The successful case of Amazon Fresh and how it’s reinventing online grocery shopping
Much has been said about how the COVID-19 pandemic became both a challenge and an opportunity for businesses all around the world from all different industries. There was a growing demand for online services and, therefore, a race for customers by the companies that were ready prior to lockdown policies. That is especially applicable for the grocery industry, an essential service whose demand for going online started to grow.
On that, a case that’s constantly quoted as a success story is Amazon Fresh, the grocery delivery and pickup service from Amazon that exists since 2017. The branch saw demand for its service skyrocket during the pandemic and, as of March 2021, already has its own physical stores – more than 28.
Let’s take a look at the story of Amazon Fresh and why it became such a case of success.
What is Amazon Fresh?
As Amazon describes it, “Amazon Fresh is a grocery delivery and pickup service in selected cities”. It could be as simple as that, but it is not: it began as an online service, but as of 2021 it has also a brick-and-mortar branch from Amazon. Below, we’ll follow its chronological timeline.
Launched in Seattle, Washington, in 2007, initially as a test, the service wasn’t what we’d call successful in its first years operating: only in 2013 it was expanded to other cities in the U.S.. That was one of the reasons that led to Amazon buying Whole Foods for more than 14 billion dollars a few years later, in 2016.
Back then, only Prime members who paid an extra monthly fee had access to the grocery delivery service.
It was in October 2019 that the company rolled out the Amazon Fresh service for invited members of its Prime program. Only those from cities where the service was available, of course. That meant no more extra monthly fees to have access to delivery.
Weeks after that, the company’s grocery delivery sales doubled on a yearly basis, according to estimates from the research firm Second Measure. It was no surprise when, by March 2021, amid a pandemic scenario where people were avoiding leaving their houses even for groceries, Amazon Fresh and Whole Foods delivery sales rose more than 400% year over year, also estimates Second Measure.
How does Amazon Fresh work?
The service consists of a two-hour free delivery or pick-up grocery service for orders made through Amazon Fresh’s website or app, where products from both Whole Foods stores and Amazon Fresh’s own warehouses are offered.
Customers can choose between the attended delivery, where groceries must be received by the customer and are delivered in plastic bags or the unattended delivery where the order is dropped off at the customer’s doorstep in temperature-controlled bags, keeping items fresh.
There’s no need for Amazon Prime’s customers to pay extra fees to order the groceries: it is included under the program in the selected cities where it is available – 18 cities in the U.S. and in Berlin, London, Hamburg, Munich and Tokyo.
Why is it such a success?
Prior to explaining what are the differentiators from Amazon’s grocery delivery service, it is nice to remember how big the company is when it comes to online shopping, which very likely influences people’s adherence to the Fresh service.
- As of March 2021, Amazon accounted for over 40 percent of all retail online sales in the U.S., around eight times more than its biggest competitor, Walmart;
- Amazon’s websites were the 5th most accessed in the U.S. in April 2021 according to ComScore, with more than 213 million unique visitors;
- In the first quarter of 2021, Amazon said it had over 147 million Amazon Prime members in the U.S.
That put, no wonder why the service caught the eyes of so many people – were they already Amazon’s customers or not.
Amazon Fresh’s differentiators
1. Free, fast and scheduled delivery
Items are delivered in a two-hour slot chosen by the customer, sometimes on the same day that the order is placed and under no extra charge. Besides, customers can choose between the delivery options that best suit their needs. It is what we call customer convenience – serving them the best way possible and matching what they’re looking for.
2. Product offering
Amazon is known for the gigantic range of products that are sold on its websites, and that applies to the Fresh service as well: it offers over 500.000 products from different brands and from Amazon’s and Whole Foods’ own brands. It also offers organic and seasonal products, as well as fresh ones – i.e. meat, seafood, dairy and others.
More than just food, customers can also buy essential household and personal care products, such as toilet paper, cleansing products, soap, shampoo and many others.
3. Integration with Alexa
Aside from buying from your computer or phone, it is also possible to add products to your cart just by asking an Alexa device, such as offered by Brazilian grocery chain Zona Sul. It is as simple as it seems: just ask your Alexa to search for a specific product and add it to your cart; then, go to the website or app to place the order.
