Shana Peterson
The Case for Online Grocery Growth
Marketing 716
1
Synopsis
Amazon was founded in 1994 in Seattle, WA by Jeff Bezos and launched in 1995 as an online book broker.
It became a publicly traded in 1997 and as online shopping and e-commerce grew, Amazon launched a
series of initiatives to grow its online offerings. Through the expansions into new markets and through
omnichannel retailing grew a loyal consumer base, Amazon stocks have risen, accumulating wealth for
founder and CEO Bezos and joined the S&P 500 in 2005.1 Amazon continues to be operated out of Seattle,
WA, while serving markets in over 14 countries and in 2019 having been in business for 25 years recorded
a 20.45% growth in sales.2
Amazon’s continued growth can be attributed to its dedication to experimenting in a variety of markets
while maintaining a commitment to customers and operations efficiency. Amazon’s many markets
include but are not limited to: distribution of media, cloud computing, home services, publishing, logistics,
apparel, and food and beverage. In addition to those e-commerce offerings, in 2017 Amazon broke into
the brick-and-mortar retailing through its acquisition of grocery store Whole Foods Market, Inc. and
following the break into physical retail also dabbled with retail store “Amazon Go” a fully automated retail
shopping experience available in 5 locations in the US and “Amazon 4-Star” a retailer in 17 states3 selling
those items sold through Amazon which have gained 4 stars or greater from collated consumer feedback.
These retailers have at this time yet to see its entire potential as a physical retailer and revenue generator
for Amazon.
Amazon’s retail acquisition of Whole Foods in 2017 introduced it further to the grocery business, adding
to the Amazon Fresh grocery delivery in major cities which began in 2007. Amazon has used its power of
online retailing to incorporate Whole Foods offerings to the now widely popular digital platform. Whole
Foods as a specialty store of natural and organic food does not resonate with all consumers in the
enormous market of groceries, however the promotion and use of the everyday value 365 brand line has
the opportunity to market to more segments and price – conscious consumers.
Amazon has gained 26.5% of market share in E-commerce and Online Auctions in the US and has sustained
growth throughout its tenure4. This industry continues to grow as access to the internet becomes more
prevalent
and
consumer
Figure 1
preferences move toward the
convenience of online shopping
as shown by the growth through
the years. (fig 1.) While Amazon
has been dedicated to entering
the retail market and gaining
market share, the public health
crisis in 2020 has changed
consumer habits and capabilities
for physical retail shopping. The
revenue in food and beverage
sold online has increased in 2020
by 41%, and expected to increase
every year after, where prior to
the COVID-19 health crisis was expected to decrease over a full percentage point by 2022.5
2
Problem Definition
As COVID-19 continuous to shape consumer habits in 2020 and will for an unknown future duration,
Amazon needs to use its digital platform combined with online grocery order and delivery capabilities to
gain in market share of online grocery retail within the year. While Amazon’s trajectory was focused on
continuing to emerge in the physical retail market, the public emergency has changed the typical in person
retailing experience, and pivoting on the opportunity to gain in sales and consumer confidence in grocery
delivery could be a beneficial and lucrative opportunity for Amazon. COVID-19 having also caused an
economic downturn and increased unemployment, reduction in disposable income has total consumption
down as compared to pre-COVID levels. Typically the online grocery sales would be affected by the change
to consumer spending as disposable income decreased, however the public health crisis has for some
necessitated the use of online grocery purchases for delivery and pick up to mitigate health risks that
physical retail poses. Following the ease of the public health crisis, Amazon could benefit from increased
brand loyalty and development of new consumer habits.
Amazon’s grocery delivery options are limited to Amazon Prime members, which have a price tag of
$119/year with lower prices for students and people on government assistance. Amazon also offers a
monthly subscription price if the pay as you go model is more affordable. Members in areas that are
serviced can access 3 kinds of grocery options through Amazon- Pantry, Whole Foods delivery, and
Amazon Fresh grocery delivery. (Amazon Fresh is also available without membership for those using SNAP
EBT card in participating states.) One way to measure increase in market share of online grocery orders
is the new accounts of Amazon Prime that use one of the 3 grocery delivery options and additionally to
measure those 112 million prime memberships who newly take advantage of the grocery options during
the period of review. Another metric to identify market share gain is in number of sales over the year
period compared to total online sales of the industry. These measurements will show if current prime
members are expanding their consumption of Amazon features to online grocery for the first time, and
new to prime members will similarly add to the increase in the use of the market of online grocery sales.
