We agree with The FWD that the threat posed by Amazon Fresh offering free delivery is bigger to supermarkets than it is to wholesalers – however, we shouldn’t think wholesalers won’t be affected at all.

They may not be directly impacted – but they might be indirectly impacted.

I say this because what we know is convenience retailers (wholesalers’ customers) have significantly increased their home delivery offering, with many retailers saying their typical basket spend has risen from about £6-£8 through the tills per transaction in shops by walk-in shoppers – but rising to £40 for home delivery orders.

 

As £40 is the threshold for free Amazon Fresh grocery deliveries, could the most successful convenience retailers, the ones who have successfully launched home delivery, conceivably be in Amazon’s firing line? Even if unintentionally….?

Amazon will have a much bigger range (currently 10,000+ skus – but this is expected to rise sharply) than the typical c-store offer (many of whom have reduced the range available to home delivery customers to about 1,000-1,500). Bigger doesn’t necessarily have to mean better, of course…

Support local? 

And as we have seen from our recent Convenience Report (Forging a New Future), consumers have fallen in love with their local convenience store. Supporting their local businesses is important to consumers currently.

But shoppers have also fallen in love with Amazon. Amazon’s Prime subscription service has 15 million members. Sainsbury’s Nectar App has less than a third of that number.  

Amazon prime customers are very loyal too. Prime customers spend almost double what casual Amazon shoppers do, and 93% of their first year members renew for a second year (source). 

Amazon will have a much bigger range (currently 10,000+ skus – but this is expected to rise sharply) than the typical c-store offer (many of whom have reduced the range available to home delivery customers to about 1,000-1,500). Bigger doesn’t necessarily have to mean better, of course…

Data driven…

Amazon’s success is put down to their obsession with ‘understanding the customer through data’ – and that might be where Amazon’s advantage lies:  Data.  

They have phenomenal amounts of data about their customers.

Is there any reason why Amazon couldn’t send offers for high protein/healthy meal recipes to their customers who buy fitness equipment, for example…with all of the ingredients delivered to their door from Amazon prime?

Or those who have just chosen a movie or show to watch on Amazon Prime receive an email for a pizza or snacks – delivered to their door within the hour by Amazon Prime. Convenience retailers don’t have this detailed knowledge of their shoppers’ behaviour away from the store.

Amazon doesn’t operate in category vertical silos – it gets to know everything they can about customers through rich data collection and previous purchasing behaviour to be able to offer them incredibly personalised and tailored ‘offers’.

So let’s see what happens. Grocery is highly attractive to Amazon because everyone needs to eat and drink daily so frequency of purchase is high compared to other categories sold by Prime. We all know that online shopping has grown during the lockdown and this is likely to remain in high demand going forward. And we know that supermarkets struggled to meet demand…

But some questions remain unanswered (at the time of writing this article). 

Will Prime customers be able to pick their delivery slots and will there be enough slots for the high demand peak periods? 

Also, supermarkets can’t make online profitable for them. Could this lead to some supermarket operators pulling out of online retailing?

Home delivery is in its infancy for most convenience retailers and Amazon already has a captive market and customer data.

Convenience retailers and foodservice operators will need to use data more and better than they are now. Maybe the best wholesalers of the future will be the ones that help their customers interpret and utilise their data….recognising that data is the new oil. 

 

 

Written by: 

Tom Fender, Development Director, TWC
07802 336333
Tom@wsale.co.uk
Twitter: @Tomhfender. @TWCGroup
Web: www.TWCGroup.net

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