By Nathan Rigby, VP Sales and Marketing at One Click Retail

Amazon has once again strengthened its hold on the grocery market, this time by striking a deal with Monoprix, a France-based retail chain that controls nearly 800 stores in Europe, North Africa and the Middle East. This follows from Amazon’s major acquisition of Whole Foods and a partnership with British supermarket chain Morrisons, allowing Prime subscribers to order Morrisons products online Amazon and have them delivered to their door.

The Morrisons deal, the first of its kind, was inked in 2016 and served as an unambiguous announcement that Amazon was targeting the grocery space. That same year, the company launched Amazon Fresh in the UK, a same-day delivery service initially only available in London but expanding rapidly.  Since then, Amazon’s share of the online grocery space in the UK has grown healthily, reaching a value of £45 million in the first quarter of this year and growing at a rate of 45% year-over-year.

Amazon Grocery Data Comparison Q1 2018

Brick-and-mortar acquisitions and partnerships are just part of Amazon’s strategy to gain more control of the competitive grocery market. The retailer is experimenting with private brands, several different subscription services, and brick-and-mortar innovations such as Amazon Go. With Amazon throwing so many things at the wall, it’s hard to predict what’s going to stick. What we can do is take a look at what’s big and what’s growing in Q1 2018 and what that means for brands going forward. 

UK Top Grocery Categories on Amazon 2018

What’s Big

Beer, Wine & Spirits, which had already been a major category, grew very rapidly through 2017 to become Amazon’s largest category by far: during Q1 2018, in both Germany and the UK it more than tripled the sales of Coffee, Amazon’s top Grocery category globally. In the UK, this category was responsible for an estimated £20M in sales during the first quarter of this year – that’s over 40% of Amazon.co.uk’s total Grocery sales – and remained the most rapidly growing category with a 55% increase compared to Q1 2017.

Though alcoholic beverages sales were twice the size of the Coffee category in 2017, it wasn’t until the first quarter of this year that the top items in the category have outranked Coffee products as the top Grocery items overall. Spirits made up each of the 6 bestsellers, led by two UK brands: Monkey 47 and Lagavulin.

Interestingly, most of the growth in the Beer, Wine & Spirits category can be attributed to an influx of third-party sellers. For the most part, alcoholic beverage sellers are identifying Amazon as a major sales channel ahead of brand manufacturers, with third party sellers going from a 15% share of Beer, Wine & Spirits sales in Q1 2017 to a 35% share in the first quarter of this year. Meanwhile, most brands remain focused on traditional sales channels, to their detriment. Now to compete on Amazon they will have to go up against 3P sellers that have already earned a strong placement and search ranking. The longer they wait, the more they will have to invest in order to win.

What’s Growing

Though beverages, including alcohol, coffee and energy drinks, held 9 of the 10 bestselling items last quarter and don’t seem likely to go anywhere anytime soon, sales of household staples are really starting to take off. After Beer, Wine & Spirits, the fastest growing categories included Baking Supplies and Snacks & Desserts. This signifies a long-awaited shift in consumer behavior from selectively buying some groceries online and some in-store to beginning to use Amazon for their entire grocery list.

UK Top Grocery Items Q1 2018

What’s Not Growing

Coffee, Amazon’s largest Grocery category globally, is levelling off in Europe. In the UK, growth dropped from 17% in 2017 (already lower than most categories) to only 3% in Q1 of this year. That being said, the top brands are still performing well, in particular Tassimo which held the top Coffee and one of the top 10 Grocery items. The category is dominated by coffee pods from Tassimo and Nescafe, consistent with consumer preference for speed and convenience, though that trend is less powerful in Europe than in the US.

Amazon Pantry

Across all markets, Amazon Pantry sales are leveling out. Pantry holds a larger share of total Grocery sales in the UK than it does in the US or Germany with more than 10%, but is experiencing the least growth of all three markets with only 5% more sales volume in Q1 2018 than during the same period in 2017. In response to slow growth across the board, Amazon announced in early March that Pantry will be shifting to a subscription model – instead of a per-box flat rate, Prime members will be required pay an additionally monthly fee for access to Pantry items. This is an attempt to make the service both more profitable for Amazon and more attractive to consumers.

Whether or not this model drives Pantry growth, Amazon’s clear commitment to (and past successes with) subscription-based services such as Amazon Fresh and Prime Now is going to have a major positive impact on brands. Amazon is already a market leader in the race for online grocery sales in the UK, and with Amazon Prime and its growing list of value-added “members only” features such as Amazon Fresh,  it’s is quickly becoming one of the world’s largest loyalty programs – and quarter after quarter, brands selling on Amazon are reaping the benefits of this loyalty.

One Click Retail is the industry’s most accurate source of sales data for the world’s top eCommerce marketplaces. Using a combination of website indexing, machine learning and proprietary software, OCR estimates weekly online sales figures with market leading accuracy in order to deliver the best insights, analytics and strategies to their brand manufacturer clients. To catch a glimpse of how OCR gives brands critical edge on online platforms with our unique data and expertise, subscribe to our weekly eCommerce insights blog, and follow us on Twitter and LinkedIn.

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