online is much tougher than just “sticking a book in the post”. A recent Mintel UK survey reported on the BBC suggests that future market share growth will require 1) retailers to put more effort into persuading shoppers to try the service and 2) fixing operational issues such as incorrect substitutions, late deliveries and damaged good. And this is at a market share of only 7%.
- Given this context, it is understandable that Amazon is working hard to become multi channel in food. However, it also suggests that if the incumbents can get their offer right they will maintain market share (especially as food retail customers are sticky). As with clothing and homeware online retailing, there is still a lot that can be done to make the offer work better.
- By this we don’t mean fancy websites. Better supply chains, improved customer recruitment & retention, and improved demand forecasting/ordering plus better content curation (fighting the “we have everything platform providers)still give food retailers a lot of levers to pull.