14 RW 10 August 2018 Why Amazon needs stores to win in European grocery A behemoth on the non-food retail landscape, Amazon's move into grocery, certainly in the UK, has not been so sure footed. But as Lisa Byfield-Green argues, this could be about to change. ollowing another jump in second- to generate meaningful volume. We can certainly quarter results and its fourth Part of this comes from the difficulty Prime Day, Amazon continues to of establishing logistics operations and anticipate that the demonstrate its retail dominance striking and maintaining agreements Fand strength. with retail partners in each market, but first international Its success has been mainly a much of it is also due to the fact that Amazon Go store is non-food story to date but following Amazon is not seen by customers as a the Whole Foods Market acquisi• grocery expert. Not yet, at least. likely to target tion, Amazon generates 8.1% of total revenues from physical stores ($4.3lbn International expansion London of its $52.9bn turnover for the quarter) This is starting to change as it builds and is firmly on course for a multi• meaningful relationships with leading channel future. FMCG suppliers. For Prime Day this year, FMCG products featured heavily Amazon's future as bestsellers, including Finish dish• Our forecasts show that Amazon is washer tablets in the UK and Italy. already set to dominate in retail, both Looking at successful grocers in players. A potential acquisition in the US and in Europe, and will grow mature market such as the UK, it is clear target for Amazon is often cited as faster than any other competitor. for the majority their success is based Morrisons and it already partners But one year on from its Whole Foods on a multichannel strategy. If Amazon well through Fresh and Prime acquisition, Amazon's new multi• is serious about grocery outside the US, Now. channel strategy demonstrates how the we can expect to see more stores inter• There may be an opportunity retailer can double the benefits of its nationally too. here, yet there are also stum• Prime ecosystem to grow loyalty and bling blocks, not least of which volume successfully across both brands, UK calling is Morrisons' 10-year agreement leveraging Prime online and offline to Our view is that the UK presents the with Ocado for online grocery make the flywheel go faster. biggest opportunity, particularly in light operations, which is set to run This is powerful stuff. Prime of recent consolidation among the major until 2024. members enjoy regular discounts on Amazon Go is another conveni• Whole Foods items in-store, and for ence format that would work well Prime Day in the US customers received in the UK and we can certainly a $10 Amazon voucher after spending anticipate that the first interna• $10 at Whole Foods. tional store is more than likely to In the UK - where it operates seven target London. stores all in London - Whole Foods offered Prime Day discounts for the first Outside the M2S time this year and installed a pop-up Another option for Amazon might VEP lounge to generate excitement at be to expand its Whole Foods the branch in Kensington. Amazon's operations outside London, either Treasure Truck offered deals on Fitbit opening new stores or picking fitness trackers for the day, a further up divested (most likely smaller venture into offline retail. store) locations from Sainsbury's Although Amazon's growth is planned merger with supermarket outpacing that of all retail competitors, Asda. its dedicated grocery operations outside Amazon's grocery competitors the US are tiny. outside the US are not quaking in Despite launching Amazon Fresh in Lisa Byfield-Green their boots yet, but just think what the UK and Germany and Prime Now Senior retail analyst Amazon could do internationally to 16 European cities, the services are LZ Retailytics if they had more bricks and mortar taking time to become established and stores. RW .