The measurement will show the online grocery market growth, and also the use of Amazon’s service in
the share of that market. The sales of Amazon’s online grocery compared to the total of the online grocery
industry will quantitatively show if the market share has grown.
The constraints that Amazon will be held back are mainly in the category of price and value-perception,
location, and distribution. Prime Now is held back by the constraints of the value perception of
consumers, and the “whole paycheck” stigma associated with natural food specialty store Whole Foods,
which may dissuade consumers from shopping there and using the Prime Now service. Another Prime
Now constraint is that service is only available where Whole Foods stores are found and has available
labor to fulfill orders. Amazon Fresh is not as constrained by price and value perception as the grocery
items and brands available through Fresh’s service are not from Whole Foods exclusively- although they
do also feature Amazon’s 365 “generic” value brand. Amazon Fresh is constrained by location- it is only
available where warehouse and distribution centers are located and could be constrained by labor during
seasonal spikes. Amazon Pantry is only constrained by labor during seasonal spikes as it is fulfilled through
any warehouse and sent through ground shipping.
Amazon’s objective is to increase market share of the U.S. online grocery market within the next year,
measured by current prime member’s commencing use of Amazon Fresh, Prime Now, or Pantry orders,
increase in prime memberships which also place first time orders from Amazon’s online grocery options,
3
and the sales of Amazon’s online grocery compared to the U.S. online grocery industry sales given the
constraints of Amazon’s consumer value perceptions, locations, and distribution capabilities.
Alternatives
Amazon should use its current product and service offerings, combined with its tested and successful
company commitment to customer oriented focus, innovation, operational efficiency, and big picture to
create growth of the U.S. online grocery industry and to gain market share. The following are options:
Open more Whole Foods Stores in uncovered locations - Whole Foods currently has approximately 500
retail stores in the U.S. although most of the stores are in major cities, and 30% of all stores are located
in California, Texas and Massachusetts.6 Amazon’s Prime Now offers same day delivery in as little as 2
hours to those within the delivery area. In order to increase sales and users of Prime Now the locations
of Whole Foods need to increase and into areas that are high in prime memberships or those which
have high market segments which would be most likely to obtain a prime membership to use the Prime
Now service. Amazon’s recent history includes the opening of retail stores and the growth that is
inspired by those stores would align with the opening of more Whole Foods stores.
Open more Amazon Fresh fulfillment centers in uncovered locations - Amazon Fresh is available only in
Atlanta, Baltimore, Boston, Chicago, Dallas, Denver, Los Angeles, Miami, Minneapolis, New York, San
Diego, San Francisco, Seattle, and Washington. An increase in fulfillment centers of Amazon Fresh in
locations where there are not Whole Foods stores gives online grocery consumers the opportunity to
make purchases from Amazon. The entry into the market in these locations gives a probability of sales
where there is none currently available. Target Market locations include high density areas with prime
memberships and areas with SNAP EBT cards for payment which are also accepted for Amazon Fresh
orders without a prime membership.
Sell Prime Now/Amazon Fresh/Amazon Pantry memberships separately- In locations where Whole Foods
Prime Now delivery and/or Amazon Fresh online order and delivery is currently available, target the
market of households that do not have Amazon Prime memberships with a lower cost membership option
for online grocery delivery. The price tag of an Amazon Prime membership is currently $119/year which
gives the household the ability to use services like online delivery of groceries where available. The SNAP
EBT program can use Amazon Fresh where available and Amazon Pantry anywhere but that does not
extend to Prime Now usage and the grocery order must be made with an Amazon Prime membership. If
Amazon offered a lower annual cost membership that applied specifically to the features and services of
Prime Now, Amazon Fresh and/or Amazon Pantry singularly or in any combination, the value of online
grocery order and delivery may present itself to those households.
Migrate Amazon Pantry to Prime Now model with quicker delivery and Every Day Low Pricing modelAmazon Pantry does not offer produce and mainly offers non-perishable food and beverage and
household items. The pantry items are sold per “box” of goods, and are delivered currently on a ground
shipment timeline of 1-4 business days. Pantry orders that could be fulfilled in same day or next day
shipments are more attractive to shoppers who are looking to get their groceries in a shorter timeline.
