A year ago, Amazon had barely dipped its toe into the grocery market, while trials of its one-hour express delivery service Prime Now were limited to barely a handful of food items available only in the Birmingham area.
Today, it has the major players running scared. Prime Now has grown to offer a large range of fresh, chilled and frozen produce and is available in 30% of UK households, following its expansion on Wednesday into North London and the East of England. Its full grocery delivery service Amazon Fresh is available in 128 London postcodes. And last month, it made ordering even easier with the launch of the Dash ‘wand’, a barcode scanner (that also uses voice recognition technology) to add products straight to your Amazon basket.
This week’s launch of the complementary Dash ‘button’ – branded wi-fi devices that send an order to Amazon with just one press – is further proof of Amazon’s determination to break the UK grocery market.
So, with figures from UBS out this week suggesting 21% of UK households are Prime members, how significant will this innovation be?
The Dash button may well boost sales if the US is anything to go by. Amazon won’t reveal exact figures but says one order is placed every 30 seconds. And the fact it has 150 brands on board Stateside suggests there is strong support from brands (hardly surprising since it reinforces brand loyalty).
It’s easy to see why consumers might love it too – the button is effectively free for Prime members, as the £4.99 fee is refunded on the first order. Bryan Roberts, analyst at TCC Global, believes it could cement Amazon as a go-to destination for household staples. “It’s another example of Amazon creating a compelling ecosystem for members and more and more of their spend at other retailers will be allocated to Amazon,” he predicts.
But this doesn’t mean Prime members will shift the rest of their grocery spend to Amazon. Adam Cochrane, analyst at UBS, admits he was “surprised” that a fifth of respondents to its survey had a Prime subscription. True, that gives them free delivery on a number of fresh, chilled and frozen products that fall outside the realm of staples. But to do all their grocery shopping at Amazon, they would need to live in one of the 178 postcodes serviced by Amazon Fresh (although that will undoubtedly expand) and pay the £6.99 monthly fee.
So even if Amazon has tempted a fifth of the market with Prime membership, that doesn’t mean it will get anywhere near this share of the grocery market, says Bernstein analyst Richard Clarke. “The grocery arm of Amazon sort of falls away from the core message of Prime, which is free delivery,” he says. And customers in the US have resented paying an annual fee for groceries, he adds. So, despite nearly half of the US population being Prime members, Clarke says Amazon Fresh only has 1% market share.
Clarke also believes the UK’s established grocery players are more than capable of countering the threat – citing Ocado’s patented picking technology and Sainsbury’s trial of one-hour delivery service Chop Chop as examples of innovation. “Everyone likes to think of Amazon as a disruptor but at the moment there’s more disrupting coming from listed players.”
If supermarkets can combine this innovation with a benefit Amazon can’t offer – a compelling in-store experience – there is little to fear from innovations such as the Dash button, says Matthew Knight, head of strategic innovation at media agency Carat.
“The grocer who leans into exploring new technology, new ways of leveraging data and new experiences for its shoppers will be the high-street store that retains its customers, because they’re valued, rather than simply accessible.”
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