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Having worked for a retail software company that was purchased by Oracle, I can assure you Grocery retail is the most difficult retail supply chain to execute w

Having worked for a retail software company that was purchased by Oracle, I can assure you Grocery retail is the most difficult retail supply chain to execute well. The margins are razor-thin. The products have myriads of stubborn problems: short life checking, long life checking, mix of delivery types (direct, warehouse, corporate and 3rd party), very complex planograms, composite units of measure, challenging shrinkage problems, many more supply chain cas fortuit issues. Amazon made its name by shipping consumer hard goods. It continues to do well with non-perishable items. But this nut is the Everest of retail. It will be a challenge to get it to fit into their model.

devmunchies 9y ago
> margins are razor-thin at any other grocery store, yes
- nickbauman 9y ago
  The most you could say is WF's margins are "thin" instead of "razor thin". They're not writing US student loans here.
- Steve44 9y ago
  I think they have higher costs too. In the UK their sites are in High Street locations unlike most other grocery stores. They also have a lot more front of house staff and have very high quality standards for their products and displays. That all costs and eats away at the raw cost-of-goods margin.
  - naravara 9y ago
    And it's not just an idiosyncrasy to maintain that stuff either. If they don't maintain the perception of being a premium brand/neighborhood anchor people will stop shopping there. Whole Foods gets higher margins because their customer base cares more about various intangibles beyond just the value-for-money. Take those intangibles away and suddenly you're competing on value-for-money alone and Walmart will eat your lunch while smaller, independent grocers go after your dinner.
    - Steve44 9y ago
      > cares more about various intangibles beyond just the value-for-money Very much, like many premium businesses part of what they are is to ensure everything will be lovely, easy, and just happen. That is the added value. Take that away and you're competing against ASDA etc. Premium brands need to keep that, it is a very valid market but must be looked after.
- hammock 9y ago
  There are actually a number of items in WF that they sell at cost or below
sgustard 9y ago
>But this nut is the Everest of retail. It will be a challenge to get it to fit into their model. Looking at it the other way: Amazon knows it's bad at this, so it's acquiring the expertise.
tigershark 9y ago
It's more than 1 year that Amazon fresh launched in uk, I guess it is even more time it launched in us. And I think is doing pretty well, I have been buying my weekly groceries always in Amazon for a while now.
thinkling 9y ago
Your point about grocery logistics being difficult is a good one. However, Amazon is not new to this. - Amazon has been shipping tens of thousands of non-perishable grocery SKUs from their main site for about 10 years. They've had to deal with expiration dates, chocolate that can melt, bundling multiples, highly variable shipping cost vs margin, etc. That organic cereal you buy at WFM is available on Amazon too. - They have relationships with all the large packaged-goods companies. - They've been operating a small-scale local grocery business (Amazon Fresh) for about 10 years, now in 14 cities. - A lot of this direct-to-consumer business is complementary to Whole Foods' experience. Whole Foods is stable as a company and (afaict) has higher operating margin's than Amazon's retail business. So they could largely leave them alone but still gain a more-or-less national perishable foods supply chain that lets them open Amazon Fresh and Amazon Go in many more cities much faster than if they had to do it from scratch.
alasdair_ 9y ago
>It continues to do well with non-perishable items. I've tried a bunch of different grocery delivery services (Seattle area) and Amazon Fresh is far and away the best of them. I stuck with Safeway for four months and literally every single time they delivered an order, there was a problem with the order. Every single week! There was always something missing (not even obscure stuff - once they claimed to be out of bananas, for example) and the packaging was terrible - just getting the bags from my front door to the kitchen often let to something falling out and breaking. Amazon Fresh does things very, very well. They show up on time, almost never have a stocking issue and the packaging is very well designed - the frozen stuff is packed with dry ice, the cold stuff with an ice pack and the rest are packed into reinforced paper bags that are sealed to prevent stuff falling out en-route. It takes only moment to move everything into my kitchen and I've never had something break en-route. Customer support is much better too - every time my order was missing an item, I'd have to call Safeway and often I simply couldn't reach someone (especially outside of 9-5). Grocery stores need to up their game quickly or they will go the way of Sears and K-Mart.
- sgs1370 9y ago
  Echoing this about Amazon Fresh. I have ordered 3 times (mainly meat and veggies) and it's been flawless. Their packaging is great, the quality of the food is great. It is a luxury purchase but although the prices are more than at my local store, they are less than what I would pay at WF. Most importantly, the delivery times are very flexible and easy to arrange...with the same great search engine amazon uses for everything else. I tried a few other grocery delivery services over the years and they couldn't promise any delivery window, their packaging was terrible, and you had to be there in person to get the groceries. As an aside, the amazon fresh packaging is great as trash bags. The ice packages they send along are great to put in your freezer and use later on trips. They recently (at least to me) added a durable cloth-based cooler, which they say you can put on your porch and they will reuse. I may let them have it back or I might use it as a cooler for my normal grocery store trips. It is slightly more expensive, but the bottom line is that in the middle of the week I am just too worn out to go to the store, so being able to have a mid or end week delivery means that I have stuff at home instead of having to order out. I guess I qualify as an amazon fanboy ;-) Relevance to this HN story, I think they can probably leverage this to help their Amazon Fresh business.

