The project has faced some serious challenges, the company seemed to have acknowledged internally. But the logistics of such an operation are daunting.
22 November 2021 – Amazon’s model is to treat every kind of product and SKU as an interchangeable packet. Where it’s often said that ecommerce has “infinite shelf space”, Amazon has one shelf that’s infinitely long.
But grocery doesn’t fit that model, since it needs a whole other and much more complex logistics mode, but it’s such a large part of retail spending that Amazon has been exploring the space for a while, and indeed bought Whole Foods in 2017 as a toe-hold (along with its experiments in automatic checkout). I covered the Whole Foods acquisition in great detail here and noted it may be remembered as the dawn of a new era in business, when an old industry stubbornly resistant to change suddenly gave way to something modern and innovative.
Now, apparently, Amazon has plans to launch a full scale national chain of supermarkets of some kind in the UK. As I have noted before, the UK is much further ahead in grocery delivery than the U.S., and in the pandemic delivery jumped from 5% penetration to 10% almost overnight. That also means it’s very competitive, with all the major supermarkets offering scheduled home delivery in their own fleets of trucks, as well as the online-only play Ocado (which is also selling tech to a number of US supermarkets).
Amazon’s decision is a typically aggressive and calculated move. As I have indicated before, and as the article I linked above points out, growing a brick-and-mortar retail presence is Amazon’s way of bringing more people into their online ecosystem and ultimately driving overall sales. The data shows that when Amazon gains a customer through their grocery channel or an existing customer opts for grocery, those customers bring in, by far, the highest life-time-value for the business. It’s just another example of something Amazon has mastered: its ability to leverage advantages gained in one sector to boost its business in another.
It is a very detailed piece and addresses competition concerns, a good look at the UK grocery market, and the unique market characteristics.