Is Amazon the Future of Grocery Shopping?
- Post by: Kourosh Maheri
- July 19, 2018
- Comments off
What we’ve learnt from Prime Day and Amazon’s push into the food category
Amazon’s third annual Prime Day began on July 16 at 3 pm EDT and ran for 36 hours. What was different from last year was the addition of Amazon-owned Whole Foods to the exclusive sales and discounts. Building on our past analysis of trends driving Amazon, here are 5 more trends spurring the Amazon growth in grocery specifically.
1. The Shoppable Universe
Customers are naturally adapting to online-offline shopping experiences. This is illustrated by the introduction of Amazon lockers at Whole Foods stores after the 2017 acquisition. These lockers are a physical penetration of e-commerce into the grocery space. But they are also a point of Amazon brand contact for in-store Whole Foods shoppers. The number of shoppable opportunities – ie points of sale – is multiplying. In the Shoppable Universe, brands bring purchase opportunities directly to customers as the consumer incentive to seek out brands decreases. Just as space in grocery stores transforms into e-commerce product collection, so too are in-store surfaces transformed into screens, and digital content into points-of-sale. Spatial and time-based barriers to purchase melt away. This trend spans available grocery aisles to vloggers’ streams. It is an opportunity for brands to get creative about the spaces in which they sell to all customers.
2. Convenience Culture
Last year, Amazon ended its Amazon Fresh grocery delivery service in parts of five states due to inefficient delivery, high costs of maintaining cold storage units and slim margins. Ahead of Prime Day, however, it encouraged new and existing Prime members to try Amazon Fresh. Deals appeared like $25 off their first order or 30% off promo codes. Many consumers welcome the increased convenience of e-commerce – but many consumers are still reliant on shopping for groceries in person. Look out for online grocery shopping’s potential, especially as 69% of US consumers now shop online monthly. Despite earlier troubles, after the acquisition of Whole Foods Amazon Fresh pushed up Amazon’s grocery sales by 35% in 2017 and Amazon is continuously expanding its 2-hour grocery delivery service to multiple states this year. And as consumers start to accept online grocery shopping, brands must think more creatively to stay connected to their customers.
3. Branding Bypass
As electronic goods take up a large chunk of Prime Day sales, the presence of Alexa will integrate deeper into homes this year too. Future consumers will even outsource decision-making to such home assistants. Already 41% of US consumers are interested in a service that automatically replenishes household supplies. Alexa has helped millions of Prime members voice shop for everyday items, and it plays an even bigger role in consumers’ lives. In 2017, it gave 9x as much cooking related advice compared to the previous year. Smart devices are consumers’ connection to invisible commerce, and voice shopping can quickly lock in brand preferences for re-ordering.
Our trend Branding Bypass looks at how brands become the go-to choice for customers within platforms like Alexa. With the boost of Alexa sales from this year’s Prime Day, we anticipate that the convenience and personalization offered by Alexa (who even knows what recipes consumers cook) will be a disruptive force in the grocery sector. Brands run the risk of getting bypassed in this world as consumers may rely on home assistants for brand choice. Brands can use this opportunity to think ahead to avoid becoming invisible, such as partnering with new AI intermediaries.
4. Maximizing Behavior
Whole Foods is known as a high-end grocery store, and Amazon has lowered some prices to soften that image. For Prime Day, shoppers received a $10 gift card when they spent $10 or more in the store as early as July 11. There are extra rewards for using an Amazon Prime Rewards Visa card or the PrimeNow service when shopping at Whole Foods.
To compete, Target announced a July 17 one-day sale. It gave shoppers who spent more than $100 online a free six-month membership for same-day delivery via Shipt, emphasizing ‘no membership required’ in their campaigns. Customers are generally becoming more alert to better deals, promo codes and loyalty pricing. Both Amazon and Target are responding to this trend of Maximizing Behavior.
5. Local Allure
30% of Americans remain ambivalent, neither agreeing nor disagreeing on the issue of employing robots and automated services over people. Sensitive to this, Amazon maintains that while the technological integration of Prime into Whole Foods’ systems will enable lower prices, the Whole Foods team will maintain operations under the Whole Foods Market brand. This will create jobs in local communities with further store openings. Whole Foods can hire new team members and expand support towards local farmers and artisans. Brands can broaden this Local Allure and link to “Made in America” enthusiasm, which rises with age. Brands promoting and beefing up their local credentials attracts consumers’ financial and emotional investment by appealing to their sense of belonging.
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