Amazon is an E-commerce company with its base of operations in Seattle, Washington. Amazon is the leading e-retailer in America with an estimated $136 in sales as of 2016 and has 310 million active subscribers. The online grocery market is estimated to be $7,066,328,828 which creates an opportunity for AmazonFresh, Amazons grocery delivery platform.
Competitors: this includes Walmart which has over 4000 physical stores and also offers free order pick-ups. Peapod also caters for a busy and tech savvy clientele and is in partnership with physical retail stores.
Strengths: Thanks to Amazon, AmazonFresh can get brand recognition. Amazon can also provide means of transportation and warehousing facilities. Being an internationally successful entity, Amazon is in a position to fund this innovation.
Weakness: Lack of physical stores is one of the weakness affecting AmazonFresh because it locks out non-members.
Opportunities: the online market for grocery shopping is not yet fully utilized which gives AmazonFresh a chance of establishing itself in the market. The future of the online grocery sector is estimated to reach $29.7 billion.
Threats: the ever increasing competition in the market is a significant threat. Due to customer awareness, customers also get a high bargaining power because they can compare prices across various online platforms. Low profit margins also present a risk because of delayed return on investment (Tugby, 2016).
Segmentation and targeting
· Urban households without vehicles: The group needs home delivery to save them on transport cost and for convenience.
· Working parents: This represent a busy family where both parents are working and lack time for shopping.
· Online shoppers: As millenials join the work force these group of online shoppers will increase significantly creating a viable market.
Behavior objective: To increase the awareness of AmazonFresh as a service delivery platform.
Knowledge objective: To make the target audience understand the benefits of using AmazonFresh instead of physically going to grocery stores.
Goals: For people to be aware of AmazonFresh as the best alternative for online grocery shopping and a 10% increase on sales in 12 months.
We want the target audience to see using AmazonFresh as a convenient means to have groceries delivered to their door steps and a way for them to get their money’s worth because same day delivery saves money time and energy.
Product strategies: Making the segment aware of AmazonFresh and its benefits as an online shopping alternative. AmazonFresh does not only provide them with convenience but it allows them to continue doing other important things. AmazonFresh Pickup will also be available for subscribers who want to pick their orders on their way home from work.
Price strategies: a price skimming strategy should be implemented to capitalize on profit for the not fully developed market. Membership of AmazonFresh will be offered at $130 annually and non-members will be charged a shipping fee of 8%.
Place strategy: A direct to consumer model will be implemented. Since AmazonFresh mainly deals with distribution considerations for warehousing and transportation have to be factored in. By using the present facilities of Amazon stores, AmazonFresh can save on warehousing and transportation costs and also cater to the present subscribers of Amazon.
Promotion: Social media will be the prime base of promotion operations because a multitude of the population currently own smartphones. Facebook will be used to offer customers insights on the benefits of AmazonFresh and how to attain membership. Twitter will increase following of AmazonFresh by having people share posts from Amazons pages. YouTube will provide a visual representation of the product that will be appealing to them. Finally Instagram will be used to issue rewards to lucky members.
Amazon is an E-commerce company with its base of operations in Seattle, Washington. The company was founded by Jeff Bezos in 1994 and sells millions of products through the internet like furniture, electronics and books. Amazon is the leading e-retailer in America with an estimated $136 in sales as of 2016. Also in 2016 the company had a customer base of 310 million active subscribers and its global reach makes it a valuable brand globally. Amazon has its presence in United Kingdom, France, Ireland, United States, China, India, Italy, Spain and Mexico just to name a few. Amazon deals in a list of products and services namely AmazonFresh, Kindle, Appstore, Amazon Prime and Amazon Studios.
The mission statement for Amazon is “We seek to be Earth’s most customer-centric company for four primary customer sets: consumers, sellers, enterprises, and content creators.” (Amazon, 2017). Using its algorithm Amazon has been creating convenience for its customers by providing them with the information they need to make well informed purchases. The customer-centric nature of the company has seen it value long term profits by providing competitive prices (Garner, 2016). It has allowed Amazon to maintain a competitive edge in e-retailing business.
Over the years Amazon has made various acquisitions one of which is the recent $13.7 acquisition of the organic grocer Whole Foods. The grocery retailing industry is very lucrative and Amazon has increased its presence through this merger with Whole Foods which will see its consumer base grow even further. AmazonFresh is a grocery delivery service and an innovation by Amazon that has been in the works since 2007, which will finally address the issue of delivering produce to consumers. Amazon seeks to beat the competition by delivering produce to clients in record time through their online platforms facilitated by their vast array of transport vehicles. AmazonFresh is available in London, berlin, Tokyo, United States, Hamburg and Munich. AmazonFresh Pickup was also rolled out in March of 2017 and it lets subscribers make orders and reserve a pickup time for their groceries (Alaba, 2017).
Although Amazon has been in the industry for many years and can be said to have experience in the sector, it still has competitors. The competitors include Kroger, Peapod, and Walmart who have a huge presence and offer competitive prices. Thanks to the purchase of Whole Foods by Amazon the tables in the grocery retailing industry could change. AmazonFresh will be a solution to the prime online grocery retailing platform and thanks to Amazon’s efficiency and speed of service provision it will revolutionize the industry. The market will present some challenges in the form of pricing, infrastructure and staffing competencies. The competitive analysis for Amazon is as follows;
Peapod caters for 13 Midwest and East Coast states and targets families and singles who are busy and are also technology efficient. The competitive edge of Peapod is that it is in league with physical retail stores meaning that it also serves customers who are not subscribers of their services.
