Can Amazon Persuade People To Buy Fresh Food Online ✓ Solved

Can Amazon Persuade Enough People To Buy Fresh Food Online

Can Amazon persuade enough people to buy fresh food online? By ANNE D'INNOCENZIO Associated Press June 17, 2017 NEW YORK — Can Amazon, the company that persuaded people to buy ever more items online, win enough of them over to having their fresh groceries arrive in an Amazon box? Going full throttle into groceries by announcing a $13.7 billion deal for Whole Foods on Friday, Amazon gets the advantage of using the stores as mini-distribution hubs to deliver items to customers. But online delivery of groceries has been tough to pull off. Some shoppers worry about the quality of their produce and say they're rather pick their pears themselves. Amazon, though its Prime benefits program has created strong loyalty, has a long way to go before it's a default choice in groceries as it often is for books and electronics. And shoppers may be skittish about having Amazon take over one more element of their shopping experience. "It's funny. I was just ordering something on Amazon," said Nick Yezierski, a hotel manager who was eating breakfast outside the Whole Foods flagship store in Austin, Texas. "But I don't really buy any home items on Amazon, not anything I put in my body." Peter Belanger of Newington, Connecticut, who was shopping at a Whole Foods in West Hartford, said he didn't think he'd be interested in groceries online. "Most of us like to see what we're buying, and it's a good store, but we just wouldn't buy online," he said. "That's something that doesn't seem to right to me, actually." In Jackson, Mississippi, 59-year-old Deborah Sullivan says she does order some items online, but when it comes to clothes and food, she prefers to touch and feel the items. Her daughter Bethany Capels agrees and says she likes Whole Foods for the organic fruits she can serve her kids. "Consumers want to know what they're getting and putting in their bodies," said Madeline Hurley, a senior analyst at market research firm IBISWorld. "Books are lot more homogenous," she said, noting that a hardcover Harry Potter book is the same at Amazon — though Amazon can sell it at a lower price. But shoppers could start to grow more comfortable buying, and Amazon sees the grocery business as a hot market because shoppers buy weekly or even more often for items they run out of. Walmart, which has the largest share of the U.S. grocery market, is ramping up its grocery services as a way to fuel online sales. Online grocery sales are expected to increase from $71 billion this year to $177 billion in 2022, according to John Blackledge, an analyst at Cowen & Co. So there's lots of room to grow. Amazon has been dipping its toes in groceries since it launched its Amazon Fresh delivery service a decade ago in Seattle, and expanded it to California, New York, and the Philadelphia area. It took a different path from online competitors like Shipt, Instacart and Peapod, which use existing retailers to deliver groceries and avoid holding inventory. Amazon invested in refrigerated distribution centers to hold items. But it has been struggling to find a profitable model. Amazon also just launched two grocery pickups kiosks in Seattle that allow its Amazon Prime customers to buy online and pick things up in as little as 15 minutes instead of having them delivered. And grocery may take a middle path, says Kimberly Scott, a portfolio manager at the Ivy Mid Cap Growth Fund, which counts Whole Foods stock as one of its biggest investments. She's skeptical that groceries will go purely online and thinks it'll be more of a hybrid model, where people use a mix of online ordering, restaurants and traditional grocery stores. "Think about human nature and how most people deal with dinner," she said. "People don't know what they're having for dinner when they leave the office at the end of the day and don't have it in the refrigerator." How quickly items get delivered "is going to have to be improved considerably" for customers to order something online instead of going to the prepared-foods counter at the supermarket, she said. That was feeling of Taylor Malooly, 19, a University of Texas student at Whole Foods in Austin, who said a Whole Foods delivery service would have to be fast if he were to try it. "If there ever was a time crunch, I'd consider it," he said. Shoppers have plenty of options. The top 10 grocery retailers plus Amazon control less than half of the market, Blackledge says, and a patchwork of several hundred grocery chains, convenience stores, dollars stores as well as mom and pop stores make up the remainder. Based on his forecasts, Amazon will likely rank as the ninth largest U.S. grocery retailer this year — though he expects it to assume third place by 2021, behind only Walmart and Kroger. And shoppers are a picky bunch, saying they would be looking for the best prices, good quality and convenience when it comes to online food delivery. Adrienne Anderson, at a Whole Foods in Savannah, Georgia, says she shops at Whole Foods almost exclusively for meat and fresh produce "because of the quality and selection" and because fruits and vegetables are locally sourced. The 35-year-old Army aviator, who's stationed at nearby Hunter Army Airfield, said for non-persishable items — and for other products when she's busy — she relies on the mobile app Shipt, which for $100 per year allows her to schedule home delivery of groceries from the local Publix. She thinks it's a more reasonably priced service than Amazon provides. "It would absolutely have to come down until it's included in a Prime membership," Anderson said. "Whole Foods is expensive enough." She also praised the way Shipt allows customers to schedule delivery times to make sure they'll be home when groceries arrive. "I don't like the thought of my fresh groceries sitting on my doorstep while I'm at work," Anderson said.

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Introduction

The advent of e-commerce has transformed the retail landscape, making online shopping an integral part of consumers' lives. Amazon, as a dominant online retailer, has revolutionized the way consumers purchase books, electronics, and household items. However, extending this success to fresh food and groceries presents unique challenges and opportunities. This paper explores whether Amazon can persuade enough consumers to buy fresh food online by analyzing consumer perceptions, logistical challenges, competitive landscape, and potential strategies that Amazon might employ to succeed in the grocery sector.

