Amazon’s Next Frontier: The Food and Grocery Business

Amazon has already proved its mettle in the e-commerce space and in the distribution sector. Earlier in the year the company also staked its claim in the digital freight brokerage industry. Now, it has set its sight on the grocery business.   

Amazon’s Grocery Connect 

Unlike its other ventures, the retail giant’s foray into the food and grocery business has not been profitable — at least not yet.

For the uninitiated, Amazon is not new to the food business. It has been operating in the food and grocery sector since it acquired Whole Foods in 2017; Amazon Go stores; and its fresh grocery delivery service. However, unlike its other ventures, the retail giant’s foray into the food and grocery business has not been profitable — at least not yet. According to an article published in The Motley Fool, Amazon’s CFO Brian Olsavsk speaks about the company’s latest quarterly results saying, its sales from physical stores, which are principally Whole Foods revenue, were actually down by 1.3% from the previous year — “this is the only major segment of Amazon’s net sales that didn’t show any growth”. 

This has not dissuaded the company from making further investment in the food and grocery business though. Early last month, it announced its plans to launch a new brick and mortar food and grocery store brand. The first store will be opened Woodland Hills, California in 2020.  This new business will be separate from its existing food and grocery business.  

With this announcement, one can say with certainty that for next year, one of Amazon’s major business goals will be to acquire a large slice of the global grocery and food retail market which is estimated to be worth USD 12.24 trillion by 2020

What will be different in the new venture?  

While Amazon has a presence in the food business, its reach has been limited. According to news reports, Amazon is aiming to reach a wider customer base. While Amazon’s Whole Foods business caters to the high-end customer, the new stores will be designed to cater to mid and low-income households. The new stores are expected to enable Amazon to offer their customers a range of products more in line with other large retailers like Walmart, Costco, and Kroger.   

In an article in Forbes retail expert Neil Stern, explores in-depth what the customer can expect from Amazon’s yet to be named new grocery venture: 

  • The new store will be omnichannel from the beginning 
  • It will have ample space for in-store picking and holding facilities 
  • The focus will be on mainstream products 
  • It will be more price-competitive than the Whole Foods business  
  • It may focus more on Amazon’s private label  

Will technology be a part of the new venture?  

Anything that Amazon does is powered by technology.

Anything that Amazon does is powered by technology. So it goes without saying that technology will be a large part of the newly announced grocery venture as well. In his article, Neil shares that the new store might not be as tech-savvy as the facilities available at Amazon Go stores. Further adding that technology in the new store might not be immediately scalable.  

Irrespective of the level of savviness, we can safely assume that technology will play an important role in the store, if not initially, then going forth.  

What’s in it for you?  

Business opportunities.  

Anyone associated with the business world knows, Amazon works on a large scale. The new grocery venture will sell a wide range of products. To run this operation efficiently and competitively, Amazon will need to source products from a variety of suppliers. And for this, the e-commerce behemoth will need to enlist a large number of suppliers.   

While working with a large scale operator like Amazon has its perks, it also has stringent requirements. Organizations like Amazon expect high quality, regular supply of goods, and adherence to delivery timelines from their suppliers. Given the fact that the e-commerce giant is a technology-driven company, it will also look for tech-savviness in its business partners.  

So, what are the qualities required to become a supplier for such a large scale venture? 

You need to have a rigorous inventory management system, a strong forecasting technique, and a well-managed distribution center. 

While the company will share what it would look for in a supplier, there are a few things that are usually expected from suppliers working with large scale multinational companies such as Amazon: 

  1. Quality products: There can be no compromise on this ever. The product, packaging, and delivery all have to follow a set standard. Any deviation from the standard can lead to losing the contract.  
  2. Technology: Technology is gradually taking over the retail space. Data transfer, reports, and invoicing are all done electronically, usually with the help of specialized software. Suppliers need to ensure that their organization is not only able to transfer required data in a systematic way electronically but is also connected internally through technology. This will help ensure both accuracy and speed in work and data exchange.  
  3. Strong supply chain: A robust supply chain with end-to-end visibility is an essential requirement to do business with large scale organizations such as Amazon. For this, you need to have a rigorous inventory management system, a strong forecasting technique, and a well-managed distribution center. 
  4. Reliable transporters: Another important factor in successfully servicing a large retail store chain is a reliable transporter/carrier with a well-connected network and a good track record of on-time delivery.  

To know what other factors come into play for qualifying as a supplier for a large, food and grocery retail chain, download our whitepaper  Whole Foods: Thriving as a supplier in the complex supermarket supply chain.  

The food and grocery retail landscape is set to change with new technologies being adopted by the retail leaders. To cater to them and work alongside them, their suppliers will also have to deploy modern technology in their business.  This is where we can work with you to make your supply chain – Amazon ready or any food and grocery retail business ready.  To know how we can assist you in getting there, connect with our team at 800.MY.SHIPPING or fill out the form below.