Two things are especially true about shopping for groceries. The first is that most people are creatures of habit. The second is that those habits are largely built on convenience and price, making it hard to break people of their preferred grocery store unless you can make the experience of buying food easier and less expensive.
Considering that selling groceries is one of the most competitive low-margin industries,
anything that gives a retailer an edge can make a huge difference. For the big players, that means convincing customers to order delivery of perishable items they're used to picking off a shelf and taking home with them.
Amazon has been working on solving the grocery problem for almost a decade. More recently, in 2015, the company introduced Prime Now, a separate app that featured items customers could order for quick delivery. The problem is, compared to the 200 million people who visit Amazon's website every month, there were only 1.8 million monthly users of the Prime Now app in August, according to a report from Bloomberg.
Amazon stepped up its efforts with its 2017 purchase of Whole Foods, but until now, it wasn't clear how Amazon planned to leverage the 500 or so Whole Foods locations in its fight against much larger grocers like Kroger and Walmart. Now we know.
Bloomberg's report says Amazon is now expanding a test to 30 cities that involves two-hour delivery from Whole Foods directly from the main Amazon website, without having to download the additional app. Taking a page out of the playbook of competitors like Target, which turned its stores into local distribution hubs, Amazon may have found an ideal way to leverage Whole Foods locations and make a dent in the $840 billion annual grocery market.
Here are three reasons Amazon could actually win:
Selling groceries online is more complicated than selling iPhone cables, for sure, with the biggest problem being that most people aren't willing to buy perishable food without seeing it first. But Whole Foods has a reputation as a high-quality brand that people trust. That matters in the battle for consumers, especially in the grocery market.
Even Amazon customers who don't already shop at Whole Foods might be willing to give grocery delivery a chance when it comes from a place known for quality food. This might not seem like a big deal, but for many consumers, it's likely the biggest barrier to ordering perishable foods online.
Walmart and Target are already in the delivery business. Walmart is undercutting Amazon's Prime with a new $98 grocery delivery service, and Target offering its own Shipt same-day delivery, as well as curbside pickup. The biggest benefit if you're an Amazon customer is that now you can order groceries from the same place you're used to buying pretty much everything else, and have them delivered.
That's a big deal for consumers who make their grocery decision based on the most convenient way to get milk, eggs, bread, and produce. Ordering food online and having it delivered in two hours may not seem especially convenient until you've spent that same amount of time in a grocery store with four young children.
The final advantage that Amazon has is the enormous amount of data the company has on what its customers buy. In fact, that's one of the hallmarks of this test, according to Bloomberg, which involves Amazon using purchase histories to recommend products from Whole Foods to be delivered.
Certainly other grocery stores keep track of what their customers buy, and have for a long time. But if the battle for this particular market comes down to who has the most data and can to turn it into future purchases, it would be hard to bet against Amazon.