Provide comments/response to the below students post:
Amazon’s move to online grocery delivery will like eventuallygive the company a competitive advantage, however initially Amazonwill have to alter the market to create conditions that create amarket advantage. Currently Amazon’s grocer delivery is in the testphase, and currently lists 28 metropolitan areas that it is able toservice (listed on the Amazon Prime Now website). This serviceprovides fresh produce, or even prepared meals, that can be orderedand delivered within an hour. This program is intended to create anew product line for Amazon (Wells). Amazon’s current prices doappear to be competitive with local grocery prices when comparingtheir online prices to my local grocery store prices. Amazon iscurrently only able to provide these service to a very smallsegment of the population, and the American public has not whollyembraced online grocery shopping. Market research for 2016 hasshown that of the $795 billion spent on groceries in 2016, only $33billion was spent online, for merely 4% of the market (Banjo, S).This lack of consumer spending is likely due to a few differentfactors. The largest factor is that consumers likely feel morecomfortable being able inspect and select the food they purchasepersonally. I know personally I especially like to inspect andselect my own produce and meat items. Additionally, groceryshopping is still fairy convenient, as grocery stores are stillextremely prolific in American cities. However, as Amazon and otheronline grocers continue to carve out additional market sharegrocery stores will be extremely sensitive to this loss of marketshare (Castaldo). Most grocers need every little bit of marketshare they are able to muster to cover their costs. As the loss ofthis market share forces grocers on the margin to close, Amazonwill be even more convenient to some customers who have lost theirlocal grocer, further increasing Amazon market share and forcingmore grocers to close. It is likely that closing and re-allocationof market share will have a snowballing effect that hits grocersvery hard. Places where Amazon will likely do very well, which willbe a large market, is places like restaurants. Restaurants havelarger grocery shopping lists, more consistent orders, and are lesssensitive to what the groceries look like since consumers do notsee the raw materials. This will be a large chunk of the market,which will probably allow online grocers to hold a significantmarket share. For local grocers to retain their customers loyaltythey must be able to compete with Amazon for prices andconvenience. American consumers will likely continue to vote withtheir wallet in stores that are able to provide more comprehensive”one-stop-shop” style where groceries and household goods can bepurchased all at once, much like the Wal-Mart superstore model isable to provide.
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