Sunday, November 1, 2015

Amazon Prime Now UK Priced to Win

Service sells, but price competitiveness garners customer migration, repeat orders, and long-term success according to Foodservice Solutions® Grocerant Guru®. Amazon is expanding Amazon Prime Now into the UK and all indications are success will continue to flourish for Amazon.

Recently Keith Anderson, vice president of strategy & insights at e-commerce analysts, Profitero, conducted a study to find out how Amazon would stack up in price compared to existing UK retailers. 

The service is only available to members of Amazon Prime, which costs £79.00 a year to join, and offers one-hour delivery on a large range of items and is priced similarly in the US.

Amazon UK Prime customers already benefit from ultra-fast delivery on everything from essentials like bottled water, coffee but Prime Now will be adding a range of chilled and frozen items to this selection as they continue to expand the number and variety of products that can be ordered for delivery within 60 minutes. Simply put service sells, 60 minutes redefines service standards within the grocery sector.  

Currently Amazon Prime Now UK has a limited assortment of chilled food products (just under 50 items are available), its one-hour delivery is unique in the market. Goodfella’s pizzas and Haagen Daaz ice cream are just some of the items that UK shoppers might want to order quickly.

When Profitero conducted price analysis of the 49 products available in Prime Now’s Dairy, Chilled and Frozen category on October 5 2015, matched to UK supermarkets carrying the identical products in the same pack-size configuration: Tesco, Sainsbury’s, Asda, Waitrose, Ocado and Morrisons.

Anderston found that Amazon Prime Now was the clear price leader on these 49 products: all six supermarkets were shown to be priced higher than Amazon. However, while all supermarkets’ prices on these items were higher than Amazon Prime Now, we found that there were varying degrees of price competitiveness between them.

For example, the average product was found to be 45% more expensive on Ocado than on Amazon, while Asda and Morrisons prices were 24% and 30% higher respectively.

Figure 1: Average UK supermarket price vs Amazon Prime Now, October 5 2015 (Source: Profitero)

 And when Anderson did a deeper dive into the price distribution of UK supermarkets versus Amazon Prime Now, we found that 75% of Ocado’s products were priced higher than the same products sold on Amazon (just 20% of products were priced the same).

By contrast, Asda priced the same as Amazon across 49% of its products.

Figure 2: Price distribution vs Amazon Prime Now, October 5 2015 (Source: Profitero)

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