May 12, 2016

Amazon Prime delivers fresh food in Berlin

Prime Now delivery bike at the Potsdamer Platz wall (photo: Amazon)
Meals on wheels (photo: Amazon)
First we take Manhattan and then Berlin? Or was it Seattle? At any rate, the US online retail giant began delivering fresh food this week in the German capital with its 3.5 million inhabitants.

For an annual fee of €49 Amazon Prime customers can choose from a programme of around 20,000 lines, ranging from batteries to HD TVs. This includes an initial assortment of over 4,700 food & drink items with more than 100 deep frozen and 200 dairy products as well as around 60 fruit & veg lines.

This week's move provides a clear indication that Amazon intends to intensify its competition with local retailers. Grocers beware?

Orders for the new German Amazon Prime Now service are picked at the company's two-storey, inner-city distribution centre on the Kurfürstendamm. They are packed in thermal bags with dry ice and delivered by e-bike or van via third-party logistics providers such as Go! or Interkep.

Amazon makes no extra charge for delivery within two hours on minimum orders of €20, but a fee of €6.99 is levied for an express service within 60 minutes.

Much of this had been expected, but there were also a number of surprises. In contrast to London or Milan, Amazon is peddling, or should one say "pedalling"?, far more food from Day One than had been anticipated.

Amazon Prime Now European Logistics director Cavit Yilmaz (photo: Amazon)
Cavit Yilmaz: "Limited food ranges don't make sense" (photo: Amazon)
"Experience has shown that limited food ranges don't make sense, which is why ours is relatively large," Prime Now European logistics officer Cavit Yilmaz told Lebensmittel Zeitung. The offer will be grown or trimmed according to customer demand, he says.

The company is also treading new ground with soft drinks and around 100 different beers, including major German brands Beck's, Radeberger and Krombacher. Unlike, these are mostly offered in crates with deposit bottles.

In contrast to the delivery service of Rewe, Germany's second-largest grocer by sales, Amazon Prime isn't placing any initial cap on the size of drinks orders. The innovative US company is also pursuing a different approach when it comes to out-of-stocks and doesn't deliver any substitute products.

"The customer can't order what we don't have in stock, but that doesn't mean that we don't strive to make every line available," says Yilmaz.

The Amazon manager is "very happy" with distribution coverage throughout Germany's largest city. Orders placed incognito by our newspaper in various parts of the town broadly corroborated this statement. Central areas were generally well-served, although there was only a two-hour option available in the more easterly districts of Friedrichshain and Prenzlauer Berg.

Amazon Fresh delivery service at the house door (photo: Amazon)
Door to door service: And the customer is actually there... (photo: Amazon)
Various sources indicate that Amazon will be extending its Prime Now delivery service to other major German cities, including both Frankfurt and the Ruhr area, in due course.

Although there is nothing very threatening about Amazon's online food prices yet, Germany's principal bricks & mortar retailers have only dabbled in fresh delivery to date. Rewe Group alone offers a service in around 70 cities and towns.
Off the record, many German retailers scorn Amazon's food online forays because they can't see a "profitable business model". But this surely begs the point, or at least shows how even top managers in the trade view our brave new digital world through their own spectacles.

Amazon Fresh delivery bike-2 (photo: Amazon)
On your bike! Former UK employment minister Norman Tebbit, who once told jobless youth to search for work on a bicycle, would love this... (photo: Amazon)
Amazon sees the customer holistically rather than on a one-off transactional basis. Turbocharged by their lucrative Cloud Computing division, while also making money on their Marketplace Web Service, Amazon Prime's algorithmic business model is the customer him- or herself.

Obviously, the Americans would like to make a profit on food as well. But, when push comes to shove, it is far more important to Amazon to provide customers with a whole array of services covering every aspect of their lives. What is, after all, a small loss on food, if your clients live in an Amazon Prime universe?

Given the obvious convenience of online shopping and modern man's love affair with electronic screens, we are therefore likely to have many more bicycles whizzing around our major cities soon. So watch out when you next go for a walk, you won't just have to duck when the drones come...

Podcast microphone (photo: Gerhard Seybert-Fotolia)
(photo: Gerhard Seybert-Fotolia)

Podcast. Click arrow to listen to an audio version of the text:

Lebensmittel Zeitung with digital sister (photo: LZ)
Our German B2B newspaper, Lebensmittel Zeitung, in print & digital
Read in German: By online news editor Jens Hols on pages 1 & 10 of
Lebensmittel Zeitung, no. 10, 13.05.2016

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