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Amazon Analysis

Amazon has struggled to succeed in last-mile grocery delivery due to high prices, delivery fees, and quality issues. Customers report produce arriving damaged and meat cross-contaminating other items. Research shows the top challenges are delivery costs and ensuring high quality selections. To improve, Amazon should lower prices, offer more coupons and promotions, and invest in better order fulfillment to provide a superior shopping experience.

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Sai Teja Annala
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73 views

Amazon Analysis

Amazon has struggled to succeed in last-mile grocery delivery due to high prices, delivery fees, and quality issues. Customers report produce arriving damaged and meat cross-contaminating other items. Research shows the top challenges are delivery costs and ensuring high quality selections. To improve, Amazon should lower prices, offer more coupons and promotions, and invest in better order fulfillment to provide a superior shopping experience.

Uploaded by

Sai Teja Annala
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Problem Definition:

Amazon has increased its presence significantly in retail space over the years, but they still did

not crack the last-mile grocery delivery. Problems include low adoption rates because of not

meeting shopping expectations, delivery concerns such as missing items and ruined orders,

unable to meet customer demands such as preference to select fresh produce and transporting

perishable goods.

Current Information:

According to Fast-moving consumer goods (FMCG) 2019 report1, the top challenge customers

face when shopping for Amazon groceries online is high prices and delivery fees. While

convenience is one of the primary reasons most customers shop online, they expect it at little to

no cost. High delivery fees instigate potential buyers to turn to the next e-commerce service that

offers free or negligible delivery fees. Both Baby Boomers (76%) and younger consumers 18-25

years old (69%) acknowledge this as a key decision influencer. In addition, U.S News 2 reviewed

the current grocery delivery services for 2020 and placed Amazon Fresh at third position and the

main issue with them being prices34 which are generally higher than those of traditional grocery

chains. The second most important aspect of online grocery delivery is quality assurance.

Research by Cogent5 business management revealed that the quality of the groceries expected by

the customers is very high, and they desire the right products to be picked and delivered at the

right time. In addition, the research indicated that e-grocers must manage customer expectations,

which are sometimes unclear and can be a huge challenge. According to consumer reports 6,

customers had to rely on a stranger to pick the fresh produce. For the most part, food was fresh,

but the handling and packing were not properly done. For example, fruits arrived squished or
with minor brown spots. Some e-grocers did not bother to put raw meat in their own plastic bags

to prevent leakage and cross-contamination.

Recommendation:

Grocery delivery saves time however customers are concerned about the subscription, product

prices and, delivery fees. Because of the low margin, high volume strategy in grocery industry

competitors like Walmart and Target provide better prices for the customers and this gives little

to no reason7 to switch to Amazon’s grocery service. Also, with the big cost consequences of

hiring someone to do customers’ shopping, Amazon is trying to shift the burden to them by

charging delivery fees. The higher prices and delivery fees do not justify the online shopping

experience and offset the advantages of grocery delivery. Amazon should focus on boosting sales

and one way to do it is to decrease prices and increase promotions. 90% of online grocery

shoppers8 are active coupon users and regularly use available promotions across all the channels.

Customers like to feel as if they received a ‘deal’ and it is a positive feeling and reassuring 9.

Grocery stores that offer coupons regularly see repeat customers that may have been costly to

acquire. Low prices and along with incorporating coupons into Amazon’s grocery marketing mix

can quickly build their customer file. Amazon has an enormous amount of customer data and

they can leverage to easily tailor promotions, coupons, and information on price and selection to

serve that customer. Strategies like weekly ad promotion via emails, Facebook, and search

engine marketing promotions can help drive customers. Increasing grocery sales could

eventually provide Amazon the leverage it needs to sustain lower prices and demand better deals

from suppliers. Overall, greater sales, albeit at a lower margin, should increase the adoption rate

and produce higher profits. While this strategy does a great job to boost volume and sales,

coupons and promotions alone cannot build Amazon’s grocery brand equity, customers also need
superior shopping and delivery experience. Quality content with detailed product information,

graphic videos, can help mitigate such concerns and create a strong motivation for customers to

purchase on Amazon.

References:
1
https://www.digitalcommerce360.com/2019/05/29/top-roadblocks-in-the-online-grocery-shopping-
journey/
2
https://money.usnews.com/money/blogs/my-money/articles/best-grocery-delivery-services
3
https://moneywise.com/a/lendedu-walmart-amazon-price-comparison
4
https://www.cnbc.com/2019/09/14/walmarts-grocery-delivery-much-cheaper-than-amazon-and-
peapod.html
5
https://www.cogentoa.com/article/10.1080/23311975.2018.1459338
6
https://www.consumerreports.org/online-grocery-services/grocery-delivery-services-review/
7
https://dollarsprout.com/amazon-fresh-review/
8
https://www.valassis.com/consumer-intel-report/
9
https://www.inmar.com/blog/press/83-percent-shoppers-report-coupons-are-driver-changes-
purchasing-behavior

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