Using already available fulfillment centers and offering quicker pantry delivery provides prime members
and SNAP EBT users the convenient option of online ordering to replace where they may otherwise be
shopping at physical retail stores.
4
Open more Amazon Locker locations and use existing and new locations for delivery to uncovered
locations near delivery borders- Amazon having already innovated the delivery issues of online shopping
and security can use the existing Amazon lockers and/or expand the Amazon lockers locations to areas
outside of the delivery for Amazon Fresh or Prime Now to be available for pickup by customers. Lockers
can be climate controlled so that perishables stay fresh for longer while awaiting pickup by customer.
These aforementioned solutions could be simultaneously implemented, or done in any and all possible
combinations.
Relevant Information
The predominant external factor for increasing market share of the U.S. online grocery industry is the
2020 Coronavirus and the public health crisis which has caused the U.S. physical retailing industry and
service industry to close its doors to consumers affecting the demand for the grocery industry. Consumers
under
typical
Figure 2
circumstances would be
consuming some meals
outside of the home
through
eating
at
cafeterias, restaurants
or picking up an item at
a convenience or fast
food location. Meals
that would typically be
consumed outside the
home became either
inconvenient due to
shelter in home orders,
inaccessible due to the
closure of restaurants and retail, or undesirable as the public health crisis severity convinced people to
stay in their homes as much as possible. As seen in figure 2, the increase in consumer’s eating habits
shifted to eating more meals that were cooked at home either out of necessity or because they were at
Figure 3
home for the majority or
entirety of the day. 27% of
consumers also responded that
they have changed their eating
habits with a number of
consumer reporting that their
snacking has increased. The
impact of these consumer
changes are likely that while
consumers may be eating
slightly more through snacking
as they have responded, the
amount of food being consumed
in the U.S. has not changed
5
drastically, however the location of food acquisition has shifted from restaurants and fast food/other
convenience retail to grocery. The increase in meals prepared and consumed at home according to the
survey increased by 47% placing the grocery industry into an Figure 4
important and essential industry. The public health crisis
further taxed consumers if they felt it was inadvisable to go
to physical retail stores for groceries, and the result being
that online grocery retailers saw an incredible increase to
sales in the digital channel. Consumers in March 2020 (fig.3)
reporting at 74% of respondent’s “Likely” to purchase
groceries online and only 6.5% of all respondents reported
being unlikely or will not purchase online. In May 2020
further research found that online grocery shopping increased in the pool surveyed by 21% first time users
and 8% returning to online grocery shopping. (fig.4) Additional May 2020 research found that online
shopping growth had been approximately 3% of non-meal service grocery sales in the United States, and
that number had increased 400% following the COVID-19 change in shopping habits.7 These insights into
grocery purchases during the public health crisis show the potential market of an online grocery service
and subsequent delivery or pick up to consumers during the public health crisis. Amazon having 3 possible
options for grocery order and delivery/pickup for an established target market of online shopper through
its prime membership, in addition to the operational capability and established supply chain, there is
tremendous opportunity to grow its competitive advantage in the online grocery industry as the public
health crisis continues in 2020 without a clear ending to the ongoing situation.
The supply chain of produce and grocery items is also an external factor for online grocery retailers
affecting supply and prices. When the COVID crisis hit the U.S., consumers answered by stockpiling nonperishable foods and household items. The supply chain struggled to keep product on shelves in stores
across the U.S., the product was available, and it was bottlenecked at distribution causing a number of
items to be out of stock as well as substitution items. (fig 5.) Distribution was also affected in online
delivery, as human resources were also subject to an enormous increase in demand. The ability to predict
Figure 5
consumer demand behaviors while people have
amended their routines to stay at home has leveled
off and items returned to stock, delivery is more
frequently available as the supply of labor has
increased again to these areas. For Amazon to
succeed in online grocery distribution, the
management of the supply chain and distribution is crucial, fortunately some of Amazon’s core
competencies are in distribution logistics and it has many years of experience in inventory management.
