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This is the second story in a two-part series. Click here to view the first installment, which outlines how Everyday Essentials on Amazon.com have quietly become the engine of Amazon\u2019s grocery business.<\/em><\/p>\n Amazon<\/strong> has spent years trialing different grocery concepts. Some have worked, some haven\u2019t, and some are finding new steam after strategy pivots. Through it all, Sam Heyworth, the company\u2019s VP of Consumables, said that two<\/strong> truths have emerged: one, customers want a seamless experience; and two, they want value.<\/strong><\/p>\n In the second part of this two-part series, we dissect (with Heyworth\u2019s help) the ingredients that are helping Amazon deliver on those two tenets across all its grocery channels, and how the mounting success of the Amazon.com\u2019s Everyday Essentials business is fueling the flywheel.<\/p>\n Amazon\u2019s yearslong effort to regionalize its fulfillment network has been a crucial unlock in terms of both customer experience and value for the whole of its business. The shift (detailed by Amazon\u2019s CEO of Worldwide Stores Doug Herrington here) has enabled the whiplash-inducing delivery speeds that Amazon has achieved in recent years, while also making this speedy delivery affordable, even for lower-priced items.<\/strong><\/p>\n Now that this localized warehouse network is established, the next step is what Herrington called \u201cperfect placement<\/strong>,\u201d that is, \u201cmaximizing the probability that\u00a0when a customer places an order, [the product] is already in the region where they live and, better yet, already in the fulfillment center that\u2019s closest to them.\u201d<\/p>\n The company\u2019s continued advancements in inventory placement and delivery speed have been, and will continue to be, particularly beneficial to Amazon\u2019s Everyday Essentials business. Decreasing the time and cost it takes to get an item to a customer means that you can offer the same speedy delivery for even low-cost (or as Herrington calls them) low-ASP (average selling price) items.<\/p>\n \u201cLow-ASP products are the vast majority of what any household buys, like 80% to 90%<\/strong>,\u201d explained Herrington at last year\u2019s Accelerate conference in September. \u201cAs big and successful as we are, we\u2019re still relatively underpenetrated in those low-ASP items. So as [sellers] add those items into the system, customers are expanding their wallet with Amazon by buying more and more in those categories.\u00a0The knock-on effect of that is that those new purchases are driving new shopping missions on Amazon, increased visits, increased traffic, and when they do that, they\u2019re buying more of everything else, the higher-priced products as well.\u201d<\/p>\n Not only has regionalization made it fiscally feasible for Amazon to grow its share of essentials purchases, but once Amazon captures an essentials sale, customers stay and shop other categories as well.<\/strong><\/p>\n In 2024, Amazon delivered more than 2 billion<\/strong> groceries and household essentials within one<\/strong> day \u2014 a 50%<\/strong> increase year-over-year, according to Heyworth. And Herrington said there\u2019s still room to grow, highlighting how helpful technology will be in further streamlining that perfect product placement. In fact, in its recent Q2 earnings, Amazon said that it was able to improve regional accuracy of inventory placement by 20%<\/strong> with AI-powered demand forecasting.<\/p>\n Not to mention that Amazon (like many of its competitors) is now turning its attention to rural areas, where delivery has traditionally been not just slow, but often nonexistent. The company announced in May that it will invest $4 billion<\/strong> to expand its delivery network to reach these customers.<\/p>\n \u201cFor my team specifically, this expansion improves the shopping experience for a customer segment that was previously underserved for everyday essentials<\/strong>,\u201d said Heyworth. \u201cThink about products like diapers, pet food or household cleaning supplies \u2014 bulky, routine purchases that rural customers previously had to drive significant distances to obtain. Now they can get these delivered quickly, often within a day. The impact goes beyond convenience \u2014 it\u2019s about quality of life. When you remove the time burden of driving long distances for routine purchases, you give people back hours in their week.\u201d<\/p>\n With the logistics nut effectively cracked, Amazon has now been steadily increasing its online selection of Everyday Essentials, adding hundreds of thousands<\/strong> of new products, particularly at price points below $10<\/strong>. And with the platform\u2019s hold over consumers now firmly established, brands are flocking on board, including big names that are firmly entrenched in everyday essentials, such as Clinique<\/strong> and Est\u00e9e Lauder<\/strong>.<\/p>\n Adding to Amazon.com\u2019s essentials lineup is an ever-growing range of items from Whole Foods and Amazon Fresh, as well as from third-party grocers including Cardenas Markets<\/strong>, Weis Markets<\/strong>, New Seasons<\/strong> and Metropolitan Market<\/strong>. And Whole Foods\u2019 core business continues to grow since its 2017 acquisition, with sales up 40%<\/strong> and a store footprint topping 540<\/strong> locations.<\/p>\n \u201cBut we\u2019re not stopping there,\u201d said Heyworth. \u201cMost recently we shared that we would trial and launch new concepts like offering fresh groceries through our same-day delivery offering<\/strong> in Phoenix, Orlando and Kansas City, Mo., and we\u2019re seeing a positive customer response. In fact, we\u2019re seeing that after a customer places a few same-day delivery orders that include fresh groceries, they begin shopping Amazon Fresh and Whole Foods Market for their full-service grocery needs<\/strong>.\u201d<\/p>\n And most of the customers who have purchased fresh food on Amazon.com where it\u2019s currently available are new to the company\u2019s perishables business<\/strong>. \u201cThat\u2019s what offering perishables on Amazon.com with relatively little friction does \u2014 it gets more people shopping for grocery on Amazon,\u201d he said.<\/p>\n What does it mean to lead the \u201cconsumables\u201d division at a consumption hotbed like Amazon?