Amazon Is Taking Grocery into the Space Age

by DailyBriefers
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Big Appetites: The Battle for the Basket  

Even as economies open up and the vaccine programme allows the return of our daily routines, many habits have been reset — and buying groceries online will increasingly become the new normal for many across demographics. Edible grocery sales will add US $653.6 billion to chain retail sales in the next five years with e-commerce representing most of that growth — 10.5% compound annual growth rate (CAGR) between 2020 and 2025 compared to 3.7% store-based CAGR over the same period.     

That means grocery — a historically rather dull and overlooked sector — is suddenly the flavor of the month. It is whetting the appetite of a range of ambitious new businesses, while pushing traditional retailers, like Walmart, Kroger, Carrefour and Ahold Delhaize, which recently completed its purchase of New York City pureplay digital grocer FreshDirect, to invest heavily in e-commerce capabilities. 

The battle lines have been drawn and the prize is the hearts and stomachs of the future supermarket shopper. 

Meanwhile, food service intermediaries will increasingly leverage their last-mile logistics infrastructure to grow market share in the category, gradually expanding their digital shelf capability and introducing opportunities for brands to advertise and drive conversion. 

In other words, they will strive to be more like Amazon, offering advanced product content, more competitive search, better product management systems for sellers, and strategic partnership opportunities like new product launches and delivery campaigns. Transformation to data-driven ecosystems will split the winners from the losers as large firms utilize loyalty schemes to harvest customer data and adapt strategies closely tailored to audience needs. 

For suppliers, this new age of grocery means reconsidering long-held business and investment strategies to win visibility as e-commerce adoption finally disrupts one of the last bastions of pre-internet life — the weekly grocery shop. 

Product ranges must adapt to reflect the requirements of increasingly health-conscious consumers who are spending more time at home while high-quality mobile-centric imagery and clear product descriptions and pricing is critical to stand out on a digital shelf.   

Retailers, meanwhile, will be paying close attention to Amazon’s push onto the high street and the customer-centric technology innovation the e-commerce giant is bringing to bricks-and-mortar stores. In June, Amazon debuted its first full-size supermarket utilizing its trailblazing Just Walk Out (JWO) technology. In this store, located not far from Amazon headquarters in Bellevue, Wash., customers can skip the checkout line if they choose the JWO option upon entry. Amazon has made this possible with a combination of computer vision, sensors and deep learning functionality. It is a pretty dramatic enhancement in its JWO technology, which was previously only used in its urban-based Fresh convenience stores through its hi-tech carts. 

This not only offers grocery shoppers the opportunity to minimize contact while shopping — desirable during a pandemic and even once it fades — but extra convenience too. It will be interesting to see how many major grocery retailers end up rolling out Amazon’s technology in their own stores.  

So, grocery retail is entering a new era, shoved into submission by the pandemic but shaped by Amazon, which is primed to benefit. The company’s persistent experimentation in the quest to provide consumers with novel, dynamic and convenient shopping solutions is having big ramifications on a sector that has been a sleeping giant for at least 50 years. What can we look forward to over the next 50 years? An Amazon Fresh on the moon? Whatever happens, if humans still exist and are buying groceries, you can bet that the way they do it will have something to do with Amazon. 

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