ON JUNE 18, 1815, NAPOLEON BONAPARTE and his formi- dable army was soundly defeated at the Battle of Waterloo, putting an end
to the French Empire’s domination over
Europe not to mention Napoleon’s career.
So much for high school history, but
history can repeat itself. Jeff Bezos might
be yet another nation builder to underestimate the opposition forces. The question being raised by some retail experts,
journalists and other naysayers… will grocery be Amazon’s Waterloo?
I cover companies in virtually every
segment of retail and it is hard for them to
conceive of anything
that could stop this
While advances in
online sales in grocery
have been relatively
meager (less than one
percent after nearly
10 years), it speaks to
Amazon’s unwavering persistence. But I
wonder if Amazon is
simply using grocery
as an added attraction to sell more books, electronics and
other goods. Or, could it be the other way
Frankly, it does not make a differ-
ence. Grocery is an important gateway
to getting more consumer data—espe-
cially from Millennials who are far more
engaged with online shopping than any
other group. Clearly, what food people
buy can tell you a lot about potential
purchases in other categories.
One of Jeff Bezos’ favorite lines is: “Your
margin is my opportunity.” To a degree,
he is absolutely right. It is not news that
the Amazonian empire was built on convenience and prices that undercut the
competition, which in some categories,
clings to its historically high margins
despite painful lessons to the contrary.
However, Amazon has its Achilles heels.
One is the question of convenience.
Research tells us that meal planning,
particularly for the much sought-after
Millennials, is not a strong suit for many
people who often do not know what they
are going to buy—even for that night’s
dinner—until they are in the store.
Additionally, consumers are still going
to have to fork over a chunk of change
for fees. Originally, in addition to Amazon
Prime and the $14.99 per month add-on
for Fresh, total annual fees were about
$299. These were far higher than competitive services like Instacart, in which Whole
Foods now has a stake, Peapod, Shipt or
FreshDirect. The price for Fresh service
has now decreased to $15 monthly for
members of the $99 a year Prime service.
But is it enough to attract a customer
base outside Amazon’s relatively narrow
Another issue is that you have to place
an order with Amazon by 10 a.m. for same
day delivery. Partnering with local grocers
means competitors can fill orders as they
come in, and not depend on owning the
inventory or building their own refrigerated warehouses and fulfillment centers,
as Amazon has done in Massachusetts
Amazon is working the problem by
going from click-to-brick and plans to
open convenience stores for perishables
as well as curbside pickup at some locations for online orders. The consensus is
that Amazon is taking a page from both
Aldi and Lidl both of which are expanding in the U.S. It is also developing license
plate reading technology to speed up
pickup services. This could solve two problems—narrow delivery windows and what
happens when customers are not home
to accept deliveries and drivers have to
spend more time and fuel driving around.
But Amazon has also run into push-back from local politicos and residents.
In the San Francisco Bay Area as well as in
Sunnyvale and San Carlos, Calif., there is
mounting concern that the stores would
clog up the streets with delivery trucks
and customers picking up orders. Amazon
has also put off some people when development projects were presented to local
officials without disclosing that Amazon
was going to be the tenant.
Given that it takes Amazon as much as a
year to open convenience store locations,
the idea could hit a wall or be shelved
before it reaches critical mass.
On the other hand, Walmart, which
recently bought Jet.com for $3.3 billion to
bolster its e-commerce chops, is using its
extensive store network to open kiosks in
some parking lots as pickup locations. This
could be significant competition since the
chain plans to have this service available
in about 25 percent of its more than 4,600
U. S. stores by the end of next year.
As Napoleon sadly discovered… never
underestimate the competition.
Amazon’s future success in selling groceries should not be a forgone conclusion.
By Len Lewis
Len Lewis is a regular Grocery
Headquarters columnist and
veteran industry journalist.