May 4, 2017

Amazon gets Fresh on Germany

Amazon Fresh customers in Germany (photo: Amazon)
When in Hollywood movies the bad guy asks the action hero's name, the cult answer is: "Your worst nightmare." As from today, German food retailers will at least find out whether Amazon Fresh is a game changer.

They have certainly long been in denial. In a relentless hunt for sales, without even a cursory glance at the return on invested capital, local bricks & mortar retailers still can't build enough physical stores. This inexorable process has continued, regardless of how late such stores may be in their life cycle; regardless of the fact that Germany is already overstored by at least a third; and regardless of the growing consumer trend towards internet shopping.

For years would-be pundits have comforted themselves by saying that the German market is so dominated by hard discounters that no online food retailer could ever make a profit here. For those readers who are not quite so sure, it might be worth looking at what Amazon has just begun in parts of Berlin and Potsdam.

Berliners have been able to order a limited assortment of fresh produce and deep frozen food from Prime Now since May last year, but as from today the US online giant is offering more than 85,000 lines, around 6,000 of which are organic.

These are sourced from both the company and more than 25 local retailers with stores in Berlin. The likes of Basic, Rausch, Nordsee, Kochhaus or Zeit für Brot can set their own prices and choose what products they wish to market via Amazon's online platform. Items include fruit & veg, meat, fish and dairy produce as well as pet food and health & beauty.

Florian Baumgartner, Director Amazon Fresh Germany (photo: Amazon)
Florian Baumgartner
"Prime customers will be able to do their whole weekly shop online via Amazon Fresh where we offer a broad range of products and price points," Florian Baumgartner, Director of Amazon Fresh Germany, told Lebensmittel Zeitung.

Same-day delivery is guaranteed on all orders placed before 12 a.m. Later ones up to 23:00 are delivered the next day within a two-hour time slot from 5 a.m. to 10 p.m.

Amazon Prime customers, who already pay an annual subscription of €69, will be able to test the service free-of-charge for 30 days. After this grace period, they must pay an extra monthly fee of €9.99. There is no delivery charge, however, on orders of more than €40.

Amazon Fresh depot (photo: Amazon)
At the depot
Amazon Fresh has set up its logistics centre in Berlin's Alt-Tegel district where the group already operates a distribution hub. Herr Baumgartner confirms German logistics giant DHL as Amazon's official service provider for the launch. Local online competition in Berlin will include Rewe, Schwarz Group hypermarket subsidiary Kaufland, and Edeka subsidiary Bringmeister.

Baumgartner is reticent as regards future expansion plans: "We know that customers have very high expectations when it comes to fresh produce, so we will evaluate their feedback before extending Amazon Fresh further." He needn't be so coy, however. The company has just finished building a new distribution hub for Amazon Fresh in Munich's Daglfing district.

Perhaps the local trade will draw comfort from an estimate by German retail federation HDE that online retailing has only been able to take a tiny 1 per cent niche of the local food retail market to date. However, as Euromonitor points out, Germany may only represent the ninth-largest food & drinks internet retailing market globally, but growth surpassed that of the US and UK from 2011 to 2016 and exceeded 25 per cent from 2015 to 2016.

Amazon Fresh delivery van (photo: SounderBruce-CC BY-SA 2.0)
One should also remember that Amazon has been testing fresh food delivery for a decade. Since Amazon Fresh started in hometown Seattle in 2007, the service has been rolled out to an increasing number of metropolitan regions in the US. The Americans started in selected postal codes in London last year and have since extended their activities to the neighbouring counties of Surrey and Hampshire. They have also just kicked off in Tokyo.

So will Amazon Fresh be successful? Perhaps an anecdote will be allowed by way of an answer. Many years ago at the start of the Industrial Revolution in England, Stephenson's Rocket passed a man on his horse. He very much disapproved of this early steam locomotive and told his family: "Had God wished us to go by train, he would have created us with wheels." Of course no comparison is intended with any retailer alive today.


Related article in German: "Amazon gibt Startschuss für Fresh in Berlin" by Jens Holst & Manuela Ohs in LZnet.

Related article in English: "Amazon Fresh starts in Berlin" by Lisa Byfield-Green, Senior Retail Analyst at LZ Retailytics.


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