Amazon stormed into the grocery retailing sector

Amazon stormed into the grocery retailing sector

I) Who is Amazon and what is its long-term goal?

Amazon is an American multinational company specialising in online retail that covers various sectors. Amazon has been running since 1994 and its headquarters are in Seattle, Washington and Arlington, Virginia. The company generated a revenue of 469.822 billion US dollars in 2021 and a profit of 33.364 billion US dollars in the same year.

Amazon's long-term goal is to be present in every aspect of a customer's life. They are already achieving this thanks to their fast delivery and premium service Amazon Prime, which allows the company to deliver almost everything very fast. Amazon is also present in the entertainment industry with Prime Video which offers streaming services – a Netflix made in Amazon. However, customers don’t rely on Amazon when they are doing their groceries and that is Amazon's next objective.

II) The grocery retailing sector, how is it doing and why is it interesting for Amazon?

For years, this sector has been growing and making a profit over people's basic need: food. Giant brands such as Carrefour or Walmart have created a new retail model, mixing foods and other products such as clothes or kitchenware. These stores were making a profit from other goods to propose food products at a lower price and attract more customers. Carrefour or Walmart created a new way of consuming: overconsumption. And, this model has remained successful for decades.

However, over the last few years, the grocery retailing sector is not doing well and this retail model is beginning to change. People are becoming more conscious about the way they consume and how their consumption has an impact on the environment. This shift can be explained by the fact that smaller structures can propose the same price as bigger ones because, in general, prices have increased significantly. In addition, the other products offered by those supermarkets are less attractive compared to the ones offered by platforms like Amazon. 

In conclusion, people are less attracted by structures with an enormous surface area, the price of food products is not eye-catching anymore and what used to be the most profitable for retailers is now bought on Amazon. Leaders in the retail sector are losing money. It is, therefore, profitable for companies like Amazon to enter this sector.

III) Amazon's first move: the purchase of Whole Foods and the launch of AmazonFresh

It’s in this context that Amazon made its first move by buying out Whole Foods in 2017, an American brand located in Austin, Texas, that sells products free from preservatives and artificial colours and flavours. Buying this company has allowed Amazon to enter the grocery retailing industry easily. Amazon is using the existing Whole Foods stores to experiment. For example, Prime users have access to discounts and special offers on products that normal customers could not access. Amazon also uses the Whole Foods store as a place to collect Amazon packages, return them or ask questions to Amazon customer service.

    Witnessing the success of the “new” Whole Foods stores, Amazon decided to open its own groceries store called Amazon Fresh in 2020 in Woodland Hills, California. Other stores opened in the United States, and Amazon is expecting to extend its concept worldwide.

IV) How AmazonFresh and its new state-of-the-art trolleys revolutionise the sector.

The goal of Amazon is to offer its own products and experience to customers. However, the core concept of its store is its trolleys and the absence of checkouts.

These trolleys are unique and created by Amazon to make the experience of doing your groceries easier. After connecting their trolley with their Amazon account, every product chosen by customers is added to a virtual checklist visible on the trolley’s screen through 4 cameras that detect every customer’s actions. These cameras detect when customers take a product off the shelf and when they put it back. Then, customers simply walk out of the store and they will receive a receipt later on their Amazon account. They pay with the card previously entered into their Amazon account. 

This new way of consuming is revolutionary. Customers have access to various information about the product and can see in real-time the amount they are buying and the total price. This makes customers more conscious about their consumption. In addition, this new trolley avoids queues at the checkout and matches the current trend towards doing things faster to not waste time. It also gives Amazon data about habits of consumption to improve stores.

With the opening of the AmazonFresh store and the implementation of its connected trolleys, Amazon is beginning to revolutionise the grocery retailing sector and is becoming a serious competitor for well-established brands such as Walmart or Carrefour.

Emma. L

745 words

Sources:

* Hypermarché, la chute de l'empire - Arte: https://www.youtube.com/watch?v=5gkqwXf_mu0 

* https://fr.wikipedia.org/wiki/Amazon 

* https://en.wikipedia.org/wiki/Whole_Foods_Market#2017%E2%80%93present:_Amazon_subsidiary 

* “Amazon opens first Fresh grocery store, debuts high-tech shopping cart in retail expansion”, Geekwire, 27/08/2022. https://www.geekwire.com/2020/amazon-opens-first-grocery-store-debuts-high-tech-shopping-cart-expands-retail-footprint/ 

* Amazon website: https://www.amazon.co.uk/gp/help/customer/display.html?nodeId=GWDXYUM9SFHE35KD