Hints Abroad of Amazon’s U.S. Future?
Nine months before Amazon announced its $13.7 billion purchase of Whole Foods Market last June, the ecommerce giant made a smaller foray into Spain’s grocery sector, unveiling its first deal anywhere for Prime Now to deliver fresh food from a traditional neighborhood market.
The alliance that started in late September 2016 with dozens of small vendors at Madrid’s 19th-century Mercado de la Paz has drawn visits from top Amazon executives, and traditional neighborhood market managers from London, Paris, Berlin and beyond.
Prime Now is already available in 30 U.S. cities, working with local grocers to quickly deliver fresh meat, seafood and produce, Ana Rigby, a spokeswoman at Amazon’s headquarters in Seattle, said in an email to Progressive Grocer.
By entering Spain, Rigby added, “Globally we offer local stores the opportunity to leverage our expertise with last-mile delivery to provide a new convenience to their customers.”
Testing Ground for U.S. Grocery
But representatives at the historic market Madrid, as well as a veteran American grocery sector analyst, sense that Amazon also sees Spain as a testing ground for its future grocery plans in the United States.
In part, it’s an effort by Amazon and the Madrid market itself to perfect the delivery of fresh fish, meat, fruit and vegetables to consumers at nearly breakneck speed, they say.
“The success of the project is that we are the first (traditional) market in the world that can send fresh products to clients in one or two hours,” said Guillermo del Campo, a lawyer and longtime manager of Mercado de la Paz.
Grocery analyst Bill Bishop says other Amazon goals also are in play.
“It’s all geared to help them reach ultimately a critical mass of penetration into households that will support their more routine direct delivery to those households. If you’re delivering to most houses, the delivery function becomes very efficient,” said Bishop, a co-founder of the Barrington, Ill.-based Brick Meets Click consultancy.
“The grand strategy involves this critical mass of groceries, because groceries represent the frequency and the dollars needed to support the ongoing distribution system,” Bishop told PG in a phone interview.
Mercado de la Paz manager Del Campo said, “Some vendors have increased their sales by 35 percent. What Amazon wants here is a daily purchase” by Prime Now clients.
Groceries Delivered Within an Hour
They get delivery from the market, in a wealthy Madrid neighborhood, to almost anywhere in greater Madrid within an hour by paying an additional 5.90 euros ($6.95), or within two hours simply as Prime Now members. The market notes new clients are placing orders from some of Madrid’s toniest suburbs.
Amazon is “bringing in young people, people that you don’t know,” said Mario Martin Dueñas, whose family has run a fish stand at the market for 72 years. His sales are up 10 percent and he says Amazon takes about a 10 percent fee for the alliance.
When entering Spain’s grocery sector, Amazon also made a deal with the large supermarket chain DIA, which had revenues of $11.6 billion in 2016 from 7,300 stores in Spain and four other nations. The alliance focused on DIA’s newer stores branded as La Plaza de Dia, which aim to replicate the old idea of shopping for your groceries on the town square (or plaza, in Spanish).
“I think this is one of the reasons that Amazon needed something like DIA, to be able to offer fresh products at an accessible price,” said DIA spokesman Gines Cañabete. “Because at Mercado de la Paz, it’s a different, gourmet purchase.”
Amazon A Compatible Partner?
Grocery analyst Bishop said it seems Amazon in Madrid “has intentionally put together several levels of food quality, combined them, bundled them, so that the consumer has a choice in interacting with them.”
The Amazon-DIA alliance started with one Plaza de Dia store in Madrid and has since added a second Madrid store and a third in Barcelona, Spain’s second-largest city.
“Amazon is very good at organizing test and innovation,” Bishop said. “While Amazon is kind of painted as a boogeyman for a lot of people, I think they also hold the potential for being a compatible partner under the right circumstances. So, it’s probably going to be true that some of the experimentation that’s happening here will be to demonstrate to other retailers that you can work with these guys.”
The deals in Spain prompted a visit last July by Rebecca Gansert, Amazon’s worldwide director of Prime Now, both the Mercado de la Paz and DIA confirmed.
“With Amazon’s global operations footprint, it is not uncommon for executives to travel abroad,” said Amazon’s Rigby. “We’re excited about the customer response to ultrafast delivery from Mercado de la Paz.”