Managing Freshness (Amazon Fresh Vs Reliance Fresh)

 Amazon Fresh

Amazon Fresh is a subsidiary of the American e-commerce company Amazon.com in Seattle, Washington. It is a grocery delivery service currently available in most major U.S. cities, Berlin, London, Tokyo and India.

Amazon Fresh has rolled out its services gradually, targeting specific parts of various metropolitan areas and partnering with local specialty stores for delivery of local items. The Amazon Fresh website allows potential customers to check availability by ZIP code.

In March 2017, Amazon announced the beta launch, on March 29, 2017, of Amazon Fresh Pickup, a drive-in-type grocery store for Amazon Prime subscribers. It's a delivery service that lets users shop online, reserve times to pick up the groceries, and have them loaded into their cars at the store.

In Germany, the product range is 85,000 product lines. By comparison, the REWE supermarket chain's home delivery service has 9,000 product lines. In the United Kingdom, Amazon signed a deal with the British Super Market chain Morrisons to provide supplies for Amazon Prime Pantry and Prime Fresh. In July 2017, it was reported that Amazon Fresh was selling meal kits.

On November 2, 2017, Amazon announced it was discontinuing its Fresh service to some smaller towns and cities in California, Delaware, Maryland, New Jersey, New York, and Pennsylvania. On December 13, 2019, Amazon announced its Fresh service will provide one and two hour delivery of meat, seafood, eggs, and produce in Tampa, Florida.

In 2020, Amazon announced that they are renaming Amazon Fresh Warehouses to Amazon Prime Now and using the name "Amazon Fresh" for their new grocery stores.

Amazon Fresh Truck

Amazon Fresh offers grocery items for sale, as well as a subset of items from the main Amazon.com storefront. Items ordered through Amazon Fresh 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. As of 11 October 2017, Amazon Fresh sold a range of Booths branded products for home delivery in selected areas.

Amazon Fresh and Whole Foods Market deliveries are available for Prime members by invitation only. You can go to Amazon's website and sign up for an invitation with or without a Prime membership. Amazon will contact you once you're able to shop. If you're not already a Prime member, you'll need to sign up in order to purchase through Amazon Fresh.

Using Amazon Fresh is simple. Customers sign in to their Amazon Prime account or use the Fresh app to start shopping. Consumers can choose an attended delivery, where groceries are delivered in plastic bags and must be received by the consumer. Unattended deliveries are dropped off at the customer's doorstep in temperature-controlled tote bags.

You can also use Alexa—Amazon's cloud-based voice service—to help with your shopping. Simply tell Alexa to add whatever you'd like to order to your Fresh cart. According to Amazon, the more you use Alexa to order your groceries the more helpful the system will become as it learns your preferences. 

On Oct. 29, 2019, Amazon announced that Amazon Fresh would be free for Prime members in eligible regions of the United States. Prior to the change, Fresh cost $14.99 per month on top of the Prime membership fee. In addition to eliminating the Fresh monthly membership fee in the U.S., Amazon combined the ordering sites for Amazon Fresh and Whole Foods Market, making it easier for customers to place their orders. Prime members also receive free delivery when ordering from Whole Foods.

In Germany, Prime members still have an additional monthly membership fee to use Fresh. However, in October 2019, Amazon reduced the fee for Fresh in Germany from 9.99 euros to 7.99 euros per month. For orders worth less than 40 euros, the delivery fee went from 5.99 euros to 3.99 euros. Prime members in Germany who don't want to sign up for a monthly Fresh membership can still use the service for 5.99 euros per delivery.

Grocery delivery orders through Amazon Fresh and Whole Foods Market more than doubled in the fourth financial quarter of 2019 compared to the same period a year ago, the company announced Thursday. Delivery through the two services, which both now operate under Amazon Prime, is currently available in more than 2,000 cities. The number of cities where Whole Foods offers home delivery increased by roughly one third over last year’s Q4, while Amazon Fresh came online in several cities last year, including Las Vegas and Houston, following a dormant period beginning in late 2017.

Expansion didn’t account for all of Amazon’s e-grocery growth in the quarter. Although Amazon on Thursday didn’t directly link improving delivery sales to its decision to fold Amazon Fresh into its Prime program and do away with the $15 monthly fee, recent reports show the move has significantly boosted customer adoption. Consumers consistently cite high costs as a barrier to online grocery adoption. And with Amazon Fresh’s expanding availability and deep well of Prime members to market to, the service has become easier to adopt in markets where it’s available.