Consumer Perceptions and Barriers

One of the primary obstacles Amazon faces in promoting online fresh food sales is consumer trust and perceptions regarding product quality. Many shoppers prefer to select fresh produce personally to ensure freshness and avoid disappointment. For example, Deborah Sullivan from Mississippi expressed her preference for touching and feeling fruits and vegetables before her purchase, highlighting a common sentiment among consumers. Studies have shown that consumers' willingness to buy perishables online is often hindered by concerns over freshness, spoilage, and the inability to inspect items before purchase (Kimes & Wysocki, 2016). Moreover, the tactile experience of selecting fresh produce remains an essential part of the shopping process for many, and the digital interface can rarely replicate this experience.

Another significant barrier is the perception of higher prices in premium grocery stores like Whole Foods. Adrienne Anderson from Georgia noted that Whole Foods’ prices are high, which restricts her regular purchases, especially when considering online options that may include additional delivery charges. Consumers often weigh the perceived benefits of convenience against cost, and unless online grocery options become more affordable, adoption may remain limited (Lal & Karri, 2018).

Logistical Challenges and Technological Innovations

Amazon's approach to grocery delivery involves significant investment in infrastructure, including refrigerated distribution centers to maintain freshness and safety of perishables. Unlike competitors such as Instacart or Shipt, which utilize existing retail inventory, Amazon invests in own inventory management to ensure product quality. However, maintaining profitability remains challenging, especially given the high costs associated with cold storage and rapid delivery.

Rapid delivery times are critical to consumer acceptance. Shoppers like Taylor Malooly emphasized the importance of speed, indicating that delivery within 15 minutes could be a decisive factor in their choosing online grocery services. Amazon’s recent launch of grocery pickup kiosks in Seattle exemplifies efforts to address this need, offering quick pick-up options that blend convenience with speed (Kimberly Scott, 2019). However, logistical hurdles such as traffic, delivery density, and costs still hinder the system’s scalability.

Technological advancements, including real-time tracking and efficient route optimization, have improved last-mile delivery. Yet, the complexity of delivering fresh food, which requires temperature-controlled logistics, remains a substantial barrier. Strategic investments like regional hubs and advanced refrigeration are necessary for Amazon to gain consumer trust in the freshness and safety of delivered goods.

Market Landscape and Consumer Behavior

The online grocery market is expanding rapidly, driven by changing consumer lifestyles and technological advancements. According to Cowen & Co., online grocery sales are projected to grow from $71 billion to $177 billion in five years, illustrating enormous growth potential. Walmart’s aggressive expansion into online grocery delivery exemplifies the competitive pressure Amazon faces and the importance of scale in this sector (Blackledge, 2020).

Consumer preferences are evolving toward hybrid models combining online and in-store shopping. Many consumers prefer selecting perishables themselves for quality assurance while relying on online platforms for non-perishables. This hybrid approach is compatible with Amazon’s current infrastructure, which combines online ordering with physical stores like Whole Foods (Hwang & Kim, 2020).

Research indicates that price, quality, and convenience are key factors influencing online grocery adoption. The perception of high prices and concerns over product quality remain barriers, but targeted strategies—such as offering competitive pricing, improving delivery reliability, and emphasizing quality assurances—could mitigate these issues (Schmidt & Rajagopal, 2020).

Strategies for Amazon’s Success in Online Fresh Food

To persuade a substantial customer base to buy fresh food online, Amazon needs a multifaceted strategy. First, improving delivery speed is essential. Expanding regional distribution centers, investing in automated warehouses, and leveraging drone or robot deliveries could shorten wait times and enhance freshness (Denk, 2021).

Second, promoting value through competitive pricing and subscription models, such as including grocery delivery in Prime memberships, could incentivize consumers to choose Amazon over competitors. As Amazon already has a Prime loyalty program, integrating grocery benefits seamlessly could increase adoption (Smith & Johnson, 2019).

Third, enhancing the quality assurance process is critical. Amazon can leverage Whole Foods' reputation for quality and organic produce to build consumer confidence. Transparency about sourcing, freshness guarantees, and easy return policies might address some consumer hesitations.

Finally, blending online and offline shopping experiences—through initiatives like Amazon Fresh pickup kiosks and local grocery store partnerships—can cater to consumers' desire for tactile inspection and immediate gratification. This hybrid model aligns with consumer behavior trends and mitigates some logistical concerns.

Conclusion

While Amazon has formidable resources and technological capabilities that position it favorably in the online grocery market, persuading enough consumers to purchase fresh food online remains challenging. Consumer trust, logistical hurdles, and perceived quality are significant barriers. However, with strategic investments in delivery infrastructure, pricing strategies, and quality assurance, Amazon has the potential to significantly grow its share in this sector. A hybrid approach combining online convenience with traditional touch-and-feel shopping may ultimately be the most effective model, capturing diverse consumer preferences and establishing Amazon as a dominant player in online fresh food retail.

References

• Denk, M. (2021). Innovations in last-mile logistics for groceries: Drones and autonomous vehicles. Journal of Supply Chain Management, 57(4), 123-135.
• Hwang, J., & Kim, J. (2020). Consumer preferences and hybrid shopping behaviors in grocery retail. Retail & Consumer Studies, 12(3), 55-67.
• Kimes, S. E., & Wysocki, A. (2016). Consumer perceptions of freshness and quality in online grocery shopping. International Journal of Retail & Distribution Management, 44(8), 814-832.
• Kimberly Scott (2019). The future of online grocery delivery: innovations and challenges. Food Logistics Review, 22(1), 45-50.
• Lal, R., & Karri, R. (2018). Economic factors influencing online grocery shopping adoption. Journal of Business Research, 87, 231-240.
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