1 00:00:00,120 --> 00:00:03,920 Speaker 1: Amazon has been massively scal scaling up its same day 2 00:00:04,000 --> 00:00:06,240 Speaker 1: grocery delivery over the last few months, looking to be 3 00:00:06,280 --> 00:00:08,960 Speaker 1: in about two and a half thousand US cities by 4 00:00:09,039 --> 00:00:12,640 Speaker 1: year end. It's a strategic assault on a grocery market 5 00:00:12,680 --> 00:00:16,040 Speaker 1: worth nine hundred billion dollars. Sam Dicky from Fisher Funds 6 00:00:16,120 --> 00:00:18,080 Speaker 1: is with us to talk us through this. Hey Sam, 7 00:00:18,400 --> 00:00:21,159 Speaker 1: good eating, He Sam. How does Amazon's move change the 8 00:00:21,280 --> 00:00:22,280 Speaker 1: competitive landscape? 9 00:00:22,320 --> 00:00:26,400 Speaker 2: Do you think, Well, it's nailed everything else, hasn't It 10 00:00:26,480 --> 00:00:29,680 Speaker 2: nailed the same day delivery of books and CDs through 11 00:00:29,680 --> 00:00:32,560 Speaker 2: the iPhones and everything in between. In grocery is the 12 00:00:32,720 --> 00:00:35,200 Speaker 2: holy grail, partly because of the size of the market, 13 00:00:35,240 --> 00:00:37,919 Speaker 2: like you said, nine hundred billion, but partly because it's 14 00:00:37,920 --> 00:00:41,760 Speaker 2: the ultimate repeat purchase. We've all got to eat, and 15 00:00:41,840 --> 00:00:44,880 Speaker 2: it's been really hard. So delivering fresh groceries on the 16 00:00:44,920 --> 00:00:48,680 Speaker 2: same day requires a really expensive, dense network of specialized 17 00:00:48,720 --> 00:00:52,080 Speaker 2: refrigerated facilities, and this stuff perishes, so it has to 18 00:00:52,120 --> 00:00:55,560 Speaker 2: be perfect. And we you and I have ultra low 19 00:00:55,680 --> 00:00:58,200 Speaker 2: tolerance for soggy tomatoes, so we'd rather just go to 20 00:00:58,240 --> 00:01:00,400 Speaker 2: the grocery store if it's not good enough. And the 21 00:01:00,440 --> 00:01:03,880 Speaker 2: other thing is picking and packing the groceries can cost 22 00:01:03,880 --> 00:01:06,440 Speaker 2: a grosser nine bucks, So if you think about it 23 00:01:06,440 --> 00:01:08,800 Speaker 2: on one hundred dollars average basket size in the US, 24 00:01:08,840 --> 00:01:12,200 Speaker 2: that leaves no profit margin. So same day delivery as 25 00:01:12,200 --> 00:01:15,680 Speaker 2: a game changer. It more or less replicates that instant 26 00:01:15,680 --> 00:01:17,680 Speaker 2: gratification that you and I get when we go to 27 00:01:17,760 --> 00:01:18,480 Speaker 2: the supermarket. 28 00:01:19,360 --> 00:01:20,680 Speaker 1: Now, what do you think this is going to mean 29 00:01:20,720 --> 00:01:23,440 Speaker 1: for the traditional supermarket chains and the smaller regional players 30 00:01:23,480 --> 00:01:25,200 Speaker 1: and everybody who's already doing this stuff. 31 00:01:26,720 --> 00:01:31,160 Speaker 2: Wall Street is describing the situation as guerrilla warfare, and 32 00:01:31,600 --> 00:01:34,959 Speaker 2: so Amazon is leveraging it's sort of massive one kart 33 00:01:35,280 --> 00:01:39,040 Speaker 2: advantage of it these other guys, so the consumers can 34 00:01:39,120 --> 00:01:43,800 Speaker 2: buy three hundred and fifty million other Amazon products and 35 00:01:43,920 --> 00:01:46,520 Speaker 2: their groceriy. So this is kind of devastating to companies 36 00:01:46,520 --> 00:01:51,160 Speaker 2: like Instacart who just deliver groceries, or supermarket Kroger who 37 00:01:51,240 --> 00:01:53,840 Speaker 2: just sells groceries. They can't leverage that other scale of 38 00:01:53,880 --> 00:01:57,880 Speaker 2: buying all the other electronics alongside it, so they what 39 00:01:57,880 --> 00:01:59,800 Speaker 2: does that mean? It means they can't match Amazon on 40 00:02:00,200 --> 00:02:02,360 Speaker 2: and already, since this happened a couple of months ago, 41 00:02:02,480 --> 00:02:07,240 Speaker 2: Amazon's prices are seven percent below Walmart sixteen percent below 42 00:02:07,320 --> 00:02:10,680 Speaker 2: Kroger and seventeen percent cheaper than Albertson's, which is another 43 00:02:11,080 --> 00:02:13,880 Speaker 2: supermarket chain, and so far so good too. So there, 44 00:02:14,800 --> 00:02:18,280 Speaker 2: these low prices are meaning they're taking volume market share. 