How will Amazon impact the future of retail? Amazon has been continually changing retail by incorporating innovation & technology in its strategy. By incorporating meal kits, online grocery shopping, and increased online offerings through Whole Foods is proving to be a game changer for the retail food industry
If you want to capitalize on the fact that over 30% of Americans are using Amazon, you gotta go there. -Andrea Blieden, US General Manager, The Body Shop.
The $30 Billion Question:
What does Amazon Mean for the Future of Retail?
When Amazon announced in June 2017 that it was purchasing Whole Foods, the news sent ripples throughout the grocery industry. This acquisition signaled the convergence of three powerful trends: health food, technology and home delivery.
AmazonFresh consumers could now purchase their favorite health foods from their desktop or mobile app, and have it delivered directly to their door. In addition, Amazon immediately dropped prices for Whole Foods, declaring their intent to make healthy foods affordable for everyone.
For manufacturers, the potential of Amazon’s control in the industry is fear-inducing in its uncertainty. As Amazon embraces the in-store space, they’ve slashed prices. In an effort to compete, other retailers reduce prices, giving Amazon the power to dictate pricing and place new requirements on manufacturers.
Technology isn’t new to the grocery game, nor to the delivery space. The introduction of DoorDash in 2013 and UberEats in 2014 enabled consumers to use mobile apps to purchase dinner from their favorite restaurants and have it delivered to their door. Meal delivery kits like Blue Apron and HelloFresh emerged in 2012, allowing consumers to select and ship fresh pre-measured ingredients to the home for cooking convenience. Grocery stores offered the convenience of shopping for groceries online, with curbside pick-up options. Yet none of these truly “disrupted” the grocery industry, as each suffered from slow long-term adoption.
Amazon, on the other hand, may just accomplish such a disruption. Packaged Facts projects Amazon’s food and beverage sales (including Whole Foods brick-and-mortar stores) could top $30 billion by 2025. Amazon is even offering their own “meal kits” to compete with Blue Apron and HelloFresh, entering that $5 billion market. Online grocery shopping was already a growing channel, but the Amazon-Whole Foods powerhouse is driving brick-and-mortar grocery stores to accelerate their online offerings: the number of grocery stores offering click-and-collect grew from 15% in 2015 to 23% in 2016.
Despite the fear and uncertainty that this might instill, Amazon is, in fact, not primed to dominate grocery. In the Bloomberg article, “Amazon Isn’t