CANADIAN BUSINESS - BUS 5100
CASE STUDY PRESENTATION
Instructor: Kathryn Djordjevic
Team members: Bhakri Twinkle, Shah Bhumi, Agrawal
Vaibhav, Malhotra Himani, Rasadiya Nirman, Batra Zubin
AMAZON.COM, INC.
DRIVING DISRUPTIVE CHANGE IN
THE U.S. GROCERY MARKET
Term - May 2021
Team 4
CONTENTS
⮚
⮚
⮚
⮚
⮚
⮚
⮚
⮚
⮚
⮚
⮚
Company Profile
Company’s Timeline
Key drivers of change in the U.S. grocery retail industry
Amazon, Inc.’s evolution in the U.S. retail grocery industry
Amazon Inc. / Whole Foods Market combination
Macro-environmental forces
Five-forces Analysis
SWOT Analysis
Key factors for Success
Challenges
Recommendations
AMAZON: PROFILE
⮚ Amazon- an e-commerce company.
⮚ One of the world’s largest online retailers.
⮚ Tech giant: one of the Big-5s along with Apple, Google and Facebook.
⮚ Mission: “to be Earth’s most customer-centric company”.
⮚ Awarded as America’s Most Trustworthy Brands in 2017-2018
⮚ Headquartered at Seattle, Washington.
⮚ 2nd HQ at Arlington, Virgina.
TIMELINE
1994:
Born as an Online
Bookstore
2001:
First 5 Million
dollar Profit
Cap
1999:
1-click patent,
Introduced 3rd party
seller marketplace
Time’s Person of
the Year: Jeff
1997:
Bezos
Goes Public,
Opens 2nd distribution
facility
2013: Introduced
Prime Air drone
delivery service
2000:
Amazon’s
launch
of New Logo
2014:
Launched
Amazon Echo
& Alexa
2015:
Amazon’s
1st physical
Book store
2005:
Launched
Amazon Prime
2002:
Started selling
clothes
2018:
$1 Trillion
Market Cap
2007:
Kindle
Release
2006:
Introduction of
Amazon Web
services
2019:
25 Years in
Business
2011:
Kindle Fire
Release
2021:
Jeff Bezos
announced to
stepped down as
CEO
ACQUISITIONS
⮚ 2008: Amazon acquired Audible, an audiobooks company.
⮚ 2009: Amazon acquired Zappos, an online shoe shopping website.
⮚ 2012: Amazon acquired Kiva Systems, a robotics company.
⮚ 2014: Amazon acquired Twitch, a social video-game streaming website.
⮚ 2017: Amazon acquired Whole Foods, a supermarket chain in America.
KEY DRIVERS OF U.S. GROCERY RETAIL INDUSTRY CHANGE
⮚ keep prices low
⮚ Wisely chosen location to
⮚ Less time consumer
tackle competition
⮚ Strengthening customer
relationships
⮚ advantage of advanced
business data analytics
⮚ Convenient and time
⮚ Change in eating habits
saving
⮚ User friendly
⮚ From anywhere and at any
time
⮚ Overall shopping
experience
⮚ Change in cooking habits
⮚ Efficient food spoilage
Management
⮚ Effective Control to increase
turn over rate
Blue Ocean Strategy:
Amazon, Inc.’s evolution in the U.S. retail
grocery industry
STEPPING INTO THE GROCERIES RETAIL MARKET THROUGH
ONLINE STORES
⮚ Groceries Retail Market is the second largest category of retail sales after general merchandise in the United
States
⮚ Bezos wanted Amazon to establish its presence in the grocery sector as he sought to make his company the
“everything store.”
⮚ Amazon forayed into the grocery business in 2007 by launching AmazonFresh, an online grocery delivery
service that allowed customers to order fresh produce and groceries online.
⮚ Customers could order from more than 500,000 items for same-day and early morning delivery.
⮚ The AmazonFresh service was available exclusively to Prime members in select cities in the U.S. for an
additional monthly membership fee of $14.99.
FROM CLICKS TO BRICKS
⮚ Though Amazon has been building online delivery services, grocery sales were limited to only 4.5% of the total
grocery market, i.e $9.7 billion out of $781.5 billion in year 2016.
⮚ Many people were reluctant to online shopping.
⮚ New Grocery experiment started with a convenience store like format in December 2016.
⮚ A check-out free convenience store was opened at Seattle on Jan 22, 2018 for public.
⮚ In March 2017, Amazon opened its first “click and collect” grocery pick-up store exclusive for prime members at
two locations in Seattle also known as AmazonFresh Pickup.
Amazon Inc. / Whole Foods Market combination
AMAZON ACQUIRES WHOLE FOODS
⮚ Declining sales for organic retail chain, since the
beginning of the year 2016.
⮚ Whole Foods was also struggling due to its “pricey
image”.
⮚ Hence in June 2017, Amazon acquired Whole foods at
approximately $13.7 billion.