Based on these known factors, Amazon should pay particular care to inventory and distribution
management during their season spikes to ensure that customers are receiving the standard of service
expected. If Amazon is able to meet inventory needs and keep prices low for consumers they have the
potential to edge out other e-retailers who expect a variety of issues in the future, with highest
expectations in production delays, and inventory shortages.7
Another external factor to consider is the economic business cycle the U.S. is in and how it affects
investment spending, unemployment and consumer’s marginal propensity to consume. While the U.S.
economy is officially in a recession as of February 2020, the consumption of necessities would not
6
necessarily affect consumers grocery expenditure, however consumers may need to borrow money or
use savings to obtain them, and they would use the most price sensitive options which online grocery
shopping may not provide. Additionally, the Fed has made it clear that they will provide liquidity to the
market for the 2020 calendar year and potentially beyond to inspire investment at near-zero interest
rates. If Amazon is willing to make investments in expansion the money is as inexpensive as it will be.
With services, retail, and manufacturing jobs out of work, the unemployment numbers in the labor force
are high, and labor is available to Amazon for increased productivity, provided they will compensate
workers for the cost of working under the increased health risks and extra safety required circumstances.
Access to internet in the U.S. is critical to the e-commerce market, without access to internet in
households and firms, the Amazon e-retailing could not continue. In addition to access to internet in the
home, the access to internet on mobile devices makes e-commerce more accessible. This is a growing
market, with 313.32 million internet users in the United States, having grown from 287 million in 2017
and is expected to continue to grow.4 For anyone to have access to Amazon and its service and offers
they must have internet access, the growth of that access is potential growth for Amazon.
Other external factors include the other businesses that are engaged in successful online grocery retailing
and those who are looking to enter the market. The margins in grocery sales are small, and the
technology, operations, and distribution logistics make entry into the market difficult. Although some
businesses with the infrastructure for success have the opportunity to innovate their services.
A major internal factor is the resources of Amazon including its physical locations of stores, fulfillment
centers, fleets of vehicles, human resources, technology capabilities, infrastructure, and finances. All of
these factors are integral as the inputs which determine the supply that Amazon can offer to the public in
goods and services. A decrease in any of the areas causes a decrease in supply and vice-versa in both the
short run and long run of the business.
Amazon’s self-described internal factors are outlined in their 2019 10-K11 and some relevant internal
factors are:
The reliance on a limited number of companies that ship inventory to their fulfilment centers, the
negotiation that must be made with them for acceptable terms, and the demand that is placed on these
companies by their other customers are somewhat internal and somewhat external. Amazon must make
continuous inventory decisions and maintain acceptable terms with companies they engage with in their
supply chain to maintain operations at the volume level that they have been maintaining. If Amazon is
going to grow to further fulfillment centers they will need to negotiate further contracts and ensure they
have the inventory necessary for demand.
Amazon’s seasonal spike of business in the 4th quarter- due to the U.S. holidays put a significant crunch
on their resources to manage the customer demand during that time. Increase labor, inventory and
network traffic must be possible for Amazon to continue to fulfill consumer needs or they may go to those
businesses which will meet their needs.
Amazon has relationships with 3rd parties and other commercial agreements which subject them to some
risk. Some of those relationships are related to consumer facing operations like customer service and
fulfillment of orders. If the relationship is not maintained or suffers some duress the consumers could
see disruption in their services, and allocation of resources from Amazon would be necessary to bridge
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the gap. Similarly, the acquisitions and investments which Amazon undertakes are factors which they
must manage internally.
Amazon’s CEO and other senior management are a major factor in their internal affairs, and the loss of
any of those personnel could cause significant damage to their business as they do not have the human
resources which would replace those key leaders in short order without hardship. They also must use
financial resources to retain other key employees in a highly skilled, competitive workforce.
Amazon’s digital channel affords them a lot of data and security risk which could harm their customers
and their business. The data that Amazon collects and uses, including personal information and payment
information puts them at risk for security breaches. These security risks have the potential to compromise
privacy and could harm Amazon as a business and its reputation which could damage its sales.
Uncertainties
When COVID-19 has been contained or a vaccination is available and consumers are able to assimilate to
the lifestyle outside of the home, it is not known what the trends for consumers will be. They possibly
could return to their pre-COVID routine, they may do a hybrid routine and they may be satisfied with the
routine they had during shelter in place and use some of the features like online grocery as a convenience
and familiarity. It is also uncertain how consumer will continue their buying habits and trends, if the
stockpiling of goods will occur again or if those purchases will continue to level off. If unemployment
continues to be high, will consumers be forced to physical lowest price retailers to save on costs.
