DUBLIN--(BUSINESS WIRE)--Sep 6, 2018--The "Amazon Fresh PrimeNow 2018" report has been added to ResearchAndMarkets.com's offering.

It's a perfect time to take stock, as it has been exactly one year since Amazon has bought Whole Foods. To almost everyone's surprise, not that much has happened yet. Or has it?

The AmazonFresh rollout both in the US and the EU has been completely overhyped. The press raised expectations that the company simply could not meet, especially as Amazon is rolling out the service in a very careful and considerate manner. In any geography, the company targets a tightly bound geographic footprint first. This means that initial sales volumes cannot be of an order that would cause significant market share shifts. But on the other hand it's still early days, one should not be dismissive just yet.

The rollout of the full AmazonFresh/PrimeNow offer has shaken up the consensus about online grocery business models. Over the years, online grocery picking has moved from in-store to semi-automated distribution centres and in the case of Ocado to fully automated robot operated warehouses. However due to space requirements, robot-operated warehouses need to be in vast out-of-town locations. This creates a problem for rapid, one hour or two hour deliveries. These out of town sheds are simply too far away from the city centre to fulfill the one or two hour promise. Hence we are seeing a return to the pick in store (Instacart/PrimeNow) model - even though there are clear economic challenges. (The Whole Foods acquisition obviously provides a real growth fillip to PrimeNow with many great central store locations)

Amazon has also challenged the consensus about average online basket sizes. Just two years ago it was still a common view that online grocery orders needed to have an average baskets size of at least 100 (US$150 or 130 or so) for companies to be able to realise a profit. And yet, the shift towards one/two hour deliveries has caused basket sizes to decline considerably.

AmazonFresh has never managed to get its average basket size to the same level as the more successful multichannel grocers. AmazonFresh's average baskets sizes have always tracked considerably lower. (The PrimeNow baskets are even lower and do not have the additional Fresh subscription fees to offset costs.) To us it looks like Amazon is trying to turn this weakness into a strength.

This, we believe, shows two things. First, it shows how committed Amazon are to cracking online grocery. Second, to us at least, it suggests that the company is going to be in for a long, hard slog. Amazon will not be able to crack online groceries in the same way as the company dominates other categories such as books, music and video, consumer electronics or clothing any time soon.

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Related Topics:Food and Grocery Retailing

KEYWORD:

INDUSTRY KEYWORD: RETAIL FOOD/BEVERAGE

SOURCE: Research and Markets

Copyright Business Wire 2018.

PUB: 09/06/2018 04:48 PM/DISC: 09/06/2018 04:48 PM

http://www.businesswire.com/news/home/20180906005940/en