Decoding the toughest category in e-commerce.

Which is the toughest category to tap into and turn into profits? Is it groceries?

On Saturday, afternoon, while sipping my coffee, a random thought crossed my mind – I took my laptop and went to Amazon. ae,

I observed that the fresh veggies were all being fulfilled by the Lulu group and it was offering 2 hours of delivery for Prime members.

Being a curious retailer, the first lesson for the day was –

lesson 1:??Outsource your weak categories to build an assortment.

Grocery retail, especially fresh food items, is one of the most challenging business categories – Low margins, seasonal dependences on sourcing, and the perishability aspect attached to it.

But it is one of the most spent or purchased category i.e. the majority of the customers shopping buys groceries (share of wallet and frequency of purchase) both are high.

Does selling groceries make sense for Amazon?

Amazon.com started as a Book store and later became the “Everything store” and is most successful in all the categories.

But in order to master the Groceries segment, in 2007 it added the fresh food category and later in 2017 bought the entire chain of “ Wholefoods” to tap into the grocery retailing for which to date Walmart is the market leader with over 37% of market share.

In 2022, Amazon launched Amazon Fresh to compete with discounters like Lidl and Aldi.

Amazon Fresh stores certainly have the technology. The online giant’s ‘Just Walk Out’ technology has shaken up the grocery industry, with shoppers able to pay for the groceries they pick up and take from the store without scanning them or queuing at a checkout.

Other supermarkets, including Aldi and Tesco have also piggybacked off the idea, opening their own ‘checkout free’ stores.

Why Amazon entered the most competitive category?

The answer is “creating habits” and “tapping into frequent purchases”.

If?customers?start shopping for Amazon groceries every week, they will make Amazon their first port of call for everything else, and for that reason, it won’t give up on groceries.

I am not sure if Amazon is making money from Amazon Fresh or by selling groceries, I feel it is losing money, but it is Amazon’s way to market other categories and becoming a non-dispensable part of its customer’s life.

Lesson 2- You have to invest in developing consumer’s habits for your products even if it means losing money on one category and compensating the same on other purchases.

Challenges for Amazon Fresh:

Grocery retailing not only is Price & Quality sensitive, but it does need the Proximity of stores to reach & process customers’ orders faster.

Currently, Amazon fresh stores are very limited hence Amazon is experimenting with “drop shipping kind of stores” in India wherein the Kirana stores are used as fulfillment hubs and for order processing.

To learn Metaverse +fashion + leadership, a recipe for success, click here.

The acquisition of Wholefoods in 2017, is also a step forward in this direction to tap the markets which are being served by physical stores and to provide physical “touch & feel” for its own products like Alexa and other categories.

If you are a business owner operating in the beauty/fragrance genre & want to grow?your?business?& need a retail expert to help you achieve your “Vision to Reality” framework?then feel free to write to me at?[email protected] ?& schedule a discovery listening call over a #coffeechat .

I have co-founded a retail accelerator for beauty brands called Adhara Retail which is a one-stop retail accelerator for testing brands in retail, Pop-ups & provides expert consulting in Retail leasing, staff training & retail ops, and franchising to scale your brand.