Final debriefing about case n. 14 () Analyzed by Anisha

Scientific articles/papers State at least n.1 scientific article/paper you selected to support your analysis and recommendations

N. Title Author Journal Year, number Link 1. Amazon’s Fresh Hamutal - 7 Jan,2018 https://rese Grocery Strategy: Schieber archci.com/a Beyond Whole Foods mazons- fresh- grocery- strategy- beyond- whole- foods/ 2. Unpacking Amazon’s Jon Reily - May 6, 2019 https://www Multifaceted Grocery .mytotalretai Strategy l.com/article /unpacking- amazons- multifaceted -grocery- strategy/ 3. - - Mar 1, 2019 https://www .digitalcomm erce360.com /2019/03/08 /amazon_gr ocery_stores _market_str ategy_domi nance/

Paper objectives:

Understanding the disruptive change in the U.S. Grocery market due to Amazon's decision of exploring in this new area

Describe the company’s strategic profile and its industry Applying the tools of analysis covered in the whole textbook, identify and evaluate the company’s strategic profile, strategic issues/problems that merit attention (and then propose, in the following section, action recommendations to resolve these issues/problems).

(Text format: n. 12 points Garamond, single-spaced, with justified left and right margins)

Amazon started with the strategy 'sell all, carry more' in 1994 during it's birth by when it was selling books but soon it figured out that it needed to be more diverse so this changed to 'sell all, carry more' model adding other categories in the catalogue in 1998. Soon Amazon made 4 pillars as it's business model to grow through innovative disruption which are low prices, wide selection, convenience and customer service. Amazon drastically changed from modest internet brand into tech behemoth as corporation moved towards new product categories such as E-readers and enterprise cloud computing services. By 2002, Amazon launched AWS and by 2005 it started a free shipping program called which resulted in high customer loyalty. Like this Amazon kept experimenting in different areas such as fashion and a 1st standalone corporation venture capital unit called Alexa fund. This resulted in increase in sales by 27% in 2016.

Soon Amazon wanted to test waters in grocery market to reach it's moto of 'everything everywhere store'. Amazon, who realized that this huge market is still untapped, started testing Fresh in 2007 in , trying to solve the logistical challenges which this new perishable concept created, finally launching at a bigger-scale in 2013. Since then, multiple delivery and fulfillment startups have mushroomed, in an attempt to solve Last Mile problems, but Amazon continued transforming the industry, launching 2-day delivery, then 1-day delivery, and finally, 1- or 2-hour delivery in some areas. So the Whole Foods acquisition was a natural part of the company’s platform building, which includes platforms that were not initially intended merely for food and beverages (but were utilized to include those – such as the “” and the Dash button); brand building efforts (launching “Wickedly Prime”), and the curation platforms (the Sweet Surprise box subscription, as well as through lifestyle-targeting tactics). Other platforms were tailored specifically for quicker, cheaper fulfillment – “click and collect” grocery locations and an in-car delivery pilot.

Amazon realized that it was not enough as there were troubles with wastage of food, management of refrigerated warehouses, hiring additional delivery people in each new market. The biggest issues it faces was the food spoilage which was a high cost for the company. So, it started experimenting into the other areas also. This resulted in the biggest acquisition of 2017 of the Inc. which was the leading natural and organic chain in US. This was Amazon’s first brick and mortar stores. Bezos realized that it was not enough to capture with its pure online format.

When looking at these platforms, it is clear that the company is attacking the grocery business from almost every possible angle. More examples include the Prime Sample platform, which already features food and beverage brands; and Amazon Prime Pantry’s bulk value proposition which is utilized for non-perishables. The company might go on to integrate its “Amazon Go” technology in the Whole Foods stores, thus further affecting the grocery industry. And, as Amazon prepares for the future of grocery shopping, it is fair to assume that Alexa will be the next frontier, compelling F&B companies to design a voice search strategy.

According to many analysts this merger can disrupt the grocery market as Amazon can cut costs out of supply chain for Whole Foods which would force other competitors like to take the same actions. This could be a gamechanger or Grocery Apocalypse. Plus, the model of Amazon can be a threat to labor sector. Some think that the traditional will still be on the upper hand as Amazon Go is still on the testing mode and is better suited to non-perishable goods. This model is not for 9 million Americans that were unbanked and doesn’t have debit or credit card or a smartphone. is a good plan but at the other hand it is a pricey service. So, few believe that Amazon’s grocery model is merely a threat to the food joints such as Walmart which has more that 5000 stores in US whereas Amazon through the merger of Whole Foods has 460. Both have different appeal in attracting customers. In addition to that Walmart announced that it would offer it’s product on Google Express. The German brand and can also pose a threat as they are trying to enter US market with it’s moto of high quality at low prices.

Not just competitors for Whole Foods, Amazon has many key challenges to look out for on an outer level in grocery sector such as blending physical station in convenience of digital retailing, managing corporate office needs, merging Whole Foods with Amazon to bring convenience to a new high. But even than Amazon’s decision can pose a threat to others if tackled properly. The grocery industry is still working to understand how Amazon will roll out the new stores, and how broadly. A lot of questions have yet to be answered. However, it’s clear that part of Amazon’s ambition to grow grocery market share is about further embedding the business in our daily lives and our data.

