They both have their adherents, with the former being a bit faster (by being closer to customers) and the latter a bit more efficient (with less handling of goods).Īmazon has tried to insert itself in the market, most notably with Amazon Fresh. The other option, as Ocado does, is to use dedicated warehouses. Online orders can be picked and shipped from stores, known as the “store fulfillment model”, as is generally the case with Tesco. Tesco and Ocado showcase the basic approaches available for fulfilling orders. The products are perishable, need to be kept chilled or frozen as they are stored and delivered, and are not very stackable. The logistics of online grocery make profits hard to get. In fact, its revenues are increasingly only driven by contracting out their ecommerce expertise rather than in online grocery. Ocado, a purely online UK grocer with 1% of the UK grocery market, eked a profit in 2016 and returned to losses in 2017. UK grocer Tesco claims 2-3% profit margins and recently implemented steep order minimum increases to firmly position home grocery delivery as a convenient and upmarket offering. Not only is online delivery only a small part of the overall grocery market, but the profitability of online grocery is dubious. Asia is ahead of the curve with 37% of shoppers in Asia Pacific claiming to have ordered online groceries compared to 13% in Europe. Online grocery delivery remains only a small part of the overall grocery market, with online shopping accounting for about 6-7% of the UK grocery market, 5% in France and the Americas, and less than 2% everywhere else.

That being said, Amazon Go might just be the disruptive force to transform the grocery industry. The limited profitability of online deliveries leaves little room for Amazon to innovate and Whole Foods only attracts a restricted, wealthier market. Actually this is a very different market.

These moves have many wondering if Amazon is about to transform the grocery business just as it did ecommerce and publishing. After entering the grocery delivery market with Amazon Fresh and buying Whole Foods, it is now in the process of launching its own supermarket, Amazon Go.

Amazon delivery grocery