It is also possible to take advantage of Alexa’s features of creating shopping lists, for example.
The cost of success
By April 2020, amid a pandemic scenario, grocery orders on Amazon were 50 times higher than usual, and fulfilment issues started to pop up, such as no delivery windows available for weeks, late fulfillment and no responsive website. The company, though, was quick in responding to those and announced several measures to keep serving customers.
The main one, yet, was not pleasant to customers: it stopped accepting new grocery delivery customers, which means that only older customers were able to keep ordering through Amazon Prime.
Those measures were, to quote a few:
- Expanding Whole Foods grocery pickup stores available from 80 to 150;
- Adjusting some Whole Foods stores hours to focus exclusively on fulfilling online grocery orders;
- Hiring 175.000 people, including for grocery delivery;
- Releasing new delivery windows and making it easier for customers to see the next delivery window available;
- And launching an “online queue” feature, that allowed the company to distribute available delivery windows on a first come, first served basis.
“While we have increased order capacity by more than 60 percent due to COVID-19, we still expect the combination of customer demand and restricted capacity due to social distancing will continue to make finding available delivery windows challenging for customers”, Amazon announced back then.
A year later, there are no reports of problems involving the Amazon Fresh service and numbers keep growing at an impressive rate. That episode, though, is what marked the service as a huge success.
Taking the physical world
Amazon is great at keeping its business evolving and offering what customers are looking for, which is why it hasn’t stopped there and kept investing in its grocery arm. Actually, Amazon started to heavily invest in taking its fresh service to the next level and launched, in August 2020, its own brick-and-mortar grocery store in the U.S., unsurprisingly called Amazon Fresh. As of July 2021, several stores are already open and operating, even in other countries such as the UK.
When telling the news, Amazon described its store as “a new grocery store designed from the ground up to offer a seamless grocery shopping experience, whether customers are shopping in-store or online”.
No wonder that Amazon Fresh store is also disruptive – here are some of the differentiators that the Fresh stores offer.
1. Seamless in-store and online shopping
Want to do the groceries in the store, pick-up your order at the store or to pick-up when you’re in a rush? You got it all – just pull up on a dedicated parking spot. All experiences are connected: to get inside the store, you need to have Amazon’s app downloaded and use it to scan a QR Code that will open the turnstiles.
2. All sorts of food
Foods and meals made in-store are available on a daily basis. You can find from bread to pizzas and fresh salads, all ready-to-eat. Amazon also reinforces that tons of national brands are available at the store and also Amazon’s and Whole Foods own brands.
3. Amazon Dash Cart
As fascinating as this one may seem, it is not available on all Amazon Fresh stores, only on selected ones. Simply put, it is a shopping cart that “makes a quick shopping trip even quicker by skipping the checkout line”. That’s right: no checkout lines.
Customers only have to place their bags in the cart, use its screen to sign in using the Fresh QR Code on the Amazon app, pick the selected items and exit through the so-called “Dash Cart lane” to automatically complete the checkout and payment. That’s the power of computer-vision algorithms and sensor fusion that Amazon uses.
When signing in on the cart, customers can also check their Alexa shopping lists and check the items being bought at the moment.
Check more about the innovative Dash Cart on the video below:
4. Alexa is available for helping out
Throughout the store, customers can ask Alexa for help. You know how it works: if you want to know where you can find the orange juice, just ask “Alexa, where can I find the orange juice?”. And there you have it.
A survey from RBC Capital Markets released in March 2020 showed that Amazon was the most popular online grocery destination for new shoppers: 60% of respondents mentioned it as their first choice. It is needless to say what led to this amazing number, but in a couple of words: being digital.
Amazon Fresh is a service ahead of its time that proves how important it is to always foresee the future and be where your customers are: Amazon Fresh was already operating before a pandemic took place, which made it possible to reach that many customers as soon as they needed an online grocery service. Other grocers who were already digital prior to the pandemic also had amazing results – it is the case of Brazilian grocery chain Zona Sul. Summarized, Amazon Fresh story shows that it is never too late (nor too early) to go digital.