What role should Amazon play in the UK for food and drink brands’ strategies?

Many brands use Amazon as a D2C channel to signal availability to consumers and this can be an important early step for start-up brands. But what about the costs and ease of doing business? Are they worth the hard yards to get established for food and drink brands?

The Role For Amazon For UK Food and Drink Brands’ Strategies

While everyone knows that Amazon is a global giant of a business, its UK grocery market share is 1.9% (Worldpanel Numerator), a little behind Ocado at 2.2%, which has been the fastest growing retailer in the UK over recent months. Where Ocado acts much like a regular bricks and mortar retailer in many ways – buyers responsible for categories, personal contacts to manage listings and promotional activity – Amazon’s interface is very much a ‘tech’ one, and when things don’t happen as they should it can be a frustrating experience to get a resolution via their formal channels.

Recent price cuts by Amazon are taking the challenge to the multiples, and according to analysis by Associa, they can now claim to match or better prices on nearly two-thirds of items stocked in common with one or more of the big chains.

It typically takes brands some time to find the right way of managing their Amazon business to avoid a situation where high levels of cost take too large a chunk out of sales revenue. The same applies to their promotional strategy in support of their presence on the platform.

And as Amazon changes, so must suppliers to ensure they are making the most of the way Amazon does business.

Amazon seems to making more efforts to become a mainstream retail option for both consumers and suppliers, with a greater focus on lower prices and single skus, but feedback from the Grocery Code Adjudicator suggests that suppliers have many more gripes with Amazon than they do with the traditional multiples, so there is clearly a way to go here.

Amazon are too big to be ignored, and their track record in other categories suggests they will learn and get bigger still.  The challenge for brands will be to navigate the best way to do business with the platform over the short and longer term.

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