Amazon tops dunnhumby Retailer Preference Index as consumers prize price, speed & safety during pandemic
The announcement comes after a tumultuous year for grocery retailers as the pandemic pushed consumers to shift how they shop and what they buy, and accelerated their adoption of e-commerce – a place where Amazon has long dominated. At the same time that Amazon helped initiate a wave of first-time online grocery shoppers it also opened its first Fresh grocery store – a move designed to create a seamless grocery shopping experience, and which helped solidify its value in many Americans’ eyes.
According to dunnhumby, which evaluates retailers based on a national survey of 10,000 US consumers’ shopping preferences, emotional connection to retailers and companies’ financial performance, Amazon’s jump to the top of its Retailer Preference Index was fueled by in large part by pandemic-related concerns.
“Covid created a perfect storm that played right into the unique strengths of Amazon’s customer value proposition. Amazon easily blew every other retailer out of the water on our Covid Momentum Metric and customer Safety ratings,” which include priorities such as speed to shop (with faster equated to safer by most consumers), safety measures to protect against the coronavirus and digital capabilities.
As the pandemic ravaged not just Americans’ health but also the country’s economy, retailers’ value proposition also became important to grocery shoppers.
Again, this is an area where dunnhumby found Amazon excelled.
“When looking at Amazon’s strengths, it is clear why they are first this year,” dunnhumby notes in the report. “Amazon occupies a clear Price-First position, ranking 11th out of the 56 retailers in our study on Price, ensuring a strong Value Core.”.
Amazon “also [is] second in Speed and first in Digital, two of the most important preference drivers for Covid Momentum,” the report adds.
The retailer did take a hit on other performance indicators, including convenience, quality and discounts, rewards and information, but in the face of the pandemic and a potential recession those became less important to shoppers.
While “humbled to be recognized as a retailer with customers top of mind,” Amazon notes in a blog post that its ascent on the index is a reflection of its expansion in grocery in 2020, including the opening of its first Amazon Fresh grocery stores and the addition of pickup at all Whole Foods Market stores.
The retailer also notes it invested $10b in safety measures to protect employees and customers from the coronavirus, including providing personal protective equipment, enhanced cleaning procedures, ‘process paths that allow for effective social distancing’ and the addition of plexiglass barriers between cashiers and customers at checkout, among other measures.
Amazon predicted to pick up $5.8b in online marketshare
Amazon’s rise also elevates its threat to other retailers, with dunnhumby predicting it will pick up 0.73% of grocery share worth $5.8b for its online business – an increase that is three times higher than the second place retailer, Target, on dunnhumby’s Covid Momentum Metric.
Despite Amazon’s success, dunnhumby hesitated to recommend legacy brick and mortar stores rush to build out an e-commerce business to protect its share from Amazon.
“Online grocery shopping is still a hard place to make profits for most, and the ability to subsidize their grocery business with profits made in other business units like Amazon can” is not an option for most retailers, the report notes.
Likewise, it emphasizes that even though e-commerce grocery sales grew about 50% in 2020, it still only accounts for about 7% of grocery sales, which means most consumers still get the bulk of their groceries from physical stores.
Finally, the report cautions, “if [retailers] do invest in e-commerce to chase top line growth and provide a competitive response to Amazon, there must not be any drop-off in the quality of the store experience or an increase in prices – two things which would harm the retailers Value Core and hinder their chances of long-term success with customers.”
Amazon discontinues Prime Pantry
While dunnhumby’s report suggests that Amazon has a winning strategy when it comes to grocery, the retailer continues to shake up its approach to the space with the quiet discontinuation of its Prime Pantry service.
Last week, Amazon ended its Prime Pantry banner, which offered for delivery of shelf stable products, with an emphasis on heavy and bulky options. Most of the products previously available through this service are now sold side-by-side other grocery and household items sold on Amazon.
The move eliminated the need for an extra subscription, purchase minimum requirement or delivery fee, and is intended to streamline the shopping experience for consumers.
Prime Pantry originally launched in 2014 as a service to Prime members, but in 2018 Amazon added a $5 monthly subscription fee or a minimum order requirement with a flat delivery fee per box depending on shoppers status with the retailer. The service also was briefly suspended last Spring after the company was inundated with orders as consumers nationwide stocked their pantries at the start of the pandemic.
Market analysis suggests that the dissolution of Prime Pantry could alleviate some competitive pressure on grocery stores by more likely consumers will simply buy what they are able through Amazon’s regular marketplace. Ending the service also could push some Pantry users to try delivery for fresh food through Amazon from Whole Foods Market or pickup, which is now available within one-hour for free at all US Whole Food Market locations.