Amazon and Deliveroo offer free delivery to Prime subscribers

Here is the marketplace news that captured our attention this week.

Amazon and Deliveroo offer free delivery to Prime subscribers

Deliveroo and Amazon have struck their first customer-facing partnership since the US e-commerce group agreed to invest in the London-based food app two years ago, offering Prime customers free deliveries on certain orders.

The move comes despite UK regulators examining the risks of just such a tie-up when considering whether to allow Amazon’s investment in Deliveroo, which was originally agreed in 2019. Millions of subscribers to Amazon Prime will be able to have a year of unlimited free deliveries on Deliveroo orders from grocery stores and restaurants, as long as they spend more than £25 per order. The offer is equivalent to the “silver” tier of Deliveroo Plus, which normally costs £3.49 a month.

Lisa Leung, director of Prime and marketing at Amazon UK, said the company was “always looking for ways to offer even more value to Prime members”. As well as free shipping, discounts and its video streaming service, Prime perks beyond Amazon’s own network of products have previously included a year’s free Nintendo Switch Online membership and discounted wireless contracts.

During its investigation last year, the UK’s competition regulator fielded concerns that tapping into Amazon’s Prime network might give Deliveroo an unfair advantage over rivals such as Just Eat and Uber Eats.

However, the Competition and Markets Authority ultimately concluded that such a collaboration would not present a “substantial” enough risk to warrant intervention.

Amazon closed its own restaurant delivery service in the UK in late 2018, shortly before it began discussions to invest in Deliveroo. Both Amazon and Deliveroo have separately been expanding their grocery delivery services. Amazon, which owns Whole Foods, has opened six of its physical Fresh grocery stores in London this year, which use its “just walk out” technology to do away with traditional checkouts.

Deliveroo has said that it plans to use some of the proceeds of March’s initial public offering to grow its Plus subscription service, which is seen as being important for loyalty and customer retention in the fiercely competitive market.

Last month, Deliveroo’s shares briefly returned to 390p at which the company priced its IPO but have subsequently fallen back to close at 331p on Tuesday.

Tambo's View:

Amazon is always looking for ways to offer even more value to Prime members, and this partnership highlights how the perks of Prime stretch beyond Amazon products. This is a move that will certainly appeal to a younger customer as Tambo's own proprietary research on Gen Z and e-commerce behaviours -add to cart- shows that food is one of the top three categories that these future shoppers spend the most money on. We expect this partnership to attract new Prime members from different demographics as the benefits of membership diversify.

Amazon to Tout Tech in Proposed Stores

It’s no surprise Amazon is going all out in its planned department stores but details including private-label brands and technology-rich dressing rooms give customers even more reason to anticipate the new brick-and-mortar locations — whenever and wherever they open.

According to a report on September 22nd in The Wall Street Journal, the stores could open next year and will largely be a hub for the company to sell T-shirts, jeans and other items from its own labels and a mix of third-party sellers from Amazon’s online stores.

Amazon retail customers might use QR codes to scan items they want to try on through a smartphone app, which would alert store employees to gather the items and leave them in fitting rooms for the customers, the WSJ report says. The fitting rooms may have touch screens to allow shoppers to request additional items to try on while they’re in the room, according to the report.

Robots or other non-human helpers could eventually be used in Amazon’s retail stores, one of WSJ’s sources said.

All of these ideas are still subject to change, the report says, noting Amazon’s stores are likely to debut in San Francisco and Columbus, Ohio.

Amazon recently passed Walmart to become the largest U.S. seller of clothing, according to Wells Fargo, which predicted earlier this year that Amazon will top $45 billion in clothing sales this year. Amazon debuted private-label apparel in 2016 and has more than 100 brands today, the Wells Fargo report says.

Last month, WSJ reported on Amazon’s plans for several brick-and-mortar retail locations, starting with the San Francisco and Columbus locations, with an average square footage of about 30,000 square feet, well below the 100,000-square-foot size of typical department stores.

The seemingly inevitable launch of physical Amazon stores is aimed at boosting the retail giant’s foothold in sales of clothing, home goods, electronics and more.

Tambo’s View:

As a disruptor, Amazon will need to offer customers something niche and technology-rich if they want to compete in the physical retail space. Namely, physical stores have been the author of their own demise by their failure to innovate and adapt and Amazon has taken note. The tech giant knows that the future of retail is multichannel and that most consumers still shop in physical stores alongside making online purchases. Physical stores will also help Amazon better showcase its new tech and will allow it to build a physical presence and reach customers during in-store shopping moments.

Walmart Links Grocery Ordering to Cross-Category eCommerce Experience

Walmart is integrating the grocery shopping experience with its overall e-commerce journey. The company sent out an email to consumers on September 21st announcing its new website, noting that this “redesigned” allows customers to shop multiple fulfilment methods in one order.

Rather than having to place their same-day grocery order, check out and then repeat the process for their retail order, the updated site allows shoppers to browse items for pickup, delivery and fast shipping, and then add items for multiple order reception methods to the same cart and check out all at once.

By joining the grocery ordering experience to all of Walmart’s other e-commerce offerings, the retailer has the opportunity to convert customers who have not been taking advantage of its food offerings to e-grocery shoppers. Additionally, the retailer added a “buy now” button, an order tracking feature and a “quick add” recommended items feature.

In the mid-2010s, it was enough for grocers just to have an e-commerce presence to be among the more digitally savvy brands. Then, the space began heating up late in the decade. Since the start of the pandemic, while the online grocery space boomed as consumers sought out contagion-safe ways to meet their food needs, the technology has evolved rapidly. Now, any point of friction in the shopping experience can be enough to send consumers running to competitors.

While online grocery has grown since it represented a low single-digit percentage of the total industry, it still remains far from the norm. PYMNTS data from the study "What Consumers Expect From Their Grocery Shopping Experiences," a collaboration with ACI Worldwide, finds that while 94% of consumers still shop in stores, only 34% buy online at all. More specifically, only 23% of consumers buy groceries online for delivery, 20% use curbside pickup and 12% utilise buy online, pickup in-store (BOPIS) options.

Features like Walmart’s new “buy now” button can make the online shopping experience more intuitive, encouraging more consumers to take advantage of the channel. PYMNTS research from the "Buy Button Report: Optimizing Payment Choice for Digital-First Consumers" finds that in shopping for food and medicine, buy buttons can reduce checkout time by 28%.

Tambo’s View

The changes to baskets and transactions further elevate Walmart’s grocery business as the retailer builds out its omnichannel strategy and looks to keep the online sales momentum brought on by the pandemic. For Walmart, with grocery as its main advantage over Amazon, the pressure to provide a compelling e-commerce experience was acutely felt, and they have now certainly shifted to a more digital mindset.