This case is about Amazon’s attempts to disrupt the US grocery market. Amazon had been chasing the grocery market since 2007 with the launch of its online grocery delivery service, AmazonFresh. But it had been unable to crack the market successfully. Finally, Amazon’s CEO, Jeff Bezos (Bezos), realized that he could not win the grocery game by being online alone. In 2017, the e-tailer started experimenting with physical grocery retail by launching the Amazon Go store (cashier-less convenience store) and AmazonFresh Pick Up services (grocery pickup). To further its brick-and-mortar ambitions and accelerate its growth in the US grocery sector, Amazon acquired retail organic chain Whole Foods in June 2017. With this acquisition, Amazon became a full force brick-and-mortar grocer, with more than 450 stores, most of them in premium urban locations in the US.
As Amazon tried to break into the US$800 billion grocery market, Bezos faced a number of challenges including growing competition, the low margin nature of grocery, logistical complexities, bringing digital conveniences to the in-store grocery experience, and turning around Whole Foods. The stakes were high for Amazon in the grocery sector. Can Amazon manage brick-and-mortar well and upset traditional grocery retailers? Can the e-commerce giant change where and how customers shop for groceries? Can Amazon disrupt grocery retail the way it upended bookstores?
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The case is structured to achieve the following teaching objectives:
Understand the strategies adopted by Amazon to establish its presence in the grocery industry
Identify the issues and challenges faced by Amazon in its efforts to disrupt the US grocery market.
Analyze the competitive advantage of Amazon in the grocery business
Understand the challenges in going from e-commerce to brick-and-mortar
Understand disruptive innovation in the grocery sector
Explore strategies that Bezos may adopt to overcome these challenges.