It is no secret Amazon is dominating the retail space, but their next target may come as a bit of a surprise. Mr. Bezos has set his eyes on the $795 billion U.S. food and beverage grocery market.
While the grocery market is only growing at about 2 percent per year, Cowen & Company projects the grocery category on Amazon will grow 22 percent per year over the next five years. Of the $70 billion online grocery market, Amazon is projected to account for roughly 33% by 2021.
SUCCESS IS NO LONGER ABOUT SHELF SPACE
If you don’t believe your brand will be able to gain significant market share and revenue online, I urge you to go on Amazon, and search for a grocery item using a non-branded phrase.
Chances are, the organic search results above the fold will show a mix of big-name brands along with smaller brands you have never heard of.
For example, we recently searched for “hummus.”
The top 4 hummus brands in the US account for 75% of national sales, but none of them are visible above the fold. The organic search results on Amazon are owned completely by other brands.
Why is this?
Amazon is a landscape of infinite shelf-space, where it’s not about your brand’s authority or your relationship with the retailer, but rather your presence and selling strategy. This is great news for smaller, emerging brands – as grocery on Amazon and other online retailers grow, the playing field will become far more level.
“Ultimately, the grocery category on Amazon is poised for astonishing growth in the near future and it is anyone’s game to capture a piece of the gigantic proverbial pie that is currently cooking at Amazon HQ.”
ADVICE TO GROCERY BRANDS
So how can a brand start to capture market share and prepare for the category’s impending maturation?
If you are not currently utilizing Amazon, get on it before your competitors read this!
It is very likely that your brand is already on Amazon – even if you aren’t doing it yourself. One of your retailers or a third party is likely already taking advantage of Amazon by selling your products through their own marketplace.
Depending on what effort they put into listing your products (e.g. – did they use their flip phone to take product images?), this could be hurting your brand’s appearance on the largest retailer in the world.
A common misconception about Amazon is that the cost of not playing an active role in your brand’s presence on the marketplace is simply losing out on some incremental revenue. In actuality, there are significant costs of inaction.
If your brand is currently selling direct on Amazon, congrats – you are ahead of many grocery brands!
The next step is to optimize your presence and start to take advantage of the specialized selling programs Amazon is using to push the grocery category.
By putting modest resources towards Amazon and pulling the right levers, your products have the potential to dominate the top of the search results – a place that will prove to be of increasing importance for grocery brands in 2017 and beyond.