Why is Amazon experimenting with a grocery delivery subscription model?

Amazon’s entry into grocery delivery subscription service is news globally.

It confirms that the food delivery business cannot be just feasible based on the basket size or ticket order value.

Last mile logistics consumes a major chunk of the grocery deliveries, especially in metros wherein the traffic is a big issue.

Moreover, Last-mile logistics is the only area for the generation of consumer complaints and losing customers.

I had previously written an article on last-mile logistics, read it here.

Amazon is testing a $9.99?monthly subscription model?earning Prime members unlimited delivery on Amazon Fresh and Whole Foods orders over $35.

Under the program being tested in three cities — Sacramento, California; Denver, Colorado; and Columbus, Ohio — subscribers also receive unlimited 30-minute pickup on orders of any size. The monthly fee comes on top of the cost of Prime membership ($14.99 per month or $139 per year).

Amazon Prime has over 80 million subscribers and Amazon is betting Prime members will want to pay an additional monthly charge for fresh food to be dropped at their doorstep without pesky delivery fees.

Retail lesson 1:

It is easier to sell to an existing customer rather than acquire a new customer.

Amazon is determined to cement itself as a grocery destination for shoppers.

Since acquiring Whole Foods Market?in 2017?for $13.7 billion, it has launched its chain of Fresh supermarkets, and it’s taken steps more recently to unify its online and brick-and-mortar grocery operations.

As a passionate student of Retail Management, Amazon’s move to the grocery subscription model raises a few questions in my mind i.e.

"Will e-grocery profitability likely have to rely on a subscription model, or does that only complicate grocery delivery for consumers?"        

Retail lesson 2:

In a perishable grocery business, Grocers continue to grapple with various schemes to cover the costs of grocery delivery, especially managing logistics around perishables.

I recall the words of my friend Jonathan Bergstrom , who had once told me that in the perishable food business, you have only one chance to take only one margin hit to recover your investments.

That is so very well said and that’s why even a giant like Amazon is experimenting with a subscription model for grocery deliveries.

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The first chapter itself talks about Key Performing Indicators that every retailer needs to know.

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