devmunchies 9y ago

> margins are razor-thin at any other grocery store, yes

nickbauman 9y ago
The most you could say is WF's margins are "thin" instead of "razor thin". They're not writing US student loans here.
Steve44 9y ago
I think they have higher costs too. In the UK their sites are in High Street locations unlike most other grocery stores. They also have a lot more front of house staff and have very high quality standards for their products and displays. That all costs and eats away at the raw cost-of-goods margin.
- naravara 9y ago
  And it's not just an idiosyncrasy to maintain that stuff either. If they don't maintain the perception of being a premium brand/neighborhood anchor people will stop shopping there. Whole Foods gets higher margins because their customer base cares more about various intangibles beyond just the value-for-money. Take those intangibles away and suddenly you're competing on value-for-money alone and Walmart will eat your lunch while smaller, independent grocers go after your dinner.
  - Steve44 9y ago
    > cares more about various intangibles beyond just the value-for-money Very much, like many premium businesses part of what they are is to ensure everything will be lovely, easy, and just happen. That is the added value. Take that away and you're competing against ASDA etc. Premium brands need to keep that, it is a very valid market but must be looked after.
hammock 9y ago
There are actually a number of items in WF that they sell at cost or below

sgustard 9y ago

>But this nut is the Everest of retail. It will be a challenge to get it to fit into their model. Looking at it the other way: Amazon knows it's bad at this, so it's acquiring the expertise.

tigershark 9y ago

It's more than 1 year that Amazon fresh launched in uk, I guess it is even more time it launched in us. And I think is doing pretty well, I have been buying my weekly groceries always in Amazon for a while now.

thinkling 9y ago

Your point about grocery logistics being difficult is a good one. However, Amazon is not new to this. - Amazon has been shipping tens of thousands of non-perishable grocery SKUs from their main site for about 10 years. They've had to deal with expiration dates, chocolate that can melt, bundling multiples, highly variable shipping cost vs margin, etc. That organic cereal you buy at WFM is available on Amazon too. - They have relationships with all the large packaged-goods companies. - They've been operating a small-scale local grocery business (Amazon Fresh) for about 10 years, now in 14 cities. - A lot of this direct-to-consumer business is complementary to Whole Foods' experience. Whole Foods is stable as a company and (afaict) has higher operating margin's than Amazon's retail business. So they could largely leave them alone but still gain a more-or-less national perishable foods supply chain that lets them open Amazon Fresh and Amazon Go in many more cities much faster than if they had to do it from scratch.

alasdair_ 9y ago

>It continues to do well with non-perishable items. I've tried a bunch of different grocery delivery services (Seattle area) and Amazon Fresh is far and away the best of them. I stuck with Safeway for four months and literally every single time they delivered an order, there was a problem with the order. Every single week! There was always something missing (not even obscure stuff - once they claimed to be out of bananas, for example) and the packaging was terrible - just getting the bags from my front door to the kitchen often let to something falling out and breaking. Amazon Fresh does things very, very well. They show up on time, almost never have a stocking issue and the packaging is very well designed - the frozen stuff is packed with dry ice, the cold stuff with an ice pack and the rest are packed into reinforced paper bags that are sealed to prevent stuff falling out en-route. It takes only moment to move everything into my kitchen and I've never had something break en-route. Customer support is much better too - every time my order was missing an item, I'd have to call Safeway and often I simply couldn't reach someone (especially outside of 9-5). Grocery stores need to up their game quickly or they will go the way of Sears and K-Mart.

sgs1370 9y ago
Echoing this about Amazon Fresh. I have ordered 3 times (mainly meat and veggies) and it's been flawless. Their packaging is great, the quality of the food is great. It is a luxury purchase but although the prices are more than at my local store, they are less than what I would pay at WF. Most importantly, the delivery times are very flexible and easy to arrange...with the same great search engine amazon uses for everything else. I tried a few other grocery delivery services over the years and they couldn't promise any delivery window, their packaging was terrible, and you had to be there in person to get the groceries. As an aside, the amazon fresh packaging is great as trash bags. The ice packages they send along are great to put in your freezer and use later on trips. They recently (at least to me) added a durable cloth-based cooler, which they say you can put on your porch and they will reuse. I may let them have it back or I might use it as a cooler for my normal grocery store trips. It is slightly more expensive, but the bottom line is that in the middle of the week I am just too worn out to go to the store, so being able to have a mid or end week delivery means that I have stuff at home instead of having to order out. I guess I qualify as an amazon fanboy ;-) Relevance to this HN story, I think they can probably leverage this to help their Amazon Fresh business.