Amazon’s introduction of its ‘Amazon Fresh’ service in the UK could prove to be the catalyst which forces the leading supermarket retailers to re-evaluate their delivery strategies, says Nick Miller, head of FMCG at Crimson & Co. Miller states that Amazon’s disruption of grocery delivery markets will drive the need for innovation amongst existing competitors in the UK.
Amazon has quietly started to offer around 50 chilled products to selected customers in Birmingham, competing directly with the likes of Ocado, Tesco and Sainsbury’s in the region. The same-day delivery service is set to expand across the UK if successful. With the grocery delivery industry having been stagnant for some time, Amazon’s fast delivery will push supermarkets into rethinking their services to avoid being shut out of the market.
Miller comments: “Amazon’s strategy with Amazon Fresh is something of an enigma. However, looking at the US could shine a light on the company’s plan. Amazon is employing drivers in Seattle as part of its ‘Amazon Flex’ programme, able to make same-hour deliveries for Amazon Prime Now customers. If this service is incorporated into Amazon Fresh in the UK, the retail giant will have significant advantages over current supermarket delivery services.
“In light of this, the emphasis will be very much on the supermarket retailers to respond and react, ultimately transforming their delivery strategies. Companies could look into new partnerships to enable them to meet their customer demands quicker and more effectively. For example, partnerships with taxi firms, or even collaboration between competitors on the deliver leg could present major opportunities to reduce delivery times, potentially at a lower cost than Amazon’s in-house arrangement with ‘Flex’. As well as improving delivery times, new partnerships can enable supermarkets to improve customer convenience by how they receive their groceries.
“Further innovation in ‘click and collect’ is also possible; customer drop off points could be established at key areas, such as schools allowing parents to collect during the school run. Deliveries to gyms or train stations could also remove friction from a customer’s journey home after work. These new partnership would work to protect a supermarket’s position within the marketplace against the disruption set to be caused by Amazon.”
Miller concluded: “No matter which route forward grocery delivery companies decide upon, consumers are bound to benefit. Traditionally, supermarkets have had a low market capitalisation due to low growth prospects and a highly competitive environment, whereas Amazon has deep pockets to drive new business ventures. Grocery delivery companies who turn towards this innovation-led business model could bring vastly superior services to their customers over time.”