Even Amazon Fresh, which leads the U.S. market, has not fared terribly well. Amazon gained notoriety when it began field-testing online grocery delivery in 2007 in downtown Seattle. There was reason to be excited. Amazon was well on its way to dominating online retailing, and the grocery business seemed ripe for disruption, just as other retailing sectors were being challenged. The field test took time, though. The roll-out to other US cities began six years later, in 2013. The first overseas endeavor for Amazon Fresh was to London in 2016, and the business is now eyeing the Australian market. But ten years after Amazon set out to disrupt groceries, the company is still struggling to establish a presence. It is in less than half the cities as Peapod, one prominent online competitor. 

Amazon Fresh’s pricing model has also not yet stabilized either. Late last year, the company went from an annual fee that bundled Amazon Fresh with the popular Amazon Prime membership, to a slightly cheaper monthly fee that includes unlimited deliveries and requires Amazon Prime membership, which must be purchased separately. This means that, to use Amazon Fresh, consumers must have an Amazon Prime membership. 

This means that Amazon Fresh essentially relies on an old-fashioned business loss leader strategy. Amazon Prime charges a flat, annual fee for unlimited two-day delivery, streaming content and other benefits. Amazon has shown a willingness to lose money on its digital retail business to foster a broad, loyal customer base through Amazon Prime. In the U.S., 60% of Amazon’s customers are Prime members, and a Prime member will spend, on average, almost double that of a non-Prime member per order. Amazon Fresh is likely to be another vehicle to drive this strategy, by offering another enticement to join Prime. Amazon Fresh is well-known, has received outsized media attention in relation to its market share and success, and encourages Amazon Prime membership. As a loss leader, it’s not hard to see Amazon Fresh as a success, even if it is not quite a disruptor. 

Amazon Fresh’s success may lie in how its beans are counted. Brick-and-mortar grocery stores are mostly made up of fixed costs. The goal is for the thin gross margin of sales to cover slightly more than the fixed costs (rent, utilities, store employees), for a profit. Comparatively, in online grocery, the costs are mostly variable. The more orders there are, the more a company has to pay for picking, packing, transport and delivery. There are few avenues to profitability.  

One route, however, is to fill the truck with more — ideally higher-margin — goods. This is where Amazon Fresh starts to look clever. The company has a supply chain configuration that is different to its competitors. Other players generally send order pickers into stores, who pick directly from store shelves, either in partnership with, or as business units of, grocery chains. Amazon Fresh uses replenishment centers just outside urban centers. This allows Amazon to potentially complement the usual offer catalogue with up to 500,000 non-consumable items for delivery with Amazon Fresh. 

With Amazon Fresh’s link to Amazon Prime and the shared variable costs with non-grocery items, Amazon can potentially leverage Amazon Fresh in ways competitors cannot, by helping to absorb the warehousing costs and sending more full trucks on the road. With this model, low-margin Amazon Fresh items are on trucks that are already scheduled to hit the road — and with higher margin goods for Prime members. It seems that store picking is not the only road to profitability. Recently, Both Tesco and another UK grocery chain, Sainsbury’s, have added replenishment centers in the London area to bolster their in-store picking models.  

Amazon is still rolling out retail innovations. The company recently announced that it was opening a retail grocery store in Seattle without cashiers or a checkout process. Instead it will use computer vision and deep learning to capture products consumers take from shelves. Amazon has named the concept Amazon Go. One can’t help but imagine the time and money saved by the technology.

Amazon spoke of opening 2,000 more locations. But the company has now shelved those expansion plans. It appears that the technology cannot manage more than 20 customers at a time in a concept store that is 167 square meters big, with a very restrained product catalogue. How would it fare in a typical U.S. grocery store, which is almost 4,000 square meters large and offers about 40,000 different products? 

Amazon Fresh is a two-hour grocery pickup and delivery service exclusively for Prime members. In 2019, Amazon removed the $14.95 monthly fee for Amazon Fresh, which made the grocery delivery service available for Prime members at no additional cost. However, Amazon Fresh membership is invitation only. Prime members must sign up in advance to receive an invitation to shop with this Amazon grocery service. Amazon Pantry is an online store where shoppers can order groceries and household items. This was previously known as Prime Pantry and required a $4.99 monthly fee, but Amazon has removed the subscription component. 