<\/p>\n At Amazon, the term \u201cconsumable\u201d is very distinctly defined: \u201cWhen most people think about grocery shopping, they envision two distinct types of products: fresh foods that require refrigeration (like dairy, produce and meat) and everything else (the things you find in the center aisles of a typical grocery store),\u201d explained Heyworth. \u201cAt Amazon, my team focuses on that \u2018everything else.\u2019\u201d<\/p>\n As such, while not officially part of the Worldwide Grocery Stores division, Heyworth\u2019s team works very closely with that group.<\/p>\n The connecting thread is the Prime membership: \u201cWhat makes our approach unique is that we\u2019re not betting everything on a single store format or online service<\/strong>,\u201d said Heyworth. \u201cInstead, we\u2019re connecting different offerings through Prime membership, which provides exclusive savings, free delivery and so much more. The key to bringing this vision to life is integration \u2014 ensuring that no matter how a customer interacts with Amazon, they can access the full breadth of our grocery offerings without friction.\u201d<\/strong><\/p>\n Returns drop-off and order pickups at Fresh and Whole Foods locations have long been part of the Prime grocery bundle, and now the company is deepening these integrations. One of the most recent examples is the trial of an Amazon.com microfulfillment center within a Whole Foods store<\/strong>.<\/p>\n \u201cWe know that Whole Foods Market shoppers love the high-quality natural and organic products they find in our stores, but data shows many of them also visit additional stores to grab their favorite national brands or household essentials to complete their weekly shopping,\u201d explained Heyworth. \u201cThe microfulfillment center allows customers shopping at that Whole Foods Market location [in Plymouth, Pa.] to pick up items from Amazon.com and Amazon Fresh in a single trip, rather than having to visit multiple stores or place multiple online orders. If you\u2019re shopping for organic produce at Whole Foods but also need Tide detergent, you can get it all in one place. It\u2019s still early days, but we look forward to opening it to the public later this year.\u201d<\/p>\n Another attempt to solve the same problem includes adding an Amazon store, like one in downtown Chicago, adjacent to Whole Foods, allowing customers to \u201ctop off\u201d their grocery cart while in the same shopping center. And these integrations are happening in reverse at Amazon Fresh<\/strong> stores, which feature a broad selection of Whole Foods\u2019 365<\/strong> private label brand, along with other offerings from the Amazon suite.<\/p>\n \u201cAn important piece in delivering on this strategy is to make Amazon\u2019s organization structure invisible to customers, or to \u2018hide the wires,\u2019\u201d <\/strong>added Heyworth. \u201cWhether you\u2019re buying fresh groceries from Whole Foods Market or Amazon Fresh, or shelf-stable snacks or household cleaning supplies from Amazon.com \u2014 the process should be seamless. We\u2019ll do this by leveraging our existing resources and expertise rather than building entirely new solutions, which means constant collaboration with the grocery organization to ensure a cohesive experience.\u201d<\/p>\n As any merchant will tell you, even more important than the first purchase is the second. When a customer comes back and buys again, then you know you\u2019re cooking with gas. And Amazon has a fail-safe in this regard \u2014 the long-running but oft-overlooked \u201cSubscribe & Save\u201d service<\/strong>.<\/p>\n \u201cSubscribe & Save is a hugely important part of our business that doesn\u2019t always get the attention it deserves,\u201d said Heyworth. \u201cThe program has tens of millions of global users with hundreds of millions of active subscriptions.<\/strong> What makes Subscribe & Save so powerful is that it solves a fundamental customer problem: the hassle of remembering to reorder routine items. Nobody wants to run out of dog food, diapers or coffee, but keeping track of when to reorder is mental overhead most people would rather avoid. By automating these purchases, we remove that burden while also providing savings of up to 15%<\/strong>.\u201d<\/p>\n Those numbers illustrate how immensely successful the program is for Amazon \u2014 not just in terms of predictable repeat business but also in contributing to Herrington\u2019s \u201cperfect product placement\u201d objective. Beyond being an expression of consumer loyalty and trust, \u201cSubscribe & Save provides valuable predictability for our operations<\/strong>,\u201d explained Heyworth. \u201cWhen we know a customer will need a certain product on a specific schedule, we can optimize our inventory and logistics accordingly. This helps us maintain high in-stock rates and efficient delivery, which in turn leads to better customer experiences.\u201d The Amazon flywheel at work once again.<\/p>\n And at a time when value is paramount to consumers, it also helps maintain Amazon\u2019s position as the lowest-priced retailer in the U.S.<\/strong> (a title that the company has held for the last eight <\/strong>consecutive years in Profitero<\/em>\u2019s ranking). In the last 12<\/strong> months, Subscribe & Save has passed on more than $2 billion<\/strong> in savings, $1.6 billion<\/strong> in the U.S. alone.<\/p>\n Taken together, the picture is one not of a digital disruptor flailing at traditional brick-and-mortar, but a proven innovator testing and figuring out what works in a complex, highly personal category. And when viewed from that vantage point it\u2019s hard not to feel like Amazon\u2019s grocery flywheel is just picking up speed.<\/p>\n For another angle on Amazon\u2019s Everyday Essentials business, check out this recent episode of Retail Remix with Adobe Digital Insight\u2019s Vivek Pandya, who dissects category sales performance during Prime Day in July to foretell what lies ahead for the holiday season:<\/em><\/p>\nIngredient 1: Regionalization<\/strong><\/h2>\n
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Ingredient 2: Expansion<\/strong><\/h2>\n
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<\/figure>\n<\/div>\nIngredient 3: Integration<\/strong><\/h2>\n
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Ingredient 4: Repetition<\/strong><\/h2>\n
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