Online retailers seem to have it over brick and mortar retailers because of big lists. Is having a big list key in getting ahead in retail sales? Well, Netflix basically put Blockbuster out of business because they had a huge list. Amazon built a big list because they discounted their way into it. One place to look is at how they are trying to break into online grocery operations.
Food has been a hard area to break into online for a variety of reasons. One is that many people don’t believe that they will get the freshest product, meats, fish and dairy products online. Many like to shop themselves and pick it out themselves. Another reason is because shipping fresh or frozen items is expensive. Then there is the lure of impulse buys that boost their bottom line in stores.
It has been done. Britain has successfully done so and other countries are following suit. But it took time. Tesco, Europe’s second biggest retailer, took 17 years to bring its online grocery business to the market and make it a success. Now it’s successful. Tesco isn’t building its online business for the sake of just having an online business. Instead it is doing so to make money. They are aiming to attract more big-spending food shoppers AND those who buy general goods. General goods sell at much higher margins than groceries.
They also found that customers who buy food online as well as in store spend twice as much as those who only shop in store. So much for lost impulse buys! Bigger yet, those who also buy general merchandise spend three times as much.
Amazon is also venturing into groceries. AmazonFresh is available in certain areas and they bundle orders of groceries with fresh foods from local specialty stores partnering with Amazon. What they have found is that the operating margin for AmazonFresh could be as high as 13 percent in denser urban areas. It takes work, but looks like it will be a money maker.