Opinion

Could Amazon’s disruption of the marketplace spark unlikely alliances?

22 November 2016

Nick Miller, Crimson&Co 3
Nick Miller

With Amazon’s expansion of its grocery deal with Morrisons, its launch of Amazon Restaurants, and a rumoured housekeeping service, incumbents could see unusual partnerships as a means to fend off the retail juggernaut, says Nick Miller head of FMCG at supply chain consultancy Crimson & Co 

Amazon’s recent advances into the homecare and food delivery market, following the much vaunted expansion of its pre-existing delivery deal with Morrisons, the rumoured launch of a new housekeeping service, as well as Amazon Restaurants and Amazon Fresh services, could result in incumbent players taking drastic measures to combat the e-commerce giant and competitors forming unlikely partnerships in order to avoid losing ground to Amazon.  

Amazon announced last week that it would be extending its existing delivery deal with Morrisons to offer one-hour grocery deliveries to selected postcodes in London and Hertfordshire to Amazon Prime Now customers, a service which has been named “Morrisons at Amazon.” 

Help at hand

Meanwhile, advertisements were seen in the US media two weeks ago for home assistants, who would work with customers to tidy people's homes, do laundry, put groceries away and "assure that customers return to an errand-free home.” If true, this new service would be another convenience to Amazon Prime Now customer who already have access to Amazon Restaurants (a home food delivery service) as well as both Morrisons at Amazon and Amazon Fresh for same-day deliveries on a massive range of fresh and frozen grocery goods.

It’s pretty clear that Amazon’s aim is to be the one-stop-shop for all domestic-life conveniences. Whether that be shopping, groceries, takeaways or cleaning, they want to lead the market – it’s an incredibly obvious and yet aggressive strategy. 

Convenience, as mentioned is the key word – the customer, for the sake of an annual fee (that being your Prime subscription) has a central platform where they can access a wide variety of services and products at their ease and with confidence in Amazon’s established reputation. As this service becomes more and more engrained amongst users, loyalties to competitors will increasingly be challenged – simply, why go to four places when one does it all?

Complex demands

While on paper these plans are impressive there are questions Amazon will need to address as these markets often entail more complex service demands and delivery requirements.

Services like Handy and Hassle are dominating players in the homecare market. Deliveroo, has developed a leading position in London’s last-mile food delivery market, but this has recently seen threats from Uber with the entry of UberEats. Meanwhile, many of the big supermarkets maintain grocery delivery services. Ocado, the online grocery specialist which supports Morrisons’ website, saw its shares fall by 8.5% in the wake of the Morrisons news. 

As Amazon refines and expands its services, these incumbent players will likely need to innovate to remain competitive. It’s clear from the diminished outlook on Ocado that Amazon is a major menace to all players in the food-delivery market. Any company seeking to compete with Amazon in this market will need to match it on convenience and come close to it on the variety and breadth of its offering. 

Going the last mile

This could be done through innovations in a number of areas. Amazon has set a forceful example here with its partnership with Morrisons, and a fast-follower strategy could be appropriate; creating a more compelling offering through unusual partnerships. For example, a last-mile deliverer such as Deliveroo could partner with a supermarket to offer grocery shopping and takeaways in one integrated platform. One service providing a weekly shop and an evening curry through the same account could be a powerful convenience offering to rival Amazon’s combination of Restaurants and Fresh. 

Moreover, in this theoretical example, the supermarket benefits from Deliveroo’s expertise in last-mile delivery, whilst Deliveroo gets access to a wider customer base. This demonstrates how unlikely partnerships could provide a route to superior service in delivery. Joining forces with local transport businesses, such as taxi firms, could also provide a boost to delivery speeds. Either way, thinking laterally and tapping into pre-existing networks could help companies to compete with Amazon.  

These ideas, however, do not come without their own obstacles. These kind of innovations would undoubtedly bring a number of logistical challenges, not least the alignment of the delivery chain to enable the fastest and best possible experience for the customer, as well as the coordination of logistics and digital platforms between two companies. However, approaching the problem from this angle could prove vital for any company attempting to see off Amazon – a giant with huge resources and clout behind it.

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