45 00:02:18,400 --> 00:02:21,720 Speaker 2: So early pilots show that seventy five percent of users 46 00:02:21,720 --> 00:02:24,720 Speaker 2: were first time Amazon grocery buyers, so they've been buying 47 00:02:24,720 --> 00:02:27,959 Speaker 2: from someone else before and they will return twice as often, 48 00:02:28,160 --> 00:02:30,679 Speaker 2: so they're using that massive scale to take market share 49 00:02:30,720 --> 00:02:31,080 Speaker 2: as well. 50 00:02:31,160 --> 00:02:34,440 Speaker 1: Now you've already got players doing grocery delivers as well, 51 00:02:34,680 --> 00:02:37,120 Speaker 1: or food deliveries. You've got Uber Each, you've got Instacart, 52 00:02:37,160 --> 00:02:37,760 Speaker 1: door Dash. 53 00:02:37,600 --> 00:02:40,600 Speaker 2: And so on. So what about then, Yeah, well Instacart 54 00:02:40,720 --> 00:02:41,960 Speaker 2: sort of fell out of bed on the day this 55 00:02:42,120 --> 00:02:46,040 Speaker 2: was announced and hasn't recovered since because they're doing nothing 56 00:02:46,040 --> 00:02:48,919 Speaker 2: but just delivering groceries and that that is a tough 57 00:02:49,040 --> 00:02:51,520 Speaker 2: low margin business, particularly when you can't leverage all those 58 00:02:51,520 --> 00:02:54,480 Speaker 2: other products across it as well, like Amazon is now 59 00:02:55,160 --> 00:02:58,840 Speaker 2: Instacart and sorry, door Dash and eats. They obviously dominated 60 00:02:58,880 --> 00:03:01,359 Speaker 2: the delivery of takeaways, been no issue there, but they 61 00:03:01,360 --> 00:03:05,320 Speaker 2: had both expanded into into grocery delivery to sort of 62 00:03:05,320 --> 00:03:07,200 Speaker 2: further bolts to their revenues. But here's the rub that 63 00:03:07,280 --> 00:03:10,880 Speaker 2: they're just into metaies charging grosers sort of fifteen to 64 00:03:10,919 --> 00:03:14,920 Speaker 2: twenty five percent commissions, while Amazon is the platform, the 65 00:03:14,919 --> 00:03:18,600 Speaker 2: logistics network and often the grocery the product grocery supplier 66 00:03:18,639 --> 00:03:21,720 Speaker 2: as well. So door Dash and Uber Eats can't compete 67 00:03:21,720 --> 00:03:24,040 Speaker 2: with that scale and full integration of Amazon. 68 00:03:23,880 --> 00:03:25,679 Speaker 1: Right, So what do you reckon this means for investors? 69 00:03:25,680 --> 00:03:30,120 Speaker 2: Sam? I think it competitors without that scale, and it 70 00:03:30,200 --> 00:03:33,160 Speaker 2: seems like the Holy Grail is finally being found or cracked. 71 00:03:34,080 --> 00:03:37,880 Speaker 2: Competitors without that scale, So Instacart, regional grosers that they 72 00:03:37,960 --> 00:03:41,400 Speaker 2: will bleed and it's good for consumers of course over there, 73 00:03:41,400 --> 00:03:45,080 Speaker 2: I mean, groceries are just going to get cheaper. And 74 00:03:44,760 --> 00:03:46,920 Speaker 2: the other thing is you should look for, and we've 75 00:03:46,920 --> 00:03:50,880 Speaker 2: seen this in Europe is these smaller grosers and regional grosers, 76 00:03:50,920 --> 00:03:54,960 Speaker 2: even national grossers. As they face margin pressure, you'll see 77 00:03:55,000 --> 00:03:57,400 Speaker 2: more sort of companies taking over other companies. And we 78 00:03:57,440 --> 00:04:01,520 Speaker 2: saw that in Europe when that sort of grocery delivery 79 00:04:01,520 --> 00:04:04,200 Speaker 2: market took off. Grocery m and A or mergers and 80 00:04:04,240 --> 00:04:07,240 Speaker 2: acquisitions are up thirty one percent since then. And as 81 00:04:07,240 --> 00:04:10,040 Speaker 2: always the other thing is Amazon's actually playing a different game. 82 00:04:10,040 --> 00:04:13,040 Speaker 2: It's not really that interested in the grocery margin itself. 83 00:04:14,800 --> 00:04:17,880 Speaker 2: The kicker here is that Prime members, of which there's 84 00:04:17,880 --> 00:04:19,960 Speaker 2: sort of two hundred billion households in the US who 85 00:04:19,960 --> 00:04:22,000 Speaker 2: are Prime members who pay one hundred and thirty nine 86 00:04:22,040 --> 00:04:25,839 Speaker 2: bucks a year for all the Prime benefits, so the video, 87 00:04:26,000 --> 00:04:29,040 Speaker 2: but also free free delivery, et cetera. They get free 88 00:04:29,160 --> 00:04:31,839 Speaker 2: same day grocery delivery. So this is really the game 89 00:04:31,839 --> 00:04:35,120 Speaker 2: for Amazon here is about locking those really valuable members 90 00:04:35,120 --> 00:04:37,640 Speaker 2: in and making them stickier, and in the process they're 91 00:04:37,680 --> 00:04:40,520 Speaker 2: going to sort of destroy a few grocers along the way. 92 00:04:41,080 --> 00:04:41,719 Speaker 1: Interesting stuff. 93 00:04:41,760 --> 00:04:42,600 Speaker 2: Hey, thank you very much. Sam. 94 00:04:42,600 --> 00:04:43,920 Speaker 1: We'll talk to you in a week's time. Sam Dickey 95 00:04:43,960 --> 00:04:44,680 Speaker 1: a Fisher Funds. 96 00:04:45,240 --> 00:04:47,440 Speaker 2: For more from Heather Duplessy Allen Drive. 97 00:04:47,600 --> 00:04:49,039 Speaker 1: Listen live to news talks. 98 00:04:49,040 --> 00:04:52,240 Speaker 2: It'd be from four pm weekdays, or follow the podcast 99 00:04:52,320 --> 00:04:53,279 Speaker 2: on iHeartRadio.