Amazon threat to big players in grocery sector

Online retail giant Amazon could potentially overtake supermarket chain Sainbury's for grocery sales, research claims.

Courses have been delivered to the likes of Amazon
Courses have been delivered to the likes of Amazon

A report from behavioural science experts Decision Technology (Dectech) suggests that as many as 13 per cent of consumers would select Amazon as their retailer of choice for groceries if it fully committed to the market.

This would place it ahead of Sainsbury’s (10 per cent), but behind Morrisons and Tesco, both on 16 per cent. Leeds-based Asda was ahead of both of these on 17 per cent.

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Bradford-based Morrisons currently has a supply agreement with Amazon which sees it provide a wholesale supply service to Amazon’s Prime customers, allowing access to a wide range of Morrisons ambient, fresh and frozen products.

The Dectech report found that, if Amazon pursued a similar strategy to the one it took with Whole Foods and acquired Morrisons, it could pose a major threat to the market.

Henry Stott, director of Decision Technology, said: “Our extensive, two-pronged research into the power of Amazon’s brand and its potential for disruption confirms that for the most part Amazon is as big a threat as people fear.

“If Amazon were to turbocharge its entrance into the grocery market, we could see significant disruption. An increasingly digitised shopping experience in the future could play into Amazon’s hands and give it an acute advantage in grabbing market share.

“Yet Amazon won’t kill off competition in every sector. The e-commerce giant fares less well in offline markets, where customers often attach an emotional element to their experiences. We found that Amazon’s brand has its limits.

“Our report offers a number of recommendations to help firms stay competitive. Brands that can compete with Amazon on price should use instore comparison tools to make sure customers know. Where they can offer unique products unavailable elsewhere to differentiate themselves from the competition, they should do so. And firms should look to curate unique, customer-centric purchasing experiences like those offered by Apple’s Genius Bars to help them escape Amazon’s looming shadow.”

As part of its research, Dectech set up randomised control trials to gauge consumer expectations and find the threat posed to existing competitors by Amazon in seven new markets, including the mobile and grocery sectors.

In other sectors, Dectech found that Amazon performed less well where customer use tends to be more ‘experiential’, such as the hotel and airline markets.