Do you order groceries online? From a dot com or an app? Did you develop the habit during the pandemic?
If you did, you’re part of a massive trend. To maintain shelter-in-place and avoid covid risks, whole populations that never even tried online grocery shopping are now hooked.
Before the pandemic, 81% of consumers had never bought groceries online. Now, more than 79% of shoppers have tried online grocery ordering and many are converted to new shopping habits.
Amazon Fresh is an Amazon offering for grocery order and delivery that taps into this enormous need for safe and convenient grocery and household good shopping.
“Online grocery shopping has accelerated even more over the past year due to covid, with huge projections for adoption in the next few,” says Laura Westberg, Senior Account Manager at Teikametrics. “Getting into additional shopping carts now can pay dividends when we think about repurchase behavior over the lifetime of the consumer.”
Here’s what brands need to know about the Amazon Fresh program and how to give their products visibility with a smart advertising strategy.
Screenshot of Amazon Fresh homepage
Fresh Operating Model
Amazon Fresh previously permitted third-party (3P) sellers, but in 2018 they dropped 3P from the program. That means the Amazon Fresh operating model is first-party (1P). Unlike Amazon proper, where brands can be 3P or 1P, there’s only one option for Amazon Fresh.
Amazon’s 1P program is by invitation only. They order products from the 1P vendors and then distribute those products from their hubs. Not all brands are available in all locations. The brands that Amazon distributes via Fresh vary regionally.
Amazon has experimented with a few different models for grocery shopping. They shuttered Amazon Prime Pantry in January 2021. But Amazon Fresh currently exists alongside the Whole Foods Market option on Amazon.
Fresh Shopping Experience
Shoppers get to Amazon Fresh by first going to Amazon.com and then finding Amazon Fresh nested within. An Amazon Prime membership is required to shop on Fresh.
Fresh offers a browsing-friendly experience with aisles and categories to identify products for purchase.
Shoppers find Fresh within the Amazon site or app
Consumer Shopping Behavior
The basket size is usually significantly larger for a Fresh grocery order than for Amazon.com. This matches typical in-store grocery trip behavior where shoppers stock up for the week. Fresh’s $35 minimum for free delivery reinforces that existing shopper behavior.
Because shopping trips involve a large number of items, many consumers will default to the past purchase list provided by Fresh to reorder routine items rather than searching for each item individually, in contrast to shopping behavior on Amazon.com.
Fresh prompts shoppers to repeat past purchases
Because of this repeat shopping behavior, the lifetime value of a Fresh shopper is much more than a one-time purchase. Getting into a customer basket the first time will likely lead to repeat purchases in the future.
Early in their adoption, consumers tend to be more comfortable buying products from CPG brands they trust where products are shelf-stable and freshness is less of a concern. There tends to be some initial apprehension when purchasing fresh products online- “Will my avocado be ripe enough to use tomorrow? Or too ripe to use later this week? Will the quality of the produce I receive be up to my standard?” It’s easier to order online when touch and smell aren’t a part of selecting an item to purchase.
Browsable categories on Amazon Fresh
PPC On Fresh
Advertising on Fresh has a lot in common with advertising on Amazon.com with some important differences. Keyword optimization and bid optimization work the same for Fresh as for 1P vendors.
Based on their experience managing ads on Fresh and throughout the Amazon ecosystem, our analysts advise focusing on Sponsored Products on this platform.
The Fritos at the top of the results is a Sponsored placement
Conversion rates for sponsored placements tend to be higher on Fresh than on the dot com, driven by lower consideration.
Don’t limit yourself to only your longtail keywords even if they’ve proven to be efficient elsewhere. Search terms on Fresh tend to be significantly less longtail because shoppers are doing so many searches and because the assortment is so much smaller than on Amazon.com. There’s also much more cross-selling and targeting of complementary items.
Sellers should be aware that there’s no way to keep Fresh Sponsored Products within the Fresh shopping experience. However, products will only appear in search results if they’re buyable for the consumer with a Fresh badge that calls out the separate platform on the search results page.
Opportunity for Growth On Fresh
As discussed earlier, the online grocery market has grown dramatically during the pandemic as people have formed new shopping habits.
We worked with Rich’s, a global family-owned food company to optimize their Amazon Fresh advertising. They increased their sales on Amazon Fresh 5.5x from January 2020 to March 2021, while maintaining a consistent ACOS. We achieved this by steadily increasing their investment in search and constantly optimizing their ads.
Hana Devore, Ecommerce and Content Marketing Manager at Rich’s explained, “The Teikametrics team has allowed us to quickly evolve and optimize our advertising strategy for Amazon Fresh while the world of ecommerce changes rapidly. By structuring our campaigns at the product level and focusing on profitability, we’ve been able to not only spend more efficiently, but also gain valuable learnings about Amazon shopper behavior.”
The Rich’s brand continues to see month-over-month incremental growth as we optimize their Amazon Fresh ads. The opportunity to capture new audiences who may become repeat customers remains strong.
Amazon Fresh Recap
To review, with changing consumer habits, online grocery shopping continues to be a major area for growth. Here’s what you’ll want to remember about Amazon Fresh:
- Amazon Fresh is an online grocery program for Prime members
- The program is limited to 1P vendors only
- Fresh prompts shoppers to become repeat customers
- Sponsored Products are proven to be effective on Fresh
- Be sure not to limit yourself to longtail keywords in your Fresh ads
- For best results, continually optimize keywords and bids for Fresh as you would for Amazon.com
Interested In Learning More?
If you want to better understand how Amazon Fresh works and where the opportunities for growth are, why not get familiar with the shopping experience by testing it out yourself? Preferably, order a second a time to see the value of the past purchase list in action.
Or, if you’re ready to take your Amazon Fresh business to the next level, reach out to us to talk about how we can help you optimize your Amazon Fresh ad strategy.
