The Amazon Effect   /   January 12, 2021

‘A lot of leapfrogging’: What went wrong with Amazon Pantry

Amazon Pantry is dead.

Amazon announced last week that it was cutting loose the service. That decision may have been foreshadowed when the company briefly suspended Pantry in early 2020, during the beginning of lockdown.

Pantry — which was initially called Prime Pantry during its launch in 2014 — stands as a relic of Amazon’s early grocery ambitions. The service, which bundled individually packaged goods into multi-item boxes, was designed for Primer members who were leery of bulk buys.

In the years since Pantry debuted, it has lost much of its relevance. Amazon bought Whole Foods, launched multiple physical Amazon Fresh stores and pushed out newer services — like Prime Now — that offer same-day grocery delivery (although Prime Now is only available in a limited number of cities at the moment). Pantry boxes were ultimately too logistically challenging to fill up and ship for customers, and likely not a major moneymaker for Amazon.

But, if anything, the death of Amazon Pantry is a signal of Amazon’s success breaking into the grocery industry writ large. Now the company has gained a big enough foothold in the grocery business that it can streamline those early experiments that weren’t pulling their weight.

“Pantry is not necessarily a failure, but I think its relevance has been subsumed or made obsolete by Fresh or Prime Now,” said Keith Anderson, svp of strategy and insights at e-commerce analytics platform Profitero, referring to Amazon’s other grocery services.

As Amazon builds out its grocery presence, it has come up with more efficient offerings than Pantry. Amazon’s newest grocery service, Prime Now, requires a $35 minimum purchase, and in exchange customers get free same-day delivery. Those who don’t meet the $35 threshold pay $5 for delivery. By the end of its life, Pantry offered a similar proposition: free shipping on orders above $35, or $5.99 shipping on orders below that threshold. The difference was that only certain items were eligible for a Pantry box, and shipping could take several days; Prime Now offers virtually anything available in a grocery store, all for delivery within hours.

Amazon first launched Pantry when it was struggling to break into the grocery sector, explained retail analyst Bill Bishop. “Now they’ve caught up and superseded the market,” he said. “There’s a lot of leapfrogging going on here.”

Solving the one item e-commerce problem
The key to understanding Amazon Pantry, said Anderson, is to think about a tube of toothpaste. Before Pantry, customers who wanted to stock up on toothpaste through Amazon had a problem: the only way to buy toothpaste from Amazon was to order it in bulk, in packs of six or eight. The reaction was inevitably, “Boy I like the convenience of shopping on Amazon but do I really need 6 tubes of toothpaste right now?” said Anderson.

For any e-commerce company, every order has to meet a minimum price threshold in order to be profitable. Amazon wouldn’t sell customers a single, standalone tube of toothpaste — which customers might find in a convenience store — because the company was almost sure to lose money on that purchase. Amazon envisioned Pantry as a solution to that dilemma. If customers wanted to that tube of toothpaste, or a small pack of potato chips or granola bars, they could bundle them into a Pantry box.

Through Pantry, many manufacturers benefited from having their products available on Amazon — including in lower, more purchase-friendly quantities — for the first time. But customers struggled with the difficulty of filling up a Pantry box to the brim. Finding enough items to maximize savings on a given box was sometimes more complicated than, say, making a trip to a convenience store down the block or in town. If someone was craving a pack of potato chips, they couldn’t just buy the chips; they needed to come up with several other non-perishable items to bundle into the Pantry box, then wait 1-5 days for the Pantry box to actually show up.

With that, Prime customers didn’t glom onto the service. One small study from earlier this year found that Amazon Pantry was a few percentage points less popular among online grocery buyers than Prime Now or the regular Amazon website, and was roughly tied with Amazon Fresh. “In terms of why it wasn’t even more widely adopted or it brought shoppers to Amazon, I think most shoppers are just not aware of, or if they’re aware just don’t care about, a retailer’s economic challenges,” said Anderson.  

Amazon’s bigger grocery ambitions
Most importantly, though, Amazon likely killed Pantry because it figured out how to offer grocery delivery on more widely appealing terms. Ordering a delivery from Amazon Go, Whole Foods or one of the many grocery stores that Amazon partners with on its Prime Now program is both easier and faster than ordering a Pantry box. Plus, the strict eligibility requirements for Pantry — where only Amazon-owned packaged goods could qualify for a box — made meeting the price minimum difficult when compared to the more widely encompassing Prime Now and Fresh programs.

Ultimately, Pantry’s shuttering says more about the success that Amazon is having in the grocery space than about Pantry’s own failures. Amazon threw out a bunch of ideas about how to conquer grocery in the early- and mid-2010s, and now the company is deciding what is — and isn’t — working.  

Anderson said he wouldn’t be surprised if Pantry’s shuttering foreshadows future streamlining in Amazon’s grocery sector. From Whole Foods to Amazon Fresh to Prime Now to Amazon Pantry, Amazon was offering a slew of overlapping grocery services at the end of 2020. But as Amazon continues to one-up itself, “in a year or two years, who knows whether that will be the case,” said Anderson.

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