Will Amazon do to the grocery industry what it did to ecommerce?
These moves have many wondering if Amazon is about to transform the grocery business just as it did ecommerce and publishing. Actually this is a very different market. The limited profitability of online deliveries leaves little room for Amazon to innovate and Whole Foods only attracts a restricted, wealthier market. That being said, Amazon Go might just be the disruptive force to transform the grocery industry.
Online grocery delivery remains only a small part of the overall grocery market, with online shopping accounting for about 6-7% of the UK grocery market, 5% in France and the Americas, and less than 2% everywhere else. Asia is ahead of the curve with 37% of shoppers in Asia Pacific claiming to have ordered online groceries compared to 13% in Europe. Not only is online delivery only a small part of the overall grocery market, but the profitability of online grocery is dubious.
UK grocer Tesco claims 2-3% profit margins and recently implemented steep order minimum increases to firmly position home grocery delivery as a convenient and upmarket offering. Ocado, a purely online UK grocer with 1% of the UK grocery market, eked a profit in 2016 and returned to losses in 2017. In fact, its revenues are increasingly only driven by contracting out their ecommerce expertise rather than in online grocery.
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