Amazon positioned to give food and beverage e-commerce a much needed spark
Based on its recent bold expansion into the grocery segment, Amazon is primed to give food and beverage e-commerce a shot of adrenaline.
This was according to “U.S. Grocery Market Focus: The Amazon Food Shopper,” a report from Packaged Goods.
According to the firm’s estimates, Amazon's 2016 online food and beverages sales, including AmazonFresh, is at $1.5 billion. This volume is expected to rise to $2.3 billion in 2017, giving the company a 19% share of the online market.
While Amazon currently garners only a small share of overall grocery sales, the company’s one-two punch of expanding its AmazonFresh service and its acquisition of Whole Foods positions the online giant’s sales to trend upward in the coming years. Growth of 70% during 2018 and 2019 is realistic, as Amazon pivots to leverage its Whole Foods acquisition into multichannel growth. Even average growth during 2021 and 2025 would catapult Amazon's food and beverages sales well past $30 billion, the firm reported.
While its growth curve is nothing to trifle with, estimated sales between 2018-2020 make only minor inroads into total food-at-home sales. Realistic projections for Amazon's market share gains hardly equate to industry ownership, and the e-retail titan would still trail national chains such as Walmart and Kroger, the report stated.
"Will Amazon overtake the food and beverage market? No, but perhaps most importantly, Amazon's major foray into food will surely stretch margins in an industry where they are already notoriously thin,” said David Sprinkle, research director, Packaged Facts. “This will in turn likely result in additional industry mergers and alliances geared toward managing costs, as other retailers seek to stay in the game with a competitor long known to absorb heavy losses over time in its quest for market share.”
Further, any success Amazon has with food will also translate to strengthening its Amazon Prime value proposition, giving more shoppers more reasons to buy three times products across categories. In this respect, food sales growth will contribute to sales growth in Amazon's other retail categories, the report said.
Amazon uses Whole Foods to bolster its private-label portfolio
Amazon is wasting no time in leveraging its ownership of Whole Foods Market.
Amazon Fresh has made “hundreds" of new items from Whole Foods' house brands available online. Merchandise includes fancier fare and bath products from Whole Foods Market, staples from 365 Everyday Value, and pet foods from Whole Paws, according to CNBC.
The swift addition of the natural grocer’s lines significantly bolster Amazon’s increasingly aggressive expansion into private-label categories. The company already features 19 company-owned brands, all exclusively available on Amazon. These lines span men’s, women’s and children’s apparel, men’s shoes, cosmetics, tools, tech accessories, fresh and frozen food, lingerie and underwear, baby goods, consumer goods, linens, spare parts and furniture.
The portfolio will soon increase further, based on at least 10 more trademarks in the works. These include household goods, leather goods, handbags, baby products, car products, makeup, motor homes and music services.
Discounter revamping cloud strategy to distance itself from Amazon
Target is using an unconventional way to send a message to Amazon.
In a move to take greater control of its infrastructure — and stop financing its rival — the discounter is scaling back its use of Amazon Web Services, reported CNBC.
Target plans to “aggressively” move e-commerce activities, mobile development and operations away from AWS through the end of the year and into 2018 — a plan it alluded to back in October, according to the report.
According to sources in the report, Microsoft Azure is already wooing Target in hopes of grabbing their business. Meanwhile, other companies, including Google and Oracle continue to bolster their cloud-based offerings — good news for other retailers that may be considering a transition away from AWS.
Target’s decision comes after a similar move made by its rival, Walmart. In June, the retail giant warned some of its tech partners not to run applications on Amazon’s cloud platform if they want to continue working with Walmart.
To read more, click here.