Although Amazon has yet to announce its plans to enter the grocery market, industry analysts are confident a US based service will launch in 2014. Amazon already has some experience in the sector and runs an online grocery service called Amazon Fresh, which only operates in Seattle.
Expanding into the US market would allow Amazon to take advantage of its world class supply chain capability. The internet retailer also recently invested heavily in fulfilment centres to boost the delivery speed of goods and has added refrigeration capacity to its California warehouses.
Securing the UK’s Home Delivery Food Market
Online food delivery currently accounts for just five per cent of sales in the UK and USA but is becoming increasingly popular. Britain’s online food market is currently growing at around 16 per cent per year and is expected to double in value over the next five years to £11bn.
The sector is likely to become even more competitive with companies such as Waitrose and Morrisons partnering with Ocado to enter the fray. Amazon’s arrival could see an already low margin sector become extremely congested. Parallels are already being drawn with the impact the internet company has had on the parcel delivery industry.
Optimising Delivery Models
Delivering perishable goods at a low price to increasingly demanding customers is a real challenge for the food retail industry. The potential emergence of Amazon on the scene would add yet more pressure to a sector which already operates on tight margins.
Traditional retailers need to act now if they are to develop an offering which can compete with highly adaptable companies such as Amazon.