In 2017, Amazon made a major move into the United States grocery market. At the time, the grocery industry had a potential value of nearly $6 trillion. Amazon acquired Whole Foods and crushed the stock value of many of its direct competitors. At first, it wasn’t clear what this acquisition meant for the grocery industry and brands who sell on Amazon. Continue reading to learn more about the impact of Amazon’s grocery strategy and what it means for brands.
Amazon Plans to Expand Its Grocery Footprint
Since Amazon’s acquisition of Whole Foods, it has gained access to in-store and online consumer data. This influx of data makes it easier for Amazon to provide more personalized experiences to its shoppers.
It’s important to note, Whole Foods isn’t Amazon’s only growth driver within its grocery plans. Before the end of 2019, Amazon plans to expand its grocery footprint to several cities throughout the United States. It will use a different approach and open up locations smaller in size than a standard grocery store. This strategy will allow Amazon to offer a wider range of products and test out new technology.
Consumer Packaged Goods (CPGs) Will Have to Restrategize
Online sales gave the CPG industry a 90-percent boost in 2018. Now, CPG brands that sell grocery products in traditional brick-and-mortar locations will have to adjust to competing with Amazon offline.
It’s unclear exactly how CPG brands will best adapt to these changes, but we can expect to see some major shifts.
Amazon’s Grocery Strategy Increases its Threat to Google
Amazon is several steps ahead of Google with its physical retail presence, and analysts believe Google’s hesitation to embrace brick-and-mortar locations is a primary factor in its struggle to compete with the marketplace giant. Amazon has also immersed itself in an industry where it has no other choice than to be data-driven. As a result, its search engine will likely continue to gain popularity.
Potential for increased search engine traffic moving to Amazon leads us to our final topic: advertising. This has been a popular discussion in 2019 as digital media investments have shifted from Google to Amazon.
Amazon Advertising Continues to Grow with the Move to Grocery
As Amazon’s acquisition of Whole Foods and expansion into the industry evolved, in-store and customer-facing promotions will become major revenue drivers. They will contribute to what’s expected to be tripled revenue for Amazon’s advertising segment. Amazon Advertising saw a slow down to its rapid growth, but efforts like Amazon’s grocery strategy will help to resume the momentum.
Brands that sell on Amazon, especially CPG brands, have a lot to think about when it comes to Amazon’s grocery strategy. Each move Amazon makes has a wide-spread impact on competitors, brands who sell on the platform, and society.
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