Amazon is to open its first grocery store. The opening will take place in California in 2020 and confirms the giant retailer’s clear intent to carve out a share of the food market. Amazon has already shown its ambition in this direction with the 2017 acquisition of the Whole Foods chain and its 500 outlets for US$13.2 billion. Amazon already offers a grocery delivery service through Amazon Fresh, Prime Now and Amazon Go. Rumours of the move to open a new chain of grocery stores were first published by The Wall Street Journal in March, but had not been confirmed. According to The Wall Street Journal, Amazon is also planning to open stores in Los Angeles, Chicago and Philadelphia. The name of the stores has not yet been publically announced.
A study of online grocery retailers has found that Amazon leads the way in terms of price. Examining over 12,500 products in 16 categories, available online at Amazon.com, Walmart.com, Target.com and Jet.com, and other leading specialist retailers, the Profitero study found that Amazon was the cheapest, followed by supermarket chain Kroger.
According to the report: “Kroger averaged 1.6% more expensive than Amazon on 156 exactly matched products; Jet was 3.5% more expensive on 133 products; Walmart was 6.2% more expensive on 172 products; Instacart was 10.7% more expensive on 137 products; and Target was 11.6% more expensive on 153 products.”
Meanwhile, in a move that will put further pressure on its rivals, Amazon has announced it is to offer free grocery delivery for Prime members, thereby eliminating its monthly fee for Amazon Fresh.
With consumers wanting their products faster and cheaper, the market for perishables is changing. To meet the higher expectations, retailers need to adapt their perishables logistics. Even potatoes are now being air freighted, despite their weight. Transporters now need to learn about the requirements for products that they are not used to carrying, meaning producers and freighters need to collaborate more closely.
These changing expectations are driven by the rise of e-commerce. Indeed, online giant, Amazon, has recently entered the market. But even Amazon will have to rely on supply chain providers for the things it cannot do.
The consequences are that profit margins are shrinking for everyone. Suggested remedies include more direct transport involving fewer stages and handlers. Rather than flying all of Europe’s perishable imports via the Netherlands – which handles 80% of the total – leisure flights can be used between South America and Europe as they are more efficient.