Amazonfresh: Attract and Convert Costumers

AmazonFresh

In 2007, Amazon had launched an online grocery store called AmazonFresh in Seattle, Washington. This online store allows customers to purchase groceries online from thousands of grocery items with same day or next day delivery. This decision to create an online grocery store was considered risky because every business that attempted to shift the grocery store online had failed. However, despite criticism and skepticism, AmazonFresh has been a very successful online-grocery store. Their innovative business plan was to promote “Convenience, Delivered” that focuses on convenience and fast delivery to customers who aren’t price sensitive but time-starved. Overall, AmazonFresh executives have been happy with the company’s performance but they are currently facing competitive pressures from online-grocery store start-ups. Therefore, to address that major issue, AmazonFresh needs to continue innovating its business model by attracting, converting and retaining customers to maintain its competitive edge against new startups in its sector.  

ATTRACT

Amazon should focus on attracting potential AmazonFresh customers by promoting the online grocery store on the actual Amazon website’s home page. This can give Amazon an opportunity to introduce the product while sparking a need and desire in Amazon customers to make the shift to online grocery shopping. According to the latest research on the Journal of Retailing, customers' actual grocery store preference for a grocery chain like, Tesco or Waitrose, influenced them to try that store's website, and their comfort level increased when they found a level of choice comparable to the actual store^[1]. But, before doing a high investment on Marketing to attract new people, we suggest using the following available resources to attract potential customers:

-Use Amazon.com’s homepage to build awareness: Amazon Fresh should be on their websites homepage.

-Combine Prime Membership service with AmazonFresh subscription: Make non-prime members aware that Prime members immediately become an AmazonFresh member.

-Make use of the logistic fleet: Promote AmazonFresh with Amazon delivery trucks. This will generate awareness because Amazon delivery trucks deliver often on the road.

-Send Invitations to potential AmazonFresh customers: after new customers have set up an account, they get an incentive for referring AmazonFresh to friends or family. Each party can get a discount after the first purchase has been made ($10 off, 20% discount or free delivery). This strategy has been successful for companies such as Uber or Groupon by helping attracting new customers.

-Offering discount coupons for every purchase on the Amazon website: This strategy will stimulate people to go and check the website often to check if there is anything interesting that catches their attention.

After utilizing the available resources, we propose these following Marketing investments:

-Target cities or markets that have long distances to the off-line store from the residential neighborhoods to attract them to the online channel.

-Use viral marketing: As we saw in class, the TNT spot is a great example of Viral marketing where you have a word of mouth publicity. You encourage people to pass on information about your site to others. If it is original and different, it will spread attraction without lifting a finger.

-Use loyalty programs to promote the website: Loyal customers could be attracted if they can use their loyalty points to buy with a preference “price point”.

Hypermarkets in Germany, for instance, allow their loyal customers to browse online coupons on their mobile phones while they walk the aisles.^[2] This can be also use to offer every customer (Loyal or not) those coupons to use them only on online purchases. We can also offer more loyalty points on each order that is made online.  

CONVERT

Amazon should focus on converting customers from its competitors to help relieve competitive pressure. According to an article published on June 2015 by www.internetretailer.com, Amazon converts regular customers to Prime Members at a high rate of 74%. In addition, when Prime members shop with other online retailers, such as Wal-Mart Stores Inc., Target Inc. and Home Depot Inc., the rate of them converting over to Amazon’s competitors is an average low of 6%.  ^[3]

Amazon should then focus on improving AmazonFresh’s conversion rate from online store competitors, Walmart and Safeway, by focusing on its commercial offer – product, price and distribution – and the customer experience. We conducted a quick research that focused on the reviews on Instagram from customers who tried the 30-day free trial of AmazonFresh. The reviews showed that consumers had a desire for more fresh products and also were concerned about fees, product delivery and product quality. Therefore, we suggest some tactics to follow:

-Price segmentation. Even though their consumers are expecting to pay a higher price for groceries, their major concern is related with the fees they are paying (Amazon Prime membership US$99/year, plus AmazonFresh fee US$14.99/month, giving a total of US$278.88/year). Our recommendation is to segment their customers according with the number of orders they purchase during a month, and the total amount of each one.

-Product delivery. AmazonFresh offer products that are on stock, but sometimes this doesn’t happen and customers receive a different product that the one they ordered (e.g. Italian parsley instead of cilantro). Our suggestion is to review their storage and classify products accordingly with their nature. In case they are out of stock it’s better to take that product out of the order, apologize to the costumer and sent him/her a coupon for future purchases.

-Product quality. As the company stated on its webpage “your favorite groceries, chosen with care. At fresh, we keep our eye on quality in everything we do”, costumers expect the best quality on each product they buy. When the opposite happens (e.g. buying ready to eat avocado and receiving it over ripe) customers stop buying. Our recommendation is to review their storage process to guaranty quality and freshness of each product at the moment of the purchase. In case they are out of stock it could be better to take that product out of the order, apology with the costumer and sent him/her a coupon for future purchases.