Amazon Fresh full case study resolved

1. Anshu Singh
TYBBA
15131112
Navrachana University Vadodara

2. About AmazonFresh
 AmazonFresh is a subsidiary of the Amazon.com
 An American e-commerce company in Seattle,
Washington.
 It is a grocery delivery service currently available in
some U.S. states, London, Tokyo, Berlin, Hamburg
and Munich.
 It was also launch in Australia and India
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3. About AmazonFresh
 AmazonFresh offers grocery items for sale, as well as a subset of
items from the main Amazon.com storefront.
 Items ordered through AmazonFresh are available for home
delivery on the same day or the next day, depending on the time of
the order and the availability of trucks.
 Many grocery items are for sale.
 As of the 11th October 2017, AmazonFresh sell a range of Booths
branded products for home delivery in selected area.
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4. Background of the Case study
 Amazon Fresh: There was the huge challenge before
launching people were skeptical about the approach.
 After the demise of Webvan and HomeGrocer the online
grocery store started facing several challenges in U.S.
 In 2010 Amazon Fresh launched as an invitation-only
beta testing platform on Mercer Island (rich suburb of
Seattle, Washington, USA)
 Experimented with several delivery options.
VALUE PROPOSITION
“A great selection and great prices and a
really convenient experience”
TAGLINE
“Convenience Delivered”
(2009)
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5. Problem Statement
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 Online Grocery store was characterized by long-lead time.
 Biggest Disadvantage: Order One-Day Before
 Online Grocery store needs own Logistic Infrastructure.
 Sufficient Customer Density in particular area (to avoid empty-truck
delivery).
 Trucks sat-idle on No operation day or during season-time high demand
leads to create sophisticated logistical supply.
 Online Grocery lacked legitimacy ( Webvan’s collapse).

6. Problem Statement
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 Bermuda- Triangle of E-Commerce: A place where
investment in dollars goes but never return back.
 Amazon Fresh came into market against this backdrop.
 Amazon Fresh’s Entry cannot be considered as “First Mover”
because they came at the time when Online Grocery Market
was at Maturity stage.
 Webvan's and HomeGrocers.com was two initial successful
player’s than whole market collapsed.

7. Analysis and Solution
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Suppliers
Enabling tight
control over
quality a
• Own Warehouse.
• Cutted Supplier revenue in
exchange for handling
payments, fulfillment and
delivery.
Distribution
• Groceries are
perishable.
• Assembling
individual order.
• Refrigeration
capabilities increased
• Dedicated floor space
Analysis Solution

8. Analysis and Solution
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Scheduling
and
Routing
Cannot depend
on 3rd Party
like FedEx
UPS
• Own Delivery Fleet.
• Designed Routes to
minimize total distance
travel and maximize
fullness of truck
Delivery
Packaging for
Delivery of
product need to
be less
• Frozen Bottle of water and
Dry ice to simplify return
logistic and minimize cost.
• Order Accuracy: QR Code
Analysis Solution

9. Website
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 At initial stage, Website was fully separate with
Amazon.com(credit-card info was integrated).
 Over the time Amazon increase web’s usability and appeal.
 Introduction to recipe, favorite, coupon, scan bar-code features.
 Biggest Problem: Routine has to be changed if grocery item was
to appear with books in the same totes at same doorstep.
 Executives both with e-commerce and retail operations
background became the member of the management team to make
it efficient.

10. Economic Analysis and Solution
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 Comparative Pricing: Convenience rather than low-price.
 Minimum Order size: $30 and $5 Fees for order up to $30-$75
(unless they subscribe to Amazon Prime)
 Big-Radish Program: $400/month or more to encourage online
grocery shopping.
 Technology for automatic replenishment.
 Trojan Horse: By expanding Amazon Fresh, Amazon.com want to
improve economics:- to pave Same-day delivery of all other
Amazon’s product.
Speculation by
others

11. Competitor Analysis
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 Safeway: An online order was transmitted to the nearest Safeway,
where pickers filled the order-in store.
 Walmart Go: Ship-from-Store:- Online order could be routed in
store’s vicinity, shortening delivery time and reducing cost via
shorter routes and fewer markdowns.
 Peapod: Order Groceries by scanning a virtual display while
waiting for the trains. Secondly, Next-Day delivery via Stop &
Shop and Giant Food stores.
 Google and eBay & Startup InstaCart: Customer could select from
array of local stores. (Crowd- Sourced Model: freelance drivers
assembled order and deliver them directly)

12. Scaling Up Amazon Fresh: From AMAZON
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With few operational
improvements the
company might be able to
extend the same-day
delivery deadline to later
day.
A switch to yearly delivery fee
might encourage customers to
use service.
Might slow acquisition of new
customers, but could lead to
higher profitability down the
road.
Continue to
Refine the
Business
Model
Enable the company to
distinguish aspects of the
model that were market-
specific from those that
were transferable across
markets.
Two cities seemed: Los Angles
and New York. LA large and
traffic congested. NY more
denser.
NY distance is far from Seattle
(HQ) and would make operation
harder where as LA has many
affluent consumer with limited
online grocery options available.
Expand to
Second City
“Scaling Up: Scrutiny from Investors and market competitive pressure”

13. Recommendation
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A
B
C
D
Centralized
Warehouse
Represents
Customer Density
in particular area
 At point A: Two times
Delivery/Day.
 Followed by Demand on B, C, D.
 Centralized Warehouse and different delivery store
same like Safeway.
 Use Bikes and small vehicles goods carriage vehicles l
for Delivery in locality ( Truck from Centralized
warehouse and then at point A small vehicles)
Initial Setup Cost will be more but on long run it will benefit

14. Recommendation
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Two cities seemed: Los Angles and New York. LA large
and traffic congested. NY more denser. So they should be
target first for the second test.
https://www.statista.com/topics/1915/us-consumers-online-grocery-shopping/

15. Recommendation
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8%
5%
2.80%
0% 1% 2% 3% 4% 5% 6% 7% 8% 9%
South Korea
United Kingdom
China
PENETRATION RATE IN PERCENTAGE
COUNTRY
PENETRATION RATE OF ONLINE GROCERY
STORE
Penetration rate
 Target South Korea
and United Kingdom
first.
 Area of operation
would be less
because of
Geographical factor.
 Target China in Tier
wise city because of
huge geography.
https://www.statista.com/topics/1915/us-consumers-online-grocery-shopping/

16. Conclusion
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 Amazon Fresh already has proper technology focus should be
more on logistic infrastructure to reduce lead-time.
 Use industry Best practice and Information Management System.
 Keep sizable inventory at warehouse based on date analytics.
 Might slow acquisition of new customers, but could lead to
higher profitability down the road: CONTINUE TO REFINE
BUSINESS MODEL
 NY distance is far from Seattle (HQ) and would make operation
harder where as LA has many affluent consumer with limited
online grocery options available: EXPAND SECOND CITY

17. © Anshu Singh. All rights are reserved