The Case for Share of Voice
Why does Amazon Fresh matter?
According to the Mastercard Economics Institute, grocers are predicted to show the most dramatic and permanent e-commerce gains coming out of the pandemic, making it one of the stickiest habit changes. Before Covid, about 7% of grocery shopping was done online. Today, that share is expected to rise to 9%, retaining 70% to 80% of the digital gains achieved during the peak of the pandemic. This boom in e-commerce grocery is fueled even further by the increasing number of consumers (30%) who plan to eat more meals at home this year. Simply put, e-commerce grocery is here to stay and only getting stronger.
Amazon Fresh, which actually started in 2007 as a hyper-local delivery service in Seattle, has been one of the recipients of the boom in online grocery. In 2017, when the service became free for Prime members, we saw a steady uptick in demand for the service and rapid expansion. Fast forward to today, and we’ve seen windfall gains of Amazon Fresh in new customers following a year that will go down in e-commerce history as a Black Swan event due to the pandemic.
Image: Growth compared to previous quarter across CPG categories
There is no doubt the pandemic created real concern over shopping for groceries in brick and mortar stores. Today, with shorter delivery times and curbside pickup making it easier to buy online, more people than ever before are shopping for bananas and cereal on Amazon Fresh. For CPGs, there’s no better time to consider Amazon Fresh as a major channel to drive e-commerce sales.
To help brands figure out how to win in e-commerce grocery, we’ve doubled-down on our machine learning and data insights specifically to support Amazon Fresh with the newest release of our CommerceIQ Sales that we just announced today.
Amazon Fresh – An Urban Phenomenon?
Today, Amazon Fresh is available in over 3,000 zip codes in the U.S. However, only about 15% (roughly 500) of these zip codes drive more than 50% of sales across all categories.
In recent months, Amazon has vastly improved their forecasting and inventory management models. But, we have yet to see CPGs mirror this level of sophistication in their own planning to take full advantage of the growth opportunity available with Amazon Fresh. Based on our discussions with top CPG brands, they want to know the top locations, products and sales trends to look into and how to prioritize them.
Which brings me back to those 500 zip codes driving over half of all category sales. A deeper analysis of those top zip codes brings our focus to a little over 100 areas where there is a strong overlap across all product categories.
Not surprisingly, zip code sales are highly skewed towards larger urban cities with New York, Seattle and the Bay Area being major hotpsots. The Southern California region (Los Angeles / San Diego) and Chicago in the Midwest round out the tlist of Top-5 revenue generating markets for Amazon Fresh.
Image: Major cities driving Amazon Fresh
Who’s moving my cheese?
While most CPG brands have 1,000s of products on Amazon, it’s no secret that only a few really matter when it comes to online sales. On Amazon Fresh that list is even smaller and more concentrated. A mere 12% contribute to a staggering 70% of sales on Amazon Fresh.
People are creatures of habit when it comes to their first choices in food. They simply aren’t open to experimenting with other options unless they can try it first, which is a practice that only takes place in physical stores (food samples at Costco, anyone?). In grocery, timeliness is key and people tend to buy only those products they have used and been satisfied with in the past.
Image: Contribution of revenue at ASIN level
The Power of Zip Codes on Amazon Fresh
In addition to researching which urban cities drive the most sales of Amazon Fresh and how to prioritize products across these cities, we noticed another interesting observation. Based on deeper analysis of the regions (Northeast, South, Midwest, Southwest, Northwest) we saw that Amazon prioritizes and recommends brands based on the type of consumption and/or preferences for products that shoppers have in those respective zip codes.
This provides even further reinforcement of the need for a razor sharp focus on understanding which ASINs to focus on across key zip codes. Having these insights in a highly competitive market like Amazon Fresh is absolutely critical.
Image: ASIN vs Zip Code visibility
What does this mean for CPG brands?
Online grocery sales are expected to hit $100B this year. For CPG brands that have yet to integrate Amazon Fresh into their e-commerce mix and want to get started, we recommend the following:
- Start by testing product launches for smaller urban demographics.
- Become more agile in getting feedback and making improvements.
- Leverage assortment and sales trends data into planning for brick and mortar stores.
- Track OOS metrics in key zip codes.
- Improve supply planning in a more decentralized way i.e. regional fulfillment.