In addition to the post-COVID routine unknown, it is not known how competitors in online grocery and
grocery delivery will respond and innovate the market. Delivery and personal shopping services such as
Instacart, Shipt, and Walmart will all be managing their market share and the strategy they will employ is
unknown. Also, due to the increase in demand for personal shopping and online ordering and delivery,
more competitors may come to market seeing it as a lucrative opportunity.
Other uncertainties include if there will be any outbreaks of COVID in any of the Amazon grocery markets,
and if they will affect the Amazon image negatively and dissuade consumers from the Whole Foods,
Amazon Fresh or Amazon Pantry market. Additionally the Amazon Flex drivers for the delivery services
may choose to stop working for Amazon causing a shortage of labor or if any safety issues arise that
become public knowledge.
Assumptions
If the costs associated with online grocery shopping are perceived as high or
not worth the value delivery, consumers could trend towards returning to
retail stores. A survey of 1500 U.S. shoppers in April 2020 responded that the
top negative issue with online grocery shopping was inconvenient delivery
times, followed by high delivery costs. If consumers will not be able to
receive deliveries when they prefer and for an appropriate cost, sales could
trend down post-COVID, but 38% believe their current level of online
grocery shopping will remain the same or increase. (fig.6)
According to the same survey of shoppers, almost half of online grocery
shopping in the U.S. has been made through Walmart who is also offering
8
Figure 6
same day delivery or pickup of groceries and targets a price conscious consumer base.8 Another feature
that Walmart has over Amazon is the ability to shop for anything that is offered at Walmart.com and is
not limited to just groceries as an Amazon grocery order is. Instacart has also seen large market share
and reporting a 450% growth in purchases since December 2019.8 Amazon’s grocery areas of Prime Now,
Amazon Fresh, and Pantry is getting 1 out of 5 online shoppers.8 Walmart is also seeing the highest
satisfaction of customers in online grocery service, with net positive 77% satisfaction. Amazon comes in
with net 49% satisfaction over Instacart and Shipt at 48% and 27% respectively.8 However, Amazon rates
in first place as the service that consumers are most likely to try coming in at 31% over Walmart’s second
place 20%. Amazon has the opportunity to drive loyalty to its products and services through gaining
satisfied customers who crave convenience, safety, ease, and product choice.8 New entries into the
market will assuredly happen as the demand for delivery and convenience has grown and consumers are
not opposed to testing new options, as 20% have responded they would. Popular food delivery and ride
share program Uber has announced its entry into the market, starting first with grocery shopping and
delivery in Latin America and Canada through Uber Eats. The next stop is into the U.S. market beginning
with grocery delivery in Miami and Dallas.9
Efforts can be made to ensure the safety of employees at Amazon, and outbreaks of COVID-19 will be
mitigated. In the 2020 second quarter, Amazon spent almost $4 billion dollars on COVID personal
protective equipment, cleaning of facilities, creating effective social distances, higher wages, and testing.10
Amazon’s commitment to its workforce as outlined in its COVID-19 blog and the commitment to the
community at large will assist with maintaining its goodwill in the public image.
Evaluation of Alternatives
Open more Whole Foods Stores in uncovered locations
Pros: multichannel retailing for Amazon in more locations, if post-COVID consumer habits trend back to
physical grocery stores, potential to build brand loyalty, targets value conscious customers, brings online
groceries and delivery to more locations in the U.S.
Cons: Does not target price-conscious shoppers, time horizon is long, cost is high, users must be prime
members.
Market Share Impact: Increased Whole Foods locations increases the opportunity for more Prime
members to order grocery delivery online and shop in stores. These new first time orders grow the market
of online grocery orders and this generates new sales to compare to the rest of the online grocery industry.
Open more Amazon Fresh fulfillment centers in uncovered locations
Pros: Lower overhead cost, less labor intensive than Whole Foods stores, more options of brands and
prices, brings online groceries and delivery to more locations in the U.S., less steps in supply chain.
Cons: cost is medium, middle-road time horizon to implement, return on investment might be too low,
users must be prime members or SNAP EBT program users.