Walmart is the leading food retailer with over 4000 stores and has a physical presence that it uses as distribution center. The company also offers free order pick-ups which gives its customers a wide selection of purchase options to choose from. A great threat to AmazonFresh is Walmart’s store networks which provide a physical proximity to clients. In case Walmart makes it stores pick up centers, AmazonFresh will face stiff competition.
Safeway which is a large supermarket chain also offers delivery services but at a time range of 6AM to PM
Situation analysis (SWOT)
Political stability is necessary for the progression of AmazonFresh. Lack of stability means that a country will lack infrastructure like loads that are essential in the transportation of the groceries. Lack of proper infrastructure significantly hinders the growth of online grocery retailing.
The support of E-commerce by the government also ensures that the industry has a strong backing and has the opportunity to grow (GreenSpan, 2017). Countries that are technologically driven can facilitate a conducive environment for growth for this venture. Enhancement of cyber security also ensures that the online sites are safeguarded against online attacks. In the present times hackers are a major concern and given that almost every aspect of business including the monetary one has been digitized, it is necessary to safeguard against such attacks.
The availability of stable markets mean that people have an abundance of disposable income, thus they are in a position to buy more goods (GreenTap, 2017). The abundance in disposable income ensures that AmazonFresh makes a quick return on investment due to economies of scale. The retail sector is usually less affected by economic turmoil because people must eat and so they have to buy food items. It presents an opportunity for AmazonFresh since it deals with groceries and other food items. The economic stability of developed markets ensures that AmazonFresh will strive and expand.
Sociocultural factors also have a great influence on the E-retailing sector. The increased use of smartphones over the years due to the of mobile technology means that majority of people can access the online sites and make orders (Pratap, 2017). The growth of digital technology like availability of 4G boosts sales for online retail firms.
Millenials provide a large market since they prefer to do most of their things online and this includes shopping. The group also looks for cheap products that can be delivered at their door steps. Also the presence of millenials on social media sites makes it easier to advertise and promote the venture. Increased levels of consumerism enables customers to look for the best products and at fair prices and this is an opportunity for AmazonFresh with its low profit margin strategies.
The 21st century has seen a surge in technological factors and these have a direct effect on online retailing. The unpredictable changes in technology could pose a threat to AmazonFresh in the sense that technology is being rendered obsolete with the emergence of better platforms in a high rate. However investment in the IT industry could thwart this threat by ensuring that AmazonFresh has technologically relevant software and accessory thereby giving it a competitive edge (Pratap, 2017.
IT efficiency also provides an opportunity for AmazonFresh since it allows for a maximization of online retail productivity. User friendly and easy to access cites means that clients will not have to struggle to buy products.
In the technological world cybercrime poses the greatest threat. It threatens customers through the identity theft of credit card information and the Amazon cites through compromising their networks which challenges the integrity of their business.
The issue of sustainability is important for all aspects of business and AmazonFresh has not been left behind. Amazon is heavily invested in environmentally friendly packaging, renewable energy and waste reduction (Pratap, 2017). Engaging in CSR has lots of benefits to the company because it allows it to relate to the community and this creates brand loyalty.
One of the strengths that AmazonFresh has is the brand recognition of Amazon. It will give the grocery delivery platform the coverage it needs to establish itself. Amazon being an international company has worldwide recognition and this means that AmazonFresh will be given the same credibility and reliability as its parent company. Also the 310 million subscribers are potential customers for this innovation.
Amazon also has various transportation means that could get the groceries to their intended clients quickly. Groceries are perishables and thus when ordered by clients they need to get to them as quickly as possible so that they do not lose their nutritional value. Amazon even has drones through their innovation Prime Air which is stated in their site to deliver products safely in 30 minutes or less. Through this system AmazonFresh can greatly dominate the service delivery sector and boost customer satisfaction.
Being a billion dollar company, Amazon can also finance the various requirements AmazonFresh needs to become an industry changing platform (Brohan, 2013). It will also be able to fend of competition that comes in the form of price wars or otherwise. The company can also invest in new ventures that can add to its income generating streams or in new product development.
Lack of physical stores is one of the weakness affecting AmazonFresh. Though it is an online service provider, lack of physical stores means that it locks out non-members and this greatly reduces the profit margins. In the grocery business it is important to have stores because customers also want to see the produce first hand and it also creates a sense of stability given that the building or store will be seen.
A survey conducted by Statista showed that only 31% of the respondents went to stores that had store pickup services or home delivery. It shows that there is a 61% untapped market that AmazonFresh can satisfy. It is also estimated that sales in the online grocery sector will reach $29.7 billion in the United States market alone. The industry is still growing and this offers AmazonFresh the chance to establish itself.
The food and retail market is huge and by offering customers a avenue where they can purchase groceries at the comfort of their homes will provide them with great convenience. AmazonFresh can serve this portion of the market with the vast products that Amazon provides. The acquisition of Whole Foods also creates another opportunity since consumers are now assured of quality products even the healthy organic kind.