A PRICE LEADER, TOO
It’s not just in the realms of delivery where Amazon has the upper hand with the
major grocers. Profitero conducted an analysis after the launch of Fresh in
he U.K. and found Amazon was, on average, 17% cheaper than the major
grocers. “U.K. retailers over the last three to four years have been terrified by the
entrance of the discounters, most notably Aldi and Lidl, and the way that they’ve
continued to drive prices down,” said Andrew Pearl, director of strategy and insights,
adding, “We’ve had a continued period of grocery price deflation in the U.K. and, with
Amazon entering the market and promising to be as competitive, if not more so than
the grocery retailers, it’s just another challenge.”
The category and shopper management specialist Bridgethorne suggests
younger consumers could hold the key to Amazon’s success too. It found 78% of
the 18-34 age group say they will probably or definitely try doing their grocery
shopping with the online retailer versus only 26% of the 55 and older crowd.
delivery across Europe, have major implications
for not only grocery retailers but all of Amazon’s
competitors,” he said.
“In the near term, it appears that the larger
supermarkets have the most to lose from Amazon’s
advance. All of the top four U. K. supermarkets
continue to experience grocery share decline, with
Sainsbury’s being the only one to experience any
short-term share growth in the last year. Collectively,
the ‘big four’ are well aware of the Amazon threat and
are taking steps to respond,” said Pearl.
Morrisons, Pearl believes, has had the strongest
response with a direct distribution agreement with
Amazon. “This may have some long term benefits,
however Amazon is likely to gain more from this
by providing a simple and credible partner to enter
the online grocery sector,” he said.
Even though Amazon is a late entrant to the U.K.
grocery market—it launched its grocery store in 2010—
it has many advantages, not least its delivery model.
“This is one of the things that’s fundamentally
set to change the U.K. market the most, as well as
the wider European market with the recent launch
of Prime Now in Paris, which offers same-day and
even one-hour deliveries,” said Pearl. “That’s a mas-
sive challenge that Amazon is throwing out to the
established e-commerce retailers over here, and one
that they’re going to find very hard to match as the
e-commerce model is very expensive for them.”
Supply chain consultancy Crimson & Co. suggests
that Amazon is likely to target existing supermarket
home delivery customers as well as those who already
buy other products through Amazon, as it is allowing
Amazon Prime customers to place unlimited delivery
orders over £ 40 for £ 6. 99 a month, and potentially
sees the opportunity for consolidation. “Whether the
larger supermarkets suffer depends on how successful
Amazon is at achieving its service promise,” said Jon
Gibson, head of logistics at Crimson & Co. “If it can do
this, it stands a good chance of taking those who favor
the one-stop shop home delivery idea.”
Other players are less likely to be affected, Gibson
states. “On the surface of it, the discount and
convenience stores are less likely to be affected—
convenience stores because a lot of their business is
impulse buy or small nightly shops, and discount shops
because of price and buying in bulk.” Meanwhile, the
inclusion of niche food retailers, such as Gail’s Artisan
Bakery, Fish Works, Bad Brownie and Turnips in
the Fresh, to name a few, is a clever piece of alliance
building on Amazon’s part and a provides further
diff-erentiator from the big four supermarket chains.
New technology, such as the Dash device, is also
a major game changer. Pearl at Profitero com-
mented: “The launch of the Amazon Dash device
is a headline-grabbing initiative but one which
proves Amazon’s desire to become fully integrated
into shopper’s lives. Although its usage is limited
to the 128 London Postcodes where Amazon Fresh
is available, it is expected it will roll out in the U. K.
and other markets over the next few years.”
Jinks at ParcelHero reckons Dash will be trans-
formational. “Amazon has tied its launch of Amazon
Fresh one-hour grocery deliveries in the U.K. with the
Internet of Things (Io T) through its Amazon Dash
device; and the impact on grocery shopping in the U. K.
will be as seismic as the day the U.K.’s first Premier
Supermarket opened in Streatham in 1951,” he said.
“Back then, the new self-service concept quickly
caught on, eventually eliminating the traditional visit
to the greengrocer, butcher, bakery, fishmonger and
general store, and even killing off the local milkman.
Now, Amazon’s Dash service could similarly end the
customary visit to the High Street supermarket for
regular staples far sooner than many retailers realize.”