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AmazonFresh Final PDF

Alicia Kim analyzes the online grocery market opportunity and AmazonFresh's strategy. The online grocery market is large but prior attempts have failed due to logistical challenges. Amazon aims to succeed by starting small with a local beta test in Seattle to work out issues before expanding. While Amazon is a disruptive company overall, AmazonFresh is not yet disruptive as it does not change the online grocery model and still faces logistical hurdles expanding to new cities. Jeff Bezos' biggest challenges are long lead times, inventory management across different distribution centers, and getting consumers to change shopping habits. Lessons include carefully testing and planning expansion to avoid failures seen by other companies.

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362 views2 pages

AmazonFresh Final PDF

Alicia Kim analyzes the online grocery market opportunity and AmazonFresh's strategy. The online grocery market is large but prior attempts have failed due to logistical challenges. Amazon aims to succeed by starting small with a local beta test in Seattle to work out issues before expanding. While Amazon is a disruptive company overall, AmazonFresh is not yet disruptive as it does not change the online grocery model and still faces logistical hurdles expanding to new cities. Jeff Bezos' biggest challenges are long lead times, inventory management across different distribution centers, and getting consumers to change shopping habits. Lessons include carefully testing and planning expansion to avoid failures seen by other companies.

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송주영
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We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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(Business Strategy)

Alicia Kim #2018427005


AmazonFresh Case: Questions

1. What is your assessment of the online grocery market opportunity? What explains prior
failures in this market?
The online grocery market opportunity is huge: not only because is the largest single retail category in the
US, but also because customers shopped for groceries frequently (2.2 times per week on average).
Groceries especially attractive sector because is downturn-resistant compared to other markets.
But there must be a reason why big companies are not migrating online, or the ones who tried, failed.
Probably one of the main reasons is the logistics that this type of industry requires. And because is so hard
to plan the logistics, is too hard to expand.
Many of the companies that tried to win this market had not proper strategy for expansion phase. This stage
consists on a lot of effort, changes (not only company-wise, but also customers' way of buying) and planning
to succeed. Moreover, the timing of expansion and testing are key stages that, for example, Webvan did not
take into consideration. Instead, they expanded into a new territory before "demonstrating success in the
first market"

2. Given previous failures, how can Amazon succeed? What makes Amazon think they can
succeed this time?
Amazon has the expertise in efficient logistics and operations. But most importantly, they started
with a beta test in one part of Seattle to make sure to fully understand this market and test different
strategies and check which worked and which did not. Also, their marketing strategy was focused
on freshness, inclusion of local products and low price. This last mentioned was questioned by
their consumers, which later on was changed for conveniency.
Regarding suppliers, Amazon had their own warehouse, but also contracted with local retailers,
stores, bakeries , restaurants, among others to help the operations and have a wider product
catalogue.
Last, but not least, Amazon can leverage their expertise in management and amazon.com itself.
This means that millions of people will be easily target just because it will pop up in Amazon’s
website.

3. Is AmazonFresh a disruptive innovation? If so why? If not why not? Be specific!


In my opinion, Amazon itself is disruptive innovation because it change the way people buy, the
retail industry itself (there’s no industry that Amazon has not entered) and the way their operations
work show the impact that Amazon has in people’s every day life. But I believe AmazonFresh
cannot be considered disruptive innovation yet for many reasons.
Firstly, as mentioned before, there’s almost no industry Amazon has not entered. This means that
groceries market was left and Amazon felt it was time to expand to this segment leveraging their
expertise. Secondly, AmazonFresh does not bring any change to previous online groceries
(Amazon brand images helps a lot!) Lastly, they still not figure out how to manage logistics with
perishable products in other cities. Maybe after succeeding in other cities and solving some 'white
areas', AmazonFresh could be considered disruptive innovation. Not now.

This study source was downloaded by 100000844076941 from CourseHero.com on 04-04-2022 13:47:18 GMT -05:00

https://www.coursehero.com/file/48987436/AmazonFresh-Finalpdf/
(Business Strategy)
Alicia Kim #2018427005

4. What do you see as Jeff Bezos’s biggest challenge(s) moving ahead in the future with
AmazonFresh? And, what would you recommend to overcome these challenges?
We can clearly see that there are a lot of challenges in this market which lead other companies into failure:
- Long lead time. It is hard to online groceries promise deliver products the same day and sometimes
customers still find the need to go the stores, choose their products and even try samples.
- Logistics. Because groceries is a perishable, special trucks controlling the temperature are needed. Also,
it is hard to plan a route if the are has no much density. This could be a problem while trying to expand.
- Inventory Management: distribution centers. Although Amazon has the expertise in this field, we can
consider inventory management a challenge. This is because actual distribution centers should be
changed, or at least adapt to these new products, which could be costly, hard to adapt internally and
complicate operations company-wise.
- Variety of Channels. The groceries market counts with a wide range of channels, from convenience stores
to big retailers like Costco. I will be hard and take some time until consumers change their way of buying.

5. What managerial lessons are to be learned from this case, if any?


The managerial lessons learned from this cases are:
- Testing phase is important and it should not be skipped.
- Carefully plan expansion phase. This could lead to failure!
- There is a time for everything. Consumers could not be prepare or willing to change their habits.
- Leverage knowledge in other markets.

This study source was downloaded by 100000844076941 from CourseHero.com on 04-04-2022 13:47:18 GMT -05:00

https://www.coursehero.com/file/48987436/AmazonFresh-Finalpdf/
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