Get the full story at thegrocer.co.uk 13 January 2018 | The Grocer | 13Patrick Pondaven, director of
consumables at Amazon, will
be speaking at The Grocer’s
‘How to Win in Online Grocery’
conference on 13 March. To book
tickets or for the full speaker
lineup go to http://www.thegrocer-
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Focus on variants_ALL.indd 67 13/12/2017 11:money, but that doesn’t matter
to them in the short term. It’s all
about growing long-term mar-
ket share and customer loyalty.”
It’s “fortunate” for the super-
markets that “not everybody is
an Amazon Prime customer or
even wants to be,” he adds.
It’s true the initial up-front
cost of doing the grocery shop
on Amazon may be offputting
to some. There are two options:
pay £79 for Prime, plus a £6.
monthly subscription (a Fresh
add-on) to access its low grocery
prices. Or a shopper could split
the cost monthly, paying £14.
per month for a ‘Prime & Fresh
Bundle’ (£179.76 a year).
Bundle
On the surface that looks expen-
sive, so despite Amazon’s “unri-
valled assortment and ultra-fast
delivery, no shopper in their
right mind would shell out £
a month for access to prices
you could find at Tesco,” says
Natalie Berg, global research
director at Planet Retail.
But Prime and Fresh can be
trialled for free for 30 days. And
Prime includes speedy one-
day delivery, Netflix-rivalling
streaming video and Spotify-
rivalling Prime Music, the
Prime Reading library, unlim-
ited cloud photo storage, and
much more.
If the £79 for Prime is put
aside as paying for all the other
benefits, a shopper would pay
£6.99 a month for Fresh (deliv-
ery is free on orders over £40),
which is roughly in line with
the supermarkets. It’s why Bubb
says the supermarkets would
be “unwise to rely on that
advantage for ever. Amazon is
bound to make its overwhelm-
ing presence in online non-
food translate into online food
event ua l ly.”
“That’s the crucial thing,”
says Harrison. “Amazon is
thinking about the economics
of its customers across its busi-
nesses, across Fresh, what they
spend on books, music... it’s
a different model that takes a
more holistic perspective,” says
Harrison.
“And if your customers
are spending across a whole
bunch of areas you can be more
selective over where you make
more margin.”
When you add in Pantry and
Dash, initiatives like Subscribe
and Save (set up monthly orders
for regular but dull purchases
like toothpaste and save 15%),
its £10.7bn purchase of Whole
Foods Market, rumours of a roll-
out of tech-heavy UK c-stores,
and its sheer popularity with
the next generation of shoppers,
Amazon is unquestionably pro-
gressing with intent.
“Like in non-food, Amazon
groceries won’t always be the
cheapest, but they will be com-
petitive and ultra-convenient,
and that’s a compelling enough
proposition for many shoppers,”
says Berg.
And shoppers are respond-
ing. UK grocery sales at Amazon
sites are on the up, hitting £25m
in Q1 2017, an increase of £5.8m
(or 30%). But for context, Ocado,
Amazon’s closest rival in terms
of rival pure-play online,
recorded sales nudging £1.3bn
in 2016. And even that only
gives it a market share of 1.3%
[Kantar Worldpanel this week.
“Amazon is growing rapidly,
but currently accounts for just
over 1% of online fmcg in the
UK,” says Fraser McKevitt, head
of retail and consumer insight at
Kantar Worldpanel.
“The e-tailer has already
seen success in higher-value
items including toiletries, nap-
pies and electric toothbrushes,
but it is yet to have a marked
impact on wider grocery. So far,
Amazon’s primary impact on
the wider market has been to
focus the minds of consumers
and competitors on price, but
this is yet to be followed by any
notable market share increases.
“Most Prime members still do
their online grocery elsewhere.
Amazon needs to think about
how it can persuade shoppers
to associate it with a straightfor-
ward weekly shop.”