Why pure-players are set to shake up the out-of-home catering market

With their digital expertise and excellence in customer experience, generalist e-commerce players are gradually but surely expanding their scope. They are attacking the historic markets once controlled by well-established players. The question is how long these companies will be able to withstand the pressure of this undoubtedly effective competition.
The most telling example is undoubtedly the arrival of Amazon, which will shake up the traditional players in the out-of-home catering market such as Pomona, Transgourmet, France Frais, Metro and Promocash. These players have proven their worth due to a very good local commercial relationship and recognised expertise in both products and targeting.
The American giant Amazon, which has already won over private individuals, is arriving in force with a powerful model and opening affirming its ambition by setting up warehouses at Rungis (just outside Paris), the undisputed national platform for the food services market.
SRR actors are about to be attacked and will have to fight back. Will they be able to develop their model and fully embrace the digital shift in order to maintain their positions?

Many of Amazon’s customers are restaurant owners and retailers. It is highly likely that these customers, who are already users, will be won over by a new B2B food offer.

Amazon’s service offers are well known and appreciated by private individuals. These offers are attracting more and more professionals and especially independent restaurant owners. This public appreciates the brand’s efficiency and moderate prices. A few figures show this close and trusting relationship with the brand: it has been the favourite brand for French people since 2013; each French internet user spends an average of 14 minutes a day on Amazon; and 5% of restaurant owners regularly buy food products online. Amazon’s already has a rapidly-growing 26% market share in food e-commerce. As a pure-player, it can count on a large customer base that includes many restaurant owners and retailers who already use Amazon’s professional services, particularly for home meal delivery (Amazon Restaurant).

Amazon makes no secret of its ambitions in the out-of-home catering market.

First of all, the American pure-player is frantically searching for growth and new markets. After dominating most of the world’s e-commerce consumer goods, it is now accelerating in the food retail and grocery market with considerable investment, partnerships and advertising. Launched gradually since 2007, the Amazon Fresh service has enabled the company to acquire real know-how in managing dry and fresh food products.

At the same time, the Seattle-based firm is developing professional expertise through Amazon Business. This B2B offer now meets the need expressed by certain restaurant owners to have an “Amazon shopping experience” in a professional setting. It enables a restaurant owner to order servers’ uniforms, cash registers and hygiene products on the same site, as well as access delivery and financing facilities.
The race for growth, gaining solid expertise in food distribution and B2B, and purchasing fresh warehouses at Rungis all point to the imminent arrival of pure players on the food services market.

Why are pure-players likely to make a place for themselves in food B2B?

Increasing supply to boost demand (or Say 2.0 law)

No surprises here: what attracts customers to pure-players’ sites is the promise of a wider selection of the best products at the best prices. This promise can be kept thanks to an internet/mobile site operating around an e-commerce model and a marketplace. Through this ecosystem, each manufacturer or raw products supplier can make their production available, thereby increasing the number of references on sale. So the offering from an e-commerce company is often ore expansive than that on offer from a traditional player.
This profusion of offerings is further reinforced by the presence of several product categories (clothing, electronics, food, etc.), which encourages cross-selling and helps inflate the average basket (35% of sales result from cross-selling).

Every day low prices

The pure-player business model is driving down prices. In fact the presence of a marketplace makes it possible to offer more references at low prices due to competition between different sellers. Moderate prices encourage the influx of prospects and boost activity. This model also reduces the WCR (Working Capital Requirement) and costs throughout the supply chain.
This digital activity enables gains in business volume, through economies of scale and reducing the unit cost of items.
Due to this lighter cost structure, a more aggressive pricing policy can be applied to gain market share and erode competitors’ margins. For example, if Amazon can sell kitchen utensils in 20 countries at a time, it benefits from advantageous purchasing and storage conditions that allow it to lower the selling price while preserving its margin.

Aiming for a monopoly situation

In the absence of competitors for an equivalent offer, the mastery of this economic model makes it possible to create a monopoly position, which reinforces the company’s ability to benefit from economies of scale. The presence of significant network effects also makes it possible to erect real barriers to entry.

Becoming the benchmark for service quality

The pure-players are distinguished by an excellent service rate. This service level applies to the areas of sales, logistics and delivery.
At the time of sale, the customer is provided with information on stock availability, estimated delivery time and an automatic replenishment option. Once the order has been placed with one click, order preparation is automatically launched to reduce lead times. The customer can monitor the various logistics operations in real time. In the case of a premium subscription, the customer benefits from a commitment to fast delivery (from 1 hour to 24 hours) free of charge.
For e-commerce activities, delivery is handled by the pure-player, which can sometimes use local logistics relays to handle peak loads or special deliveries (last-mile delivery).
For marketplace activities, the quality of service is maintained by close monitoring of the sellers’ notes.
This monitoring is a means of guaranteeing customer satisfaction and protecting the brand image.
Finally, intelligent stock management and order picking robots provide a high service rate.

Developing a personalised proximity relationship is a differentiating factor

Pure-players are experts in digitizing the proximity relationship. A service offer that is accessible 24/7 and mobile due to an online order-taking system is an undeniable asset.
In addition, the relevant use of order and browsing histories, filters and recommendations, enables consumer to benefit from a fully personalised purchase path and commercial relationship.
Finally, these web players rely on 24/7 customer service (telephone, chat, email, textos) along with personalized, automated tools (chatbot).

Offering a personalised customer experience pays off because it strongly encourages cross-selling and order taking.

The art of building customer loyalty

Intimate knowledge of the customer and their buying behaviour encourages customer loyalty. Using customer behavioural analysis, we can identify uses and encourage their recurrence. User attention is captured via daily special offers, a personalized, constantly changing site, optimal and secure technology, plus a strong, well-recognised brand.
Customer loyalty is also fostered through subscription programmes for fast delivery services that encourage customers to order regularly and in larger amounts.

Finally, the free dispatch of tools designed to make customers’ daily lives easier can encourage many users to buy regularly from products sold by the brand. For example, the launch of Amazon Dash, an automatic order-taking and replenishment device, is offered free of charge. This tool encourages customers to regularly scan their stocks and consumption of food products and to set up order suggestions based on stock levels. This loyalty scheme aims to make the purchase of everyday products on Amazon (lock-in strategy) unavoidable.

These tools are a means of providing brands with ultra-reliable data on customer consumption behaviour.

A brand image that embodies trust and efficiency

All of the following – secure technology, an optimal customer experience, an extended product/service offer, moderate prices, a high service rate, a personalized, close relationship, and loyalty tools – help build a brand that inspires confidence and efficiency. This excellent brand image will then encourage customers to rapidly adopt new offers.
So restaurant owners who have had satisfactory shopping experiences are more easily convinced by using an Amazon offering in their professional setting.

« Innovations don’t evolve from old ways, but emerge alongside them, competing with them until they ruin them. » Schumpeter, 1911