PARTNERSHIP POTENTIAL
⮚ Amazon Market valuation increased by $14.27 billion, while Walmart, Kroger and Costco together lost $ 18.8
billion in market capitalization on June 16, 2017.
⮚ Many Whole Food in-house brands such as 365 Everyday Value products were made available on Amazon’s
Website, AmazonFresh, and prime pantry.
⮚ Hence based on the research conducted and the analysis made of the industry’s key drivers of change, we
believe that the Amazon/Whole Foods Market alliance has a powerful potential to disrupt the US grocery retail
industry.
⮚ There are many factors and advantages that their combination presents that will allow them to have an edge
over their competitors.
Macro-environmental Forces
MACRO-ENVIRONMENTAL
FACTORS
To analyse Amazon’s macro-environmental forces, we will use the Pestle Analysis tool:
⮚ Political Factor
⮚ Economic Factor
⮚ Socio-cultural Factor
⮚ Technological Factor
⮚ Legal Factor
⮚ Environmental Factor
POLITICAL
FACTORS
⮚ Political stability of developed
countries, especially the U.S.A.
and European countries
⮚ Governmental support for e-
commerce
⮚ Increasing governmental
efforts on cyber-security
ECONOMIC
FACTORS
⮚ The organization has economic
stability in the developed
markets
⮚ Increasing disposable incomes
in developing countries
SOCIO-CULTURAL
FACTORS
⮚ Many people around the
world now emphasise on
healthy lifestyles
⮚ Increasing online buying
habits
Survey of Consumer Barriers to U.S online grocery purchases, 2015
TECHNOLOGICAL
FACTORS
⮚ Rapid technological
obsolescence
⮚ Increasing efficiencies of IT
resources
ENVIRONMENTAL
FACTORS
⮚ Rising interest in
environmental programs
⮚ Rising emphasis on business
sustainability
LEGAL FACTORS
⮚ Rising product regulation
⮚ Changing import and export
regulations
⮚ Rising environmental
protection regulations on
businesses
Five-forces Analysis
COMPETITION IN THE GROCERY RETAIL INDUSTRY
To analyse Amazon’s competition in the grocery
retail industry, we will use the Five-forces Analysis:
⮚ Have to Face very stiff competition between the
established players like Walmart, Kroger, Costco,
Target, etc.
⮚ The Strongest of all among the Five forces is Rivalry
between existing and Bargaining power of buyers:
Medium to high force.
⮚ Threat of New entrants: Low
⮚ Threat of substitute in terms of service: Low to
Moderate.
⮚ Bargaining power of Suppliers: Low
COMPETITION IN THE GROCERY RETAIL INDUSTRY (CONT…)
After merger with “Whole Foods” stocks of other competitors.
GREATEST EFFECT ON INDUSTRY & PROFITABILITY OF NEW
ENTRANTS
⮚ Logistic infrastructure
⮚ Leverage with suppliers, supply chain which is expensive and complex
⮚ Expertise in distribution and delivery
⮚ Thin margin
⮚ High capital investment
SWOT Analysis
Strengths
•
•
•
•
•
•
•
•
Weaknesses
Strong distribution network
Highly skilled workforce
Strong Brand Portfolio
Reliable suppliers
Online Stores
Technology
Synergies: Its services compliment each
other.
Customer Experience
•
•
Low Profit Margins
Days inventory is high compare to the
competitors
SWOT
Threats
Opportunities
•
•
•
•
Developing Markets
Eating healthy habits
Expansion of physical stores
Services provided like online stores,
pick-up services from stores, home
delivery during pandemic.
•
•
•
•
Intense Competition
Rising product regulation
Changing import and export regulations
Amazon is under multiple, possibly
overlapping investigations by the U.S
Department of Justice and FTC on past
acquisitions.
Amazon SWOT Analysis Conclusion:
⮚ Amazon is growing beyond its original online retailer and enters into
other growing industries that, with proper investment, will definitely
become profitable.
⮚ Amazon needs to develop proper inventory management system to
minimize the food spoilage issue.
⮚ The company has enough resources to discourage competitors in
every industry it participates in, nevertheless, Amazon has to watch
out for possible antitrust litigations from the Department of Justice.
Key Factors for the Success
KEY FACTORS FOR SUCCESS
⮚
Various Unique
Features
⮚
Maximising
Product Quality
⮚
Good Supply Chain
Whole Foods Store in North America, June 16, 2017
Challenges for Amazon
CHALLENGES
⮚ Delivery of fresh food
to customers
⮚ Refrigerated
warehouse
management
⮚ Overcoming the
wastage of food items
⮚ Reluctance of
customers to adapt
online system
⮚ Tough competition
from rivals
© American Customer Satisfaction Index. All Rights Reserved.
RECOMMENDATIONS
⮚
Balancing the Whole Foods culture and Amazon’s aim of uniformity.
⮚
Overcome supply chain challenges by deploying own delivery units.
⮚
Keeping a check on turnaround plans.
QUESTIONS