Amazon's choice to remove the subscription requirement from both Fresh and Pantry shows a shift in strategy on subscriptions and food services. It could relate to the company's effort to become more established in the food retail industry, which began with the 2017 acquisition of Whole Foods.

Removing the subscription component could also be an effort to better compete in the crowded online grocery services market. Traditional players in food retail offer online grocery pickup and delivery services, such as Walmart with Walmart Grocery and regional grocery store chain Stop & Shop with Peapod. There are also several online-only vendors with specialized food delivery services, like Instacart, a personal same-day grocery delivery service, HelloFresh, a meal kit delivery subscription, and Thrive Market, which specializes in organic food delivery.

Amazon already has a number of ways it’s trying to shift customer behavior from offline to online. Its Prime Now service offers same-day delivery of products and household goods in certain markets, while its Amazon Fresh and Amazon Restaurants divisions are trying to capture more of the market for grocery and meal delivery. Prime Pantry is the company’s strategy for getting you to buy things like paper towels and peanut butter online, while its Dash buttons help customers with one-click ordering of products like laundry detergent without ever needing to pull out their phone.

Chief among Amazon’s rivals here is Walmart, which makes more than half of its nearly $500 billion in annual revenue from groceries. On top of that, Walmart has at least one store within 10 miles of 90 percent of Americans. In 2016, 95 percent of Americans visited a Walmart, compared with just 46 percent that bought something from Amazon, according to analyst firm NPD. In that sense, Amazon’s biggest fear is that Walmart transforms itself into Amazon before Amazon transforms itself into Walmart. And with Walmart’s purchase of Jet.com in 2016 and an impressive number of tech-focused partnerships in the last 12 months, it’s increasingly looking like Walmart could accelerate its shift into a hybrid retailer.

Not only does Walmart have Amazon beat in groceries by a mile, including in the new and growing category of grocery delivery and online ordering, but it’s also positioned to strategically capitalize on recent trends in consumer behavior that show that a sizable number of people are comfortable picking up items in person, if it means they can get it same day. Increasingly, consumers are buying online and choosing in-store pickup, or prioritizing the convenience of having a product immediately instead of waiting the 48 hours it takes for Amazon to get it to their doorstep. Not until Amazon has Prime Now in every city in America, or its drone delivery program up and running (which won’t happen any time soon), can the company offset those trends by shipping products even faster.

Reliance Fresh

Reliance Fresh is the convenience store format which forms part of the retail business of Reliance Industries of India under its subsidiary Reliance Retail Limited. Reliance Fresh is the convenience store format which forms a part of Reliance Retail Ltd (RRL) of its parent company, Reliance Industries Ltd (RIL). RRL was set up in the year 2006 to lead Reliance Group's foray into organized retail.

Presently, it has grown into an organization that caters to millions of customers, thousands of farmers and vendors. Based on its core growth strategy of backward integration, RRL has made rapid progress towards building an entire value chain starting from the farmers to the end consumers.

Reliance Fresh now operates 1,691 stores across the country. These stores sell fresh fruits and vegetables, staples, groceries, fresh juice, bars and dairy products. In addition, RRL has also ventured into the retail optics business and has opened about 100 stores in India in a partnership with Grand Vision and it also owns the i Store, which is a one-stop-shop for all Apple products and services.

 Reliance Retail became the first Indian retail company to clock more than Rs100,000 crore in annual revenues after the retail venture of Mukesh Ambani-led Reliance Industries Ltd (RIL) reported an 89% jump in income for the fiscal year 2018-19 to Rs.130,556 crore, up from Rs.69,198 crore in the previous fiscal year.

Reliance Retail’s profit before depreciation, interest and taxes (PBDIT) rose 77% to Rs.1,923 crore for the fourth quarter of financial year 2018-19 ending March 31, 2019, the company said in its earnings announcement on Thursday. For the same period of last fiscal the company had posted PBDIT of Rs.1,086 crore. Business PBDIT for the financial year 2019 grew by 145.2 percent year-on-year to Rs.6,201 crore as against Rs.2,529 crore in previous year.

Reliance Fresh, the new retail initiative from the stables of the corporate behemoth Reliance Industries Limited (RIL) has now an established presence in the retail market of India. It has entered into the retail market with its first foray as Reliance Fresh. Reliance Fresh is an effort of organized retail in the perishables segment with its stock including food and vegetables. Mukesh Ambani who was heading RIL was quite optimistic about the venture as its initial success would decide his future course of action related to the expansion plans of his retail venture. 

