With Amazon launching its mobile-only convenience programme in
London, offering 1-hour delivery on "thousands" of items for £6.99,
or in a 2 hour window for free with a £20 minimum, what are the
implications for retailers/suppliers?
Convenience retailing without stores
Amazon Prime Now is primarily a fulfilment innovation centred on
Amazon's competitive advantage of scaling multiple backend shipping
options into a seamless experience for the shopper. Amazon's
mission to bring 'The Everything Store' to its shoppers 'every day'
should be a wakeup call to UK supermarkets who have thus far been
able to weather the storm by focusing on small box express/local
stores to win share of convenience - an advantage which may no
longer be sufficient.
The shift to grocery singles
Part of the operational challenge of Amazon's core .com assortment
is the focus on case packs rather than singles. Shipping singles
(such as bottles of water or cans of soft drinks) is both cost
prohibitive for Amazon, as well as the supply chain of
manufacturers. Prime Now is the signal that Amazon will be putting
considerable momentum behind building out its grocery assortment
Still early days on shopper experience
Remember (point number 1) that Prime Now is primarily a
fulfilment innovation with a focus on getting the economics right
around single item top up consumables. The actual shopper
experience through the mobile app has significant room for
improvement as predefined categories such as "Sunny Days" returns
bottled water, sunscreen, Pimms, a Taylor Swift CD, and a
children's swimming pool as the top 5 results. Search rankings also
share a suboptimal result. Expect ongoing improvements to the
shopper experience that suppliers may be able to influence.
By the end of 2015 Amazon expects all London postcodes to be
covered, as well as expansion into additional cities.
Source : Kantar Retail