Amazon continues to grow as the grocery market becomes its next meal

Amazon has extended its reach in recent years to explore different industries. From its pop-up stores to Amazon Go, to even running its own festivals, the company has used its giant budget to expand and compete in several areas.

The grocery arm of Amazon has been developing for years but offering free delivery for its Prime members is yet another perk for users of the biggest loyalty programme out there. And the eCommerce giant has continued to consolidate its customer base of 68% of the US population, as it continues to condition them with quick and free delivery of goods.

In this article, I will look at why geography is no longer an issue for Amazon and how retailers can use its aggressive expansion to their advantage.

Geography is not a problem

Same-day delivery for groceries is particularly important for its US market and given the size of the country, it takes a significant investment in infrastructure to be able to afford offering these services for free. But Amazon knows that service is king, a fact backed up by our research which indicates that 72% of customers wish that all online retailers offered similar services to Amazon Prime. Amazon has felt the cost of this, as in the company’s latest financial results it saw earnings fall short of Wall Street’s expectations.

Yet, the short-term losses are a long-term gain for Amazon and the investments they have made have contributed to its ability to offer speedy services to its Prime members. Its unique approach to growth over profit gives it a strong competitive advantage. Ultimately, what it is doing is shifting the narrative in the US on ordering groceries online – and is making a giant statement to its rivals.

While Amazon’s quick grocery delivery is only available in the US, it would be surprising not to see it introduced in the UK anytime soon; if it can crack one day delivery in the States, then the much smaller UK market should be much less of a challenge. Its grocery business is something that has not yet fully matured in Britain, but it has all the right ingredients for success – especially given eight in ten (84%) of consumers say that speed of delivery is an important part of their purchasing decision. And while many supermarkets in the UK offer same-day delivery, none will be able to do it to the same extent as Amazon.

Are there any positives for retailers?

While Amazon continues to innovate to consolidate its dominance in retail, it’s not all doom and gloom for retailers.

As it continues to grow, brands are increasingly able to use Amazon as a means of introducing their products to a global range of customers that they may not have the funding to do otherwise. However, it is key that retailers do not solely rely on Amazon’s platform as the only way to push their business.

Ultimately, for retailers to be successful in an industry dominated by Amazon, they must have a balanced approach – operating across marketplaces, retailers, direct to consumer and increasingly social commerce. And the challenge posed to many in the industry is finding a way to work with Amazon that will, first and foremost, benefit the consumer whilst also retaining their brand or product equity. This will become increasingly challenging as we have seen a continued erosion in the importance of brand when shopping online, with only 25% of consumers saying that it was an important factor in their purchase decision. Retailers also need to think where consumers will be introduced to their products. For example, Amazon is now the go-to place for consumers to start searching for products, with 56% of consumers starting their searches on the website.

As brands look to master a multichannel strategy, they need to think where consumers are engaging with their products. By encompassing marketplaces, retail websites and own brand websites, organisations can actually use Amazon’s success to its advantage.

Amazon remains king

Amazon’s investment in infrastructure has allowed it to go above and beyond its competitors – and its continued dedication to innovate is a testament to its business strategy. While its competitors may worry about Amazon’s position as the dominant force in retail, there are still ways they can use it for their own gains and there are still ways to compete. But with every passing day, these areas of differentiation shrink.

The US is just a start – there is no doubt Amazon will follow suit in the UK. The grocery industry needs to be prepared to be gobbled up by Amazon’s latest venture.