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02/12/2021

Amazon Advances Food Agenda and Retail Ranking

Mike Troy
Editorial Director, Grocery Group
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Amazon Advances Food Agenda and Retail Ranking
Amazon Fresh stores are expanding quickly following the banner’s debut last August in Southern California and its recent entry in Chicago.

Amazon’s aggressive moves in food retailing have come fast and with increasing frequency of late. The first Amazon Fresh store opened in Southern California last August, other units were quickly added in that market, and more recently, Chicago saw its first Amazon Fresh store. There are now nine locations.

The first Amazon Go cashierless store opened to the public roughly two years ago, and the concept has since quietly expanded to 26 locations in Seattle, San Francisco, New York and Chicago. The first Amazon Go Grocery store opened a little over a year ago in Amazon’s hometown of Seattle, and was followed by a second location in nearby Redmond, Wash., in September 2020.

In November, Amazon began a pilot program called Key In-Garage Grocery Delivery that lets Prime members in select markets in Chicago, Dallas, Los Angeles, San Francisco and Seattle have orders placed with Whole Foods Market or Amazon Fresh delivered inside the customers’ garages. Drivers use a one-time code to gain access to the Prime member’s garage. The service is an extension of the Key program, which was also recently expanded to 4,000 cities from an initial 50 markets, a move that offers an indication of what could be next for the in-garage grocery service, since Amazon Fresh is already available in 2,000 cities and towns.

Those are some of the high-profile food moves that Amazon has made outside of its Whole Foods Market brand, which it acquired four years ago. The volume of recent activity, combined with pandemic-driven shifts in shopper behavior, helped Amazon gain traction with American food shoppers faster than it might otherwise have done in a non-pandemic year. As a result, Amazon secured the top ranking in dunnhumby’s 2021 Retailer Preference Index (RPI), now in its fourth year, and is poised for further success, given what dunnhumby refers to as the company’s “strong value core.” It’s the first time that Amazon has been ranked first overall, thanks to an approach that resonated strongly with shoppers on many fronts.

“COVID-19 created a perfect storm that played right into the unique strengths of Amazon’s customer value proposition,” dunnhumby concludes after surveying 10,000 U.S. shoppers for the RPI. “Amazon easily blew every other retailer out of the water on our COVID Momentum Metric and customer safety ratings.”

The overall RPI ranking evaluates retailer performance on seven drivers of customer preference: price, quality, digital, operations, convenience, speed and discounts, and rewards and information. This year, dunnhumby also included a new “COVID Momentum Metric” to account for pandemic-driven marketplace dynamics. Amazon ranked first on this new metric, and first overall. It was also top-ranked on speed, second on digital and 11th on price. Amazon wasn’t in the top quartile of the 56 food retailers evaluated in the areas of quality, operations, convenience and discounts, and rewards and information. 

“COVID has led to record highs and lows in economic metrics, along with huge shifts in where and how consumers shop food retail, changing the competitive trajectories of retailers who were winning and those who were struggling before the pandemic,” says Grant Steadman, president of North America for Chicago-based dunnhumby. “As a result, we viewed 2020 through a different lens than we’ve viewed the grocery industry in previous years. When looking at Amazon’s strengths, it is clear why they are first this year. They rank second in speed and first in digital, two of the most important preference drivers for COVID momentum. Amazon also occupies a clear price-first position, ranking 11th out of the 56 retailers in our study on price, ensuring a strong value core.”

While Amazon may have made tremendous strides with digital- and safety-minded shoppers during the pandemic, its fledgling physical presence could make it difficult to stay atop the RPI in coming years. E-commerce share of grocery sales was about 5% in 2019, according to data from London-based Edge by Ascential in the RPI, and even though sales grew 50% in 2020, that still puts e-commerce’s share of grocery sales at around 7%. Grocers that increase investments in e-commerce to chase Amazon, dunnhumby cautions, must not permit a drop off in the quality of store experience or increase prices, as those moves would harm a retailer’s value core and long-term prospects.

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