With its Whole Foods purchase, Amazon was really getting another avenue to its best customers, Prime Members. However, with the proposed move into the discount grocery sector, it would tap into another treasure trove of household data it may not have today. The new grocery chain also serves as another very effective vehicle for Amazon to move its high- margin private-label goods, and perhaps drive even higher adoption of Prime subscriptions. Though and Walmart experienced temporary hits when the news was announced, the real immediate threat is not to grocery stores but rather to CPGs, which now have one more channel to connect to their customers owned by the beast that's trying to kill them.

This move will likely light a fire under many CPGs which were on the fence about direct-to-consumer (DTC) sales. We can also expect a crush of new CPG-to-consumer connection attempts. Ironically, Amazon moving into discount grocery will further squeeze the already very competitive talent market for e-commerce professionals, as CPGs look to shore up their defenses to this new front.

Your action recommendations

Reports say Amazon wants to open 3,000 Amazon Go locations by 2021, but so far there are 10— four each in and Seattle and two in . The much-larger Whole Foods chain operates 479 stores in North America. Compared to the grocery leaders, that is a modest presence. Amazon reportedly wants to open 3,000 Amazon Go convenience stores by 2021. So far, it has opened 10.

Walmart, America’s largest grocery store, operates 4,750 grocery stores nationwide. Kroger Co., the second-biggest U.S. grocery retailer, has about 2,800 grocery stores in 35 states, and third-ranked Cos. Inc. runs roughly 2,300 food and drug stores in 35 states and the District of Columbia. To realize its ambitions in the grocery market, Amazon must dramatically increase its store footprint. To become the nation’s food retailing leader Amazon needs a significant presence in the grocery business, which means directly challenging Walmart Inc. and Kroger. And doing that requires opening more grocery stores. Demand of grocery never dies. Even at the time of the pandemic COVID-19, demand of groceries did not decline. This brings Amazon to it’s dreams of becoming an everything everywhere store and will bring the company more closer to it’s customers. Even while selling the products in low margin this plan can benefit it for it’s online business where it can sell high margin products. They can use these various ideas I have discussed to concentrate on it’s low cost strategy to attract customers. Amazon should keep it’s low price strategy on the first foot as we have discussed earlier how other competitors are already working against Amazon by using offensive strategies. So, Amazon has to use the same strategy to capture this market. Amazon has the means to be able to use it’s already established markets to be able to work in it’s favors. It is already working on it by reducing the prices of many products such as avocados, eggs, fruits etc. by as much as 50% in Whole Food stores. According to CNN business, At Whole Foods, Amazon's imprint is growing. Price reductions have improved traffic, same-store sales have grown about 3% since the deal, and the grocer got a big lift from July's Prime Day sale, according to RBC. But instead of making drastic changes, Amazon has steadily attempted to use Whole Foods as a weapon to lock more Americans into the Prime ecosystem by offering member discounts and selling electronics in stores. Meanwhile, Whole Foods trails rivals in the race to expand pickup and delivery. And although it could prove more competitive in urban areas, it still faces an uphill climb with middle-class suburban and rural shoppers. Amazon can use the experience by already established brands and try to adapt some of the learnings in it’s business model such as in-store-dining which is lacking from it’s model. This was one of the biggest trends in United States in recent years. Grocers were luring customers into stores with dining options. Amazon can look into these business models and innovate it’s model. It should work on resolving the last mile challenge of delivering the fresh food to its customers by bridging the small distance from the distribution hubs to individual customers and even work on it’s problem of spoilage. This would build trust in customers and it would affect in building Amazon a strong market in Grocery sector. It should try out new areas and experiments to enter into the market and I think it is already working on it as according to recent news channel cnet.com, Amazon on Monday said it plans to open its first new brand of grocery store in next year, as it amps up its ambitious push to become a bigger name in food. "Amazon is opening a grocery store in Woodland Hills in 2020," an Amazon spokesperson confirmed to CNET on Monday morning, soon after the company published four new jobs postings for the location. Woodland Hills is a neighborhood in Los Angeles. The store will be different from Amazon-owned Whole Foods, the company said. It didn't say whether it will open more of these locations, what its selection or pricing will be, or what the brand name is. But in the job postings, the company described the Woodland Hills location as "Amazon's first grocery store," suggesting that it will have the Amazon brand name and that the company could expand to multiple sites. The store won't use the company's Amazon Go technology, which allows customers to check out without waiting in line. Instead, checkout will be conventional as at other grocery stores, the company said. The new store, though with only one confirmed location so far, points to Amazon's growing ambition in the roughly $800 billion US grocery market, where rival Walmart is the leader and Amazon, even after its Whole Foods deal, remains a small player. Expanding in the grocery sector helps Amazon, the world's largest online retailer, in a number of ways: It reinforces customer loyalty because people tend to shop at a local store every week and it could allow the company to continue its fast revenue growth, which typically hovers around 20% every quarter despite its massive size. Additionally, the new line could let Amazon move into the more mainstream grocery store business, while maintaining Whole Foods as a higher-end store for organic and specialty foods. This work could offer new competition to Kroger, SuperValu and many other supermarket chains.

Optional section: additional sources (company disclosures, web pages, video etc)

N. Title Author Journal Year, number Link 1. Amazon-Whole Foods Nathaniel CNN Business August 28, 2018 https://mon one year later: The Meyersohn ey.cnn.com/ grocery business will 2018/08/28/ never be the same technology/ business/am azon-whole- foods-365- walmart- kroger- - grocery/inde x.html 2. Amazon will launch Ben Fox Rubin Cnet.com Nov. 11, 2019 https://www new grocery store as .cnet.com/n alternative to Whole ews/enter- Foods for-your- chance-to- win-a- tovala- smart-oven- and-tovala- meals/ …