Amazon Fresh: Exciting times in UK Grocery – unless you’re a supermarket…
There aren’t many parts of retail where Amazon is late to the party, but fresh food has always been the big one. Until now. With rumours swirling that Amazon Fresh – having leased a warehouse once used by Tesco – could launch in London as early as next month, it looks like Amazon has finally dug out its invitation.
Famed for its disruptive and innovative retailing, this fresh move could signal excitement for customers, but more tricky times ahead for the UK’s troubled grocery sector.
The timing couldn’t be worse for the Big Four. Already struggling to hold market share, as the discounters cunningly reset price perceptions, their customers have also learned to shop around more, adding online and convenience to their repertoires.
But what’s really exciting about Amazon Fresh is that it offers new and compelling benefits for customers. US subscribers can access same day deliveries, unattended deliveries (so you don’t need to wait at home for your shopping) and food delivered from local restaurants, alongside the more mundane ‘spuds and carrots’ part of your weekly shop.
This goes well beyond the service offered by UK grocers at present. Same-day delivery slots in particular should put a rocket up the competition, as only Ocado and Morrisons offer this. When customers can drive to the shops themselves and pick up items on the same day, it is hard for them to understand why their favourite supermarket can’t offer the same service.
Amazon has a great place to start from. Customers trust its prices, its ability to deliver and are comfortable shopping on its site – three of the key barriers to entry for an online retailer. Research from the IGD suggests that 35% of online shoppers “would consider buying fresh food from Amazon” if the service were available. So far so good. It also has a ready-made loyal customer base in its Prime subscribers, and has done well in the US by offering short-term free trials.
But it’s not all wine and roses. US subscribers pay a $299 (c. £192) subscription fee for Fresh (including Prime), and each delivery has a minimum order value of $50 (c. £32 – for the Big Four in the UK today it is around £40). Given that Ocado’s annual Smart Pass comes in at £109.99 and offers 10% off big brands, Amazon’s subscription fee could be quite a big hurdle for non-Amazon Prime customers to overcome.
The UK is remarkably price conscious and it remains to be seen if Amazon’s value-add would be compelling enough to compete with Sainsbury’s annual delivery pass at £60, for example.
The number of online grocery money off vouchers falling out of magazines (and ironically, out of Amazon parcels) demonstrates just how open British grocery shoppers are to switching, but they are also a very unforgiving lot and rightly so. Retailers have one shot at getting it right, as poor service or quality can lose them a customer in minutes. Fresh foods are tricky to manage, and require careful handling to ensure that they keep well and look and taste good. Get your fresh wrong, and you lose the customer.
And shoppers in the UK have very long memories… I still haven’t forgotten the first (and last) time I tried one online fresh retailer – leaky meat items soaked my food and my hall carpet and after several long phone calls to customer services, to say I was infuriated would be to put it mildly. I’ve never shopped with them online again.
That said, when it comes to shopping, the British also love to try something new, and London seems the perfect place to launch with a good base of time poor, cash rich shoppers. Amazon is obsessed with customers, and innovations such as ‘Amazon Prime Now’ one hour delivery slots for their non-food items show that they understand what big city customers value – convenience, innovation and reliability at a price they deem fair.
So bring it on Amazon. Show us what you’re made of.
Marie Anderson is a retail, customer insight and loyalty expert, and Director at maran www.maran.consulting
This article was first published in Marketing Magazine in August 2015.