Blog Post - Frank Kochenash , Nov 11 2019

How Amazon is simplifying its services for customers

How Amazon is simplifying its services for customers

The big news last week was Amazon shifting Amazon Fresh to a "free" program, meaning that the service is now included in a Prime member's subscription for no additional charge. But is also did 2 other things; Fresh now comes with an option for 2-hour delivery, and includes Whole Foods assortment purchasable from the Amazon app. In summary:

  • Amazon Fresh is now an included part of Prime
  • Amazon Fresh now has the same 2-hour delivery promise as Prime Now
  • Amazon Fresh includes Whole Foods

This is another case of Amazon simplifying its services for customers. A few weeks ago, I noted this as the case when they deprecated the Add-On program. In the not-so-distant future, we can expect Fresh and Prime Now (as well as probably Whole Foods) to be folded simply into an expanded Amazon Prime offer. For example, I suspect Amazon will at some point eliminate the $35 minimum purchase requirements for Fresh orders. Such simplification fits with Amazon's development of customer-focused solutions. It has gotten what it needed out of Fresh, Prime Now, Add-On, etc. Now, time to integrate and simplify.

As if to give away the plan, Stephenie Landry's LinkedIn page has her title as "Vice President, Amazon Fresh, Prime Now, & Whole Foods Integration." The cited Forbes article notes Stephenie's title as "Amazon's VP of grocery delivery." Both indicate she's playing a/the key role on the operations side to integrate the offerings.

As she notes, this is a potential game-changing event. It is Amazon concentrating its business model on the Amazon Prime member rather than fragmenting business and effort across several programs. Every online grocery program is now competing against the full scale of Amazon, not just its Fresh program. (To the competition point, the timing is also probably not coincidental, this coming two months after Walmart consolidated its grocery program under Delivery Unlimited for $98/year.) Amazon is challenging the market, essentially saying "I can profitably grow sales from Amazon Prime members and take share from other retailers." I look at it like a Costco model fuelled by an online experience, enormous amounts of member behavioural data, and massive B2C distribution scale rather than concentrated buying power.

Obviously, this is Amazon's bet to make and it will cost them a lot. For brands, they need to tow the line between taking advantage of the growth opportunities this provides (on Amazon and in online grocery more generally) without subsidising Amazon's expansion. This simplification should benefit brands by reducing the number of programs they need to manage, but it will take time. In the meantime, continuing to prepare for a future where an increased share of products (across all categories) are sold online and, probably, through Amazon is the future. I believe last week's events will only accelerate the change.