Amazon’s new tie-up with Morrisons reveals the web retailers’ ambition to be the pipe through which everything is delivered. ParcelHero’s Head of Consumer Research, David Jinks argues that the move is a cog in Amazon’s far wider plan to win customer loyalty through its Prime service.
Amazon’s strategy is to use deliveries to win long-term loyalty from shoppers; luring its customers into its Prime service through free deliveries. The large scale expansion of its Prime Now food service will tempt many more customers to lock in to Prime Membership.
Our research shows Amazon’s Prime members shop 50% more frequently with the company than non-members and spend an average of £1,000 a year, as opposed to £450 a year for non-members. For consumers who have so far resisted the allure of Prime membership, this huge potential expansion of its food delivery service may prove to be just the hook Amazon needs. And Amazon is also offering exclusive deals for Prime Members on its Pantry service; so it really is a joined up approach.
Of course free deliveries and Same Day services costs money. But ParcelHero’s influential report last year, Amazon’s Prime Ambition, revealed the company has been steadily developing its own Amazon Logistics delivery services in the UK – as well as the US and Europe. By moving as much of its deliveries as possible ‘in house’, rather than paying external couriers and the Royal Mail, Amazon has been able to absorb more of its huge delivery costs, and continue to use deliveries as a weapon almost as powerful as low prices in attracting customers. The Morrison’s deal adds a whole new dimension to this strategy.
We said in our report that it is Amazon’s long term aim to be the pipe through which all your shopping flows. We expect continuing reductions in costs for Amazon as its investment in its own fulfilment services pay off. That’s how it can afford to take on this large scale expansion through the tie-in with Morrisons and deliver it later this year. Amazon investors may have wobbled after its latest results last month, but long term the company still looks set to deliver.
By David Jinks
Head of Consumer Research
ParcelHero
Find out more about Amazon’s ultimate plan to be the conduit through which everything is bought, and how it is using deliveries to attain its goals here.