What can we learn from the Amazon-Whole Foods deal?

Amazon made a splash recently with its new Amazon Go store concept. Then last week, Amazon had everybody talking with an announcement that it would acquire the Whole Foods supermarket chain.

The ripple effects were immediately seen in the stock performance of other grocery retailers, and experts across many industries were speculating on the business move and its impact.

The sale makes sense for Whole Foods since the business model has been successfully attacked in recent years with the mainstreaming of organic foods and products. On the same day of the Whole Foods news, Walmart acquired Bonobos, an e-commerce apparel company, but the news was overshadowed by Amazon’s largest acquisition to date.

It’s rumored that Amazon is pursuing additional grocery acquisitions to accelerate growth, and it will be interesting to see what segments are in its sights: smaller-format convenience stores, discount/value stores and/or others? Amazon must believe it has a grocery-business model that scales. And this move certainly bolsters local presence is some key geographies, providing in-store pick-up locations as well as additional fulfillment flexibility in the supply chain.

In recent years, experts has counseled retail clients, especially grocery retailers and sometimes even Walmart, in developing an explicit strategy to compete with Amazon. Many grocery retailers have still not fully embraced unified commerce across all channels. But I have a feeling that will change soon, and consumers will be the ones who benefit.

I’m also interested to see the innovations Amazon brings to store-based grocery retailing.

Some have touted the demise of the brick-and-mortar store. (My wife is almost giddy about the Meijer/Shipt delivery service that recently came to our hometown, thinking she may never have to go to a grocery store again. We already receive regular deliveries from Amazon, Home Chef and chewy.com.)

I believe stores will continue to play a role in the unified commerce experience for grocery retailers, although that role will have to change. With the Amazon Go store, the online behemoth gave a glimpse of one approach for the future.

I believe we’ll see new approaches leveraging the strengths of store-based retailing and more direct connections to online channels, as well as other emerging channels aligned with the “connected” world. Think: the connected home, connected car and the like.

Aided by tools like Alexa and Amazon Dash buttons, users could have groceries delivered to their homes without ever touching a keyboard or even a smartphone. Maybe you’ll arrive at a redesigned Whole Foods store Saturday morning for a cooking class, pick up your groceries for dinner — as well as the shoes and weed trimmer you ordered from Amazon the day before.

As has been the case in other retail segments, Amazon seems poised to take grocery to the next level. What will change as Amazon continues down this path, and what areas do other grocery retailers need to think about as they determine how to compete? Here are a few ideas:

  • Unmatched consumer shopping behavior insights will inform decision-making and enable a more personalized experience, product recommendations and promotions/offers across online and physical channels.
  • Amazon’s superior service model will be delivered across the online experience and physical stores. New thinking will come to the customer experience, bringing a more unified approach.
  • Industry-leading loyalty programs – yes, Amazon Prime is a loyalty program – will evolve across online and physical channels to deliver new value to consumers and “lock them in.”
  • Supply chain capabilities, including new real estate assets for last-mile delivery, will be advanced to provide whatever fulfillment approach the consumer chooses.
  • Buying power/synergies will be leveraged to continue to drive down consumer prices and industry margins.
  • Exclusive products, new supplier relationships and product development capabilities/partners will be developed to meet the product needs/desires of every customer segment.

Consumer goods companies should also consider the impact. Their digital priorities should be focused in two areas now:

  1. Making themselves easy to do business with, specifically focusing on omni-channel retailers, with robust product content that is easily leveraged across channels and agile/efficient supply chain capabilities that provide the flexibility omnichannel retailers
  2. Having a digital marketing strategy that emphasizes brand enhancement, consumer engagement and maybe even consumer-driven product development. And don’t forget about seamless integration for consumers to take advantage of promotions/offers and place orders with retail partners

These are certainly interesting times. It remains to be seen if this is truly a “watershed moment” in the grocery retail segment. But grocery retailers and consumer good companies would be wise assume it is — and aggressively define and execute the right digital transformation strategy encompassing customer experience, internal operations and new business models accordingly.

Jef Fite is a Retail Industry Executive Advisor at DXC Technology. Jef works with retailers and consumer good companies to enable and accelerate their business strategies with technology innovations and solutions. Jef’s 28-year career has been focused on the Retail/eCommerce industry as a consultant, CIO, a business function leader, as well as a brief (but very educational) time as the leader of an Internet start-up.


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