Market Share Impact: Increased Amazon Fresh fulfillment centers increases opportunity for Prime
members to shop for groceries online. These new first time orders grow the market of online grocery
orders and this generates new sales to compare to the rest of the online grocery industry.
9
Sell Prime Now/Amazon Fresh/Amazon Pantry memberships separately
Pros: Access to more households at lower price point and high value, could generate more prime members
through entry to Amazon offerings, increases number of online groceries and deliveries sales, could be
implemented quickly.
Cons: Margins may not produce enough revenue for sales growth, increased demand could cause delivery
delays, Prime members could downgrade their membership to the lower cost offering.
Market Share Impact: A lower cost alternative to the Prime membership that offers grocery only prime
benefits in covered locations. These new first time orders grow the market of online grocery orders and
this generates new sales to compare to the rest of the online grocery industry.
Migrate Amazon Pantry to PrimeNow model with quicker delivery and Every Day Low Pricing model
Pros: Available to more consumers across the U.S. than Whole Foods or Amazon Fresh, limited supply
chain steps to consumer, targets price conscious customers, quicker delivery is more desirable to
households, once labor is available could be implemented quickly to locations near Pantry fulfillment
centers.
Cons: Only non-perishable items in Amazon Pantry, increased costs to distribution vehicles and labor
needs.
Market Share: Increase in convenience and delivery time of Amazon Pantry could generate new orders
from Prime members, these new first time orders grow the market of online grocery orders and this
generates new sales to compare to the rest of the online grocery industry.
Open more Amazon Locker locations and use existing and new locations for delivery to uncovered
locations near delivery borders
Pros: Easy way to expand delivery zone with minimal labor, ability to do large volumes of orders since
destination is in one location, technology available and familiar to many Prime members.
Cons: Additional labor costs and physical building costs.
Market Share: The coverage area would be expanded for consumers to “meet in the middle” and offers
opportunity for Prime members to order groceries online. These new first time orders grow the market
of online grocery orders and this generates new sales to compare to the rest of the online grocery industry.
10
Alternatives
Summary
Impact/Metric
Increased Multichannel retail for
Open more Whole Foods Stores Amazon, target value-conscious
in uncovered locations
consumer market, time horizon to
implement is long.
Growth of Market
Growth of Market Share through
sales:industry
High Cost & High Risk
Brings more online grocery sales to
Growth of Market
Open more Amazon Fresh
households without the overhead cost Growth of Market Share through
fulfillment centers in uncovered
of stores. Time horizon to implement sales:industry
locations
Middle Cost & Medium Risk
is reasonable.
Sell Prime Now/Amazon
Fresh/Amazon Pantry
memberships at a lower cost
Offers more grocery memberships to
consumers who wish for a
subscription delivery without the
Amazon Prime pricetag. Potential to
lose Amazon Prime members to
downgrade their membership. Time
horizon is short to implement.
Offer more convenient delivery time
of pantry items available to all of U.S.
Migrate Amazon Pantry to Prime
to increase Pantry sales. Increase
Now model with quick delivery
need of delivery drivers for large
and EDLP
pantry boxes. Time horizon is
dependent on finding labor and fleets.
Open more Amazon Locker
locations and use existing and
new locations for delivery to
uncovered locations near
delivery borders
Expansion of delivery by allowing
pickup and existing Amazon Locker
locations and build of Amazon locker
locations in areas with high potential
for use. Satisfaction with this service
may be limited. Time horizon to
implement is short.
Growth of Market
Growth of Market Share through
sales:industry
Low cost & some risk
Growth of Market
Growth of Market Share through
sales:industry
High cost & low risk
Growth of Market
Growth of Market Share through
sales:industry
Low cost & some risk
Recommendations
Within the year, Amazon’s objective is to gain market share in the growing industry of online grocery order
and delivery/pickup. This will be measured by the number of Amazon Prime users who order groceries
through Amazon Fresh, Prime Now, or Amazon Pantry for the first time, and for new prime members who
also place their first online grocery order. Additionally the measurement of market share will be
calculated by Amazon’s total online grocery sales compared to U.S. online grocery industry sales, given
constraints of Amazon’s value perception, location, and distribution capabilities. Given the opportunities
at hand the recommendation is to:
Open more Amazon Fresh fulfillment centers in uncovered locations due to the ability to service more
households with Amazon Prime and SNAP EBT payments, while mitigating the overhead costs associated
with a fully operational physical store. The operations and distribution tactics of Amazon that has led to
its growth since 1994 are rooted in the ability to get products demanded to households at a reasonable
cost in a short amount of time. This tactic has made Amazon a household feature to millions of Americans
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and other countries as well. This solution also meets Amazon’s desire to serve consumers while focused
on selection- Amazon Fresh has many brands to select from, Price- lower cost of brands than Whole Foods,
and Convenience- this solution will add to the convenience of the serviceable households who have a
demand for online grocery purchases and delivery or pickup.
