E-commerce to take on Grocery Market:
The shopping cart will soon be a thing of the past. Amazon and its newly formed rival Instacart are in the trial stages of providing online ordering of common supermarket products. AmazonFresh has begun providing groceries to the New York, Los Angeles, and Seattle areas. Their competitor Instacart, launched in 2012, is now in 16 metropolitan areas and made over $100 million in revenue in 2014. Both companies have faced their share of problems in the initial stages though. This summer AmazonFresh and Instacart were forced to address issues with their digital status updates, incomplete order deliveries, and slow customer service. But the future looks bright. Instacart has joined with well-known grocery stores, including Costco, Kroger, and Whole Foods, and by using their existing infrastructure they are able to focus on other aspects of delivery such as speed and reliability. This has created a new network of relationships between the businesses:
Since Amazon is now attempting to get customers to shop for groceries online, they are taking business away from the stores named above. Therefore they are now competitors (-), whereas Instacart is now working with them (+). The above graph is not balanced because while Instacart, Costco, Whole Foods, and Kroger are all in competition with Amazon, the three grocery stores listed are still in competition with each other.
Amazon has big plans to move forward in e-commerce of groceries and will most likely be around in the market longer than any competition. These plans however will involve a lot of changes for their distribution network. Amazon has strategically placed their warehouses in order to most efficiently meet the demand of their customers. Now stocking perishable goods will force them to re-design their warehouses to accommodate refrigeration. They might also find that new warehouses need to be built in order to meet the demand of groceries in areas that they cannot reach as fast. Looking at the Amazon’s fulfillment center network, there are very few in western states and none in Montana, Wyoming, and Colorado. If a customer were to order a phone case, for example, Amazon can deliver it in a timely manner without worrying about the product being ruined. If milk is ordered in those states however, the closest distribution centers are Kansas and Washington, greatly increasing the chance of the product spoiling along the way or forcing Amazon to change their delivery methods to include refrigerated trucks. Both options would involve pretty large changes to the way their distribution network is set up, but Amazon is determined to not only enter this market, but become a long-term competitor.
Sources:
http://www.fastcompany.com/3048627/the-new-rivalries-amazon-vs-instacart
http://www.mwpvl.com/html/amazon_com.html (Amazon’s Distribution Network)