Supermarkets Fear Amazon For the Wrong Reasons

The assumption that Amazon is about to do to groceries what it did to books may be wrong.

The largest population cohorts are increasingly concerned with quality and freshness. This trend may counter the ecommerce consolidation model, though they are not mutually exclusive. Consumers have demonstrated they are comfortable shopping at Tiffany's and Target - and that may well be the case with groceries. JL


Barbara Thau reports in Forbes:

E-commerce accounts for a mere 2% of grocery sales. Only 22% of shoppers are inclined to buy groceries from Whole Foods online.And they are least likely to buy perishables on the web. Shoppers want to see, touch and smell meat, seafood and produce, and therein lies the competitive advantage for brick-and-mortar retailers: fresh food accounts for between 27% and 49% of the food sales in the U.S. As shoppers gravitate to better quality food, mainstream supermarkets are growing their mix of healthy, organic assortments
It conquered books, consumer electronics, and now it’s gunning for food.
Retailers are panicking over Amazon's salvo for grocery dominance—and rightly so, but perhaps for the wrong reasons.
A deep dive into why consumers buy food tells a more nuanced story that challenges conventional wisdom about what Amazon’s threat to supermarkets truly is.
Despite chatter that the e-tailer is poised to take a big bite of consumers’ food budgets, a majority of shoppers don’t want to buy groceries from Amazon online, even with Whole Foods’ high-quality foodie bona fides attached to it, according to a new study from consulting firm Simon-Kucher & Partners.
Fears over Amazon’s bid for shoppers’ grocery dollars came to a fever pitch when the retailer announced plans in June to buy Whole Foods.
Supermarkets have been largely untouched by the online retail revolution, as e-commerce accounts for a mere 2% of grocery sales. Groceries are a tricky low-margin, business. Food is perishable and storage logistics are complex. The theory goes that Amazon’s escalating bid for groceries — from its Whole Foods buy to the new test of pickup points where shoppers retrieve items like drinks and snacks minutes after ordering them — is poised to move more supermarket sales online.
That might indeed be true, but consumers don’t necessarily want to buy all of their groceries online. Only 22% of shoppers are inclined to buy groceries from Whole Foods online via Amazon, the Simon-Kucher study revealed.
And they are least likely to buy perishables on the web. Shoppers want to see, touch and smell meat, seafood and produce, and therein lies the competitive advantage for brick-and-mortar retailers over ecommerce when it comes to this slice of the grocery business. It's a substantial one: Fresh food accounts for between 27% and 49% of the food sales in the U.S. grocery retail landscape, according to Nielsen research reflecting 62 different retail banners.
The Young And The Perishables
Millennials, in particular, prefer to buy perishables in store, the survey found. And as they’ve displaced baby Boomers as the nation’s biggest buying group, retailers should take note.
Millennials are “looking at food in a very different way than their parents,” said Susan Lee, a partner with Simon-Kutcher. They seek recipe discovery, freshness and food
from local farms. “They want to know where their food is coming from —the value drivers are really different” from earlier generations."
For traditional supermarkets, speaking to Millennials means staying on top of how this generation eats amid trends like meal kits a la Blue Apron (and now Amazon Meal Kit), and by drumming up excitement on "how to cook and live” in the fresh food aisles, she said.
As shoppers overall gravitate to better quality food, mainstream supermarkets from Wal-Mart to Publix are growing their mix of healthy, organic assortments and adding elements of a “grocerant” (grocers that sell restaurant-quality meals) to their stores to appeal to changing tastes.
Where the Krogers, Wal-Marts and Targets of the world are most vulnerable to Amazon is in the embattled center core of the grocery store.
The health-and-wellness trend that’s dampened consumers’ appetite for the packaged foods in the center aisles has also cooled sales of everything from canned vegetables to boxed cereals at supermarket chains.
And this is where Amazon can hit supermarkets where it hurts.
Non-perishables are three to four times more likely to be purchased online than perishable items, the survey found. That’s in part because food’s perceived variation in quality – checking out a salmon fillet in the aisle versus a can of beans with a long shelf life — informs shoppers’ inclinations — or lack thereof — to buy it online. And with the price war raging in packaged foods  at retailers like Wal-Mart and Target, Amazon is a formidable foe.
As traditional retailers  jockey to protect their grocery business — just this week Target plucked executives from Wal-Mart and General Mills to right its struggling food department — one warning is to keep the battle off the non-perishable aisles, where it’s that much  harder to win.