Amazon Fresh PrimeNow 2018

Amazon Fresh PrimeNow 2018

Release date: June 18th, 2018 (83 pages)
PDF/Powerpoint format. Price: GBP1,999.00


It’s a perfect time to take stock, as it has been exactly one year since Amazon has bought Whole Foods. To almost everyone’s surprise, not that much has happened…yet. Or has it?

The AmazonFresh rollout both in the US and the EU has been completely overhyped. The press raised expectations that the company simply could not meet, especially as Amazon is rolling out the service in a very careful and considerate manner. In any geography, the company targets a tightly bound geographic footprint first. This means that initial sales volumes cannot be of an order that would cause significant market share shifts. But on the other hand it’s still early days, one should not be dismissive just yet.

The rollout of the full AmazonFresh/PrimeNow offer has shaken up the consensus about online grocery business models. Over the years, online grocery picking has moved from in-store to semi-automated distribution centres and in the case of Ocado to fully automated robot operated warehouses. However due to space requirements, robot-operated warehouses need to be in vast out-of-town locations. This creates a problem for rapid, one hour or two hour deliveries. These out of town sheds are simply too far away from the city centre to fulfil the one or two hour promise. Hence we are seeing a return to the pick in store (Instacart/PrimeNow) model – even though there are clear economic challenges. (The Whole Foods acquisition obviously provides a real growth fillip to PrimeNow with many great central store locations)

Amazon has also challenged the consensus about average online basket sizes. Just two years ago it was still a common view that online grocery orders needed to have an average baskets size of at least £100 (US$150 or €130 or so) for companies to be able to realise a profit. And yet, the shift towards one/two hour deliveries has caused basket sizes to decline considerably.

AmazonFresh has never managed to get its average basket size to the same level as the more successful multichannel grocers. AmazonFresh’s average baskets sizes have always tracked considerably lower. (The PrimeNow baskets are even lower and do not have the additional Fresh subscription fees to offset costs.) To us it looks like Amazon is trying to turn this weakness into a strength.

This, we believe, shows two things. First, it shows how committed Amazon are to cracking online grocery. Second, to us at least, it suggests that the company is going to be in for a long, hard slog. Amazon will not be able to crack online groceries in the same way as the company dominates other categories such as books, music and video, consumer electronics or clothing any time soon.

Table of contents

Executive summary: AmazonFresh and PrimeNow 2018 p6
Amazon offer in grocery p8
How to define? A narrow view… p10
… or wide? p12
Why is Amazon targeting fresh? p14
5 reasons, applying the Amazon way to online grocery p16
1 - Unrivalled selection p18
2 - significant raising of the bar for delivery speeds. p19
3 - A revolutionary new loyalty experience. p21
4 - The platform approach p22
5 - Price leadership. p24
Amazon: Fresh pricing snapshot vs competitors, UK 2017 p25
Best sellers grocery U.S. TTM 4 2018 p25
Amazon 3P business, issues p28
AmazonFresh London best sellers p30
Amazon: the basket size issue p31
AmazonFresh data Seattle p32
Issues to overcome to expand AmazonFresh p33
The Whole Foods acquisition p35
Amazon: The Whole Foods acquisition and reasons for doing so p36
Turning Whole Foods into an omnichannel retailer p38
Amazon: What is happening at Whole Foods right now? p39
The experience so far (US/UK/DE/FR) p41
What has happened so far? p42
Amazon: what has happened so far in the US p44
USA - fresh pulls back p45
Amazon: what has happened so far in the UK p46
UK - no major impact yet p47
Amazon: what has happened so far in Germany p48
Germany - underwhelming so far p50
France - a different challenge p51
Challenges opportunities Fresh/PrimeNow, deep dive into the business models p52
Fresh - opportunities/challenges p53
PrimeNow - opportunities/challenges p57
Groceries – opportunities p60
Future outlook: Amazon plans and strategy p62
Future strategy, 4 key issues to resolve p63
Connected household devices - move to voice p65
Amazon: opportunities in in & outbound, private label p66
Inbound logistics/order picking p67
Outbound - from flex to drones? p68
Private label, 365 p69
Amazon: Future outlook, questions to consider p70
Online grocery questions to consider p71
Amazon: expansion abroad p72
Roll out to Australia? How Amazon proceeds p73
Conclusion & recommendations p74
FMCG tactics, our recommendations p75
Amazon: what should FMCG players do? p76
Retailer tactics, our recommendations p77
Amazon: what should retailers do? p78
Sources p79
Chart 1 Amazon grocery business verticals p10
Chart 2 Amazon business verticals p12
Chart 3 AmazonFresh London best sellers p30
Chart 4 AmazonFresh data Seattle p32
Chart 5 Amazon private label universe – grocery p69
Table 1: Amazon: Fresh pricing snapshot vs competitors, UK 2017 p25
Table 2: Best sellers grocery U.S. TTM 4 2018 p26