Additional considerations should be made for the
recommendation to offer a grocery only subscription
for non- Prime members. A lower cost annual fee has a
potential to gain additional members, but market
research should be done to conclude that members
would be added and that current Prime members
would not downgrade their service to the less
expensive grocery only membership. The value of
Prime’s membership should be used for marketing
materials, and as seen the cost of Prime Now is worth
considerably more than the cost of the Prime
Membership and a discounted cost for grocery only
service would be of even greater value to consumers.
(fig. 7)
Figure 7
Implementation
Amazon should look to lease or purchase empty spaces and warehouses that are located in locations
without Amazon Fresh coverage currently. Acquiring the physical building space, the inventory
organization and delivery, hiring of labor should all be completed prior to Amazon Fresh being offered.
Prime members and past non-members who have placed orders on Amazon should receive promotional
materials to alert them of the upcoming availability of Amazon Fresh.
Analysis of the new use of Amazon Fresh by Prime members and increased Prime memberships with use
of Amazon Fresh can be collected through Amazon’s customer relationship management programs, and
can use the data on previous purchases to make recommendations to consumers in the delivery area to
encourage the use of Amazon Fresh. The number of new online grocery orders users will be collected
and used as a representative of growth in the online grocery market as compared to the prior year. The
total sales as compared to the total sales of the online grocery industry will be used to identify the
growth in the market share. These measurements should be made quarterly and concluding at the yearend following implementation of Amazon Fresh to a new market location.
12
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Figures
Figure 1. Statista. (2020, July). Food and beverage retail e‐commerce revenue in the United States from
2017 to 2024 [Infographic]. Statista. https://www.statista.com
Figure 2. Food Insight. (April 14, 2020). Changes in consumers' eating habits during the COVID‐19
outbreak in the United States in 2020 [Graph]. In Statista. Retrieved August 15, 2020, from
https://www‐statista‐com.libproxy.uww.edu:9443/statistics/1120951/eating‐habits‐changes‐
during‐coronavirus‐us/
Figure 3. Izea. (March 17, 2020). Share of consumers in the United States who believe they might
purchase grocery store items online if confined at home due to the coronavirus as of March
2020 [Graph]. In Statista. Retrieved August 15, 2020, from https://www‐statista‐
com.libproxy.uww.edu:9443/statistics/1106449/likelihood‐online‐grocery‐due‐to‐coronavirus‐
home‐usa/
Figure 4. FMI. (May 7, 2020). Online grocery shopping trends* [Graph]. In Statista. Retrieved August 13,
2020, from https://www‐statista.com.libproxy.uww.edu:9443/statistics/1127515/change‐in‐
out‐of‐stock‐grocery‐products‐us‐march‐april/
Figure 5. FMI. (May 7, 2020). The Evolving Role of Online Grocery Shopping* [Graph]. In Statista.
Retrieved August 13, 2020, from
https://www‐statista.com.libproxy.uww.edu:9443/statistics/1127515/change‐in‐out‐of‐stock‐
grocery‐products‐us‐march‐april/
Figure 6. Escalent. (May 1, 2020). Perceived negatives of online grocery shopping services in the United
States in April 2020 [Graph]. In Statista. Retrieved August 15, 2020, from https://www‐statista‐
com.libproxy.uww.edu:9443/statistics/1127053/negatives‐of‐online‐grocery‐experience‐us‐
2020/
Figure 7. Wagner, P. (May 24, 2018). Amazon Prime's Cost is Peanuts Compared to its Value [Digital
image]. Retrieved August 14, 2020, from https://www‐statista‐
com.libproxy.uww.edu:9443/chart/13946/amazon‐prime‐costs‐compared‐to‐its‐value/
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