Reliance Fresh has adopted a business model of operating through small and medium size stores. These stores would be of 2,000-5,000 sq. ft. in comparison to a supermarket which needs 8,000-10,000 sq. ft. In the current business model it has positioned itself as a food and grocery convenience store. 

The strengths of the model are providing affordability and a clean and hygienic shopping environment to the customers. Reliance Fresh aims to be a channel for not only consumer sales but also positions itself as a distribution channel for other small outlets in various parts of the city. 

It aims to build an integrated supply chain to deliver and operate its claimed ‘Farm to Fork model’. Reliance has been racing to set up deals with state governments to establish rural hubs to buy fruit, vegetables, pulses and dairy goods from farmers as it moves to build a 'state-of-the-art supply chain spanning the entire country'. 

The competition in the food and agriculture retail sector is getting hot with the advent of new players which include both home grown companies and MNCs. This case gives an exposure to the students about the developments taking place in the retailing in India. The case provides an opportunity to discuss issues like prevailing competition in Indian retail sector, drawing parallel between the various retail models, their supply chains, the significance of vertical co-ordination of supply chain, the appropriateness of retail format of Reliance Fresh and possible future strategy.

Reliance Retail has the ambition of reaching the hinterlands of the country and is putting together a framework of expanding each store concepts across Tier 2 and tier 3 cities and beyond to achieve market leadership,” the Press Trust of India quoted Reliance Industries Limited as saying in its annual report. “It will leverage and interplay strengths with Reliance Jio to execute this,” the report explained.

Four action points have been created to execute this plan which are to augment geographical research, innovate new store concepts and channels, enhance customer experience, and leverage technology. The Jio telecom arm of Reliance Industries will be used for the technology side.

Reliance Retail now has the largest organized retail footprint in India with around 17.7 million square feet of retail space. Reliance Retail aims to further expand on this, seeing large opportunities in the market. “Organized retail has a 9 per cent share in the overall Indian retailing market, providing significant growth opportunities to the formal sector,” the business’ report stated.

During the course of the previous financial year that ended in March 2018, Reliance Retail added 221 stores for its numerous brands across India as well as 3,736 Jio Points stores. As the next round of expansion will take place in more rural areas, Reliance Retail is tapping into the fact that the market is becoming more organized in non-metro locations.

Reliance Fresh vs Amazon Fresh

• Flush with funds, Reliance Retail has trained its sights on the Flipkart-Amazon duopoly. How will it fare?
• Reliance will find it tough to break the dominance of Amazon and Flipkart, similar to how Walmart is struggling to challenge Amazon in digital sales in the US even as its stores continue to prosper

These volumes still comprise a small fraction of the overall business of Amazon India and Walmart-owned Flipkart, the two dominant online retailers. But that’s because JioMart is only selling groceries now; it plans to sell other products like fashion and electronics soon. It’s clear that after many years of talk and hype, Reliance, which owns India’s largest offline retail chain, is finally becoming a serious challenger to Amazon and Flipkart, as well as BigBasket and Grofers.

Still, industry executives, logistics firms, consultants and analysts that Mint spoke with said that Reliance will find it tough to break the dominance of Amazon-Flipkart in e-commerce, similar to how Walmart is struggling to challenge Amazon in digital sales in the US even as its stores continue to prosper. Amazon and Flipkart both have deep pockets, proven expertise in e-commerce, popular brands and good knowledge of the Indian market.

Reliance has the financial muscle, but Walmart (Flipkart) and Amazon are no pushovers," said Harminder Sahni, managing director, Wazir Advisors, a consultancy. “Today, most people who want to shop online are happy with Flipkart and Amazon. These companies have achieved significant scale and have very few weaknesses. As a latecomer, it will be very difficult for Reliance to make a big dent in the market."

Reliance did not respond to an emailed questionnaire seeking comment. During the pandemic, Reliance has not only moved fast to make inroads into the e-commerce market, it has also consolidated its leadership in organized offline retail. Last month, Reliance bought most of the businesses of Future Group for about $3.4 billion in a deal that will take its retail footprint to nearly 14,000 stores—by far, the largest in India.

In the past six months, Reliance has raised more than $21 billion for its digital unit Jio Platforms. This month, Reliance kickstarted a separate fund-raising spree for its retail unit, Reliance Retail, bagging about $1.8 billion from private equity firms Silver Lake and KKR, two of the investors in Jio. Several more investment firms, including other shareholders in Jio, are expected to join them.

These moves are part of Reliance’s efforts to transform itself into a 21stcentury digital behemoth. It is positioning itself as India’s answer to Amazon, Facebook, Google, Alibaba and other world-class digital giants, and unlike local startups like Flipkart, Ola and Paytm that have or had similar ambitions, Reliance enjoys some unparalleled advantages.

It is now accepted wisdom among politicians and regulators that India needs a ‘local’ internet powerhouse to counter the dominance of America’s Big Tech and the growing influence of Chinese firms, partly because of sovereignty concerns. Reliance’s mastery in lobbying and its political clout makes the firm best-placed to exploit this urgent establishment need to find a domestic internet powerhouse.

Amazon, Flipkart, Facebook and others face many policy-related restrictions that not only serve as obstacles to them but pave the way for domestic firms led by Reliance to enter the fray. For instance, foreign investment rules prevent Amazon and Flipkart from owning inventory or selling private labels (though critics say that these firms do it anyway using clever legal workarounds), while Reliance has no such constraints. Apart from a supportive policy environment and huge capital resources, on the business front, too, Reliance has an enviable digital distribution network and reservoir of customer data on account of Jio.

But despite these formidable advantages, Reliance has yet to prove that it has the chops to realize its ambitious vision.

The war among Reliance and Flipkart and Amazon and other internet firms is also not restricted to retail, but will extend to other sectors like financial services, content and business-to-business commerce. The technology-centric nature of the battle is more suited to the internet companies than to Reliance. There’s little doubt that Reliance will be a major player in the digital business, but the jury’s out on how much value the firm can corner. Its foray in e-commerce and B2B will provide early answers to this question.

After JioMart began testing its service late last year, media reports said that the company would deliver products to customers from local kirana stores. After Facebook invested in Jio in April in a deal that included a business partnership between JioMart and WhatsApp, Ambani said that JioMart would soon connect some 3 crore kirana stores with their neighborhood customers.

Many analysts, too, expect the partnership with WhatsApp, the most popular app in India, to be a game-changer. In July, Goldman Sachs estimated that Reliance’s entry will help expand the online grocery market by 20 times to about $29 billion by 2024. Reliance’s partnership with Facebook could help the firm become the leader in e-grocery and garner a market share of more than 50% by 2024, Goldman said.

According to one e-commerce executive, for BigBasket and Grofers, the delivery cost is about 3-4% of the average order value, which exceeds ₹1000. For Reliance, the delivery cost is presently much higher because its order value is below ₹800. The lower order value is partly because most of JioMart’s 200 city-markets are non-metros. BigBasket and others generate an overwhelming majority of their business from the metros. Reliance is betting on expanding the e-grocery market rather, than taking market share from incumbents, which generate an overwhelming majority of their sales from 10-15 cities. But while Reliance may be able to attract customers in smaller cities initially with discounts, profitability will be tough.

Apart from retail, Reliance is also rapidly expanding its B2B business. Its private label products form a key component of its retail and wholesale business plans, the people cited above said.

The private label push, however, is making large FMCG companies like Hindustan Unilever, Marico and Dabur, which sell competing products, wary of working with Reliance’s B2B arm.

Like Flipkart and Amazon, which are also expanding their B2B businesses, Reliance’s grand vision over time is to have an integrated ecosystem of wholesale and retail in which it connects consumer goods makers with kirana stores and retailers, supplies a large number of private label products across many categories to retailers and end-customers, and becomes the biggest omnichannel retail firm in the country. But realizing this vision will require Reliance to work seamlessly with millions of kirana stores, thousands of brands, modern retailers (all of which will see the firm as a rival to an extent)—and provide exceptional service in a profitable manner to retail customers.

The market is too varied for one player to be big in all categories," an investment banker said. “Reliance will have to carefully choose its battles. There’s a risk that it may spread itself too thin, so it’s wise for them to have started with grocery."

Meanwhile, while Google and Facebook have together invested more than $10 billion in Reliance, both companies are continuing to expand their own businesses in India. Google and Facebook have ambitions to enter e-commerce and expand in other sectors like payments and content. What this means is that while Google and Facebook will end up collaborating with Reliance in some areas, they will also compete with the firm in others, joining Flipkart and Amazon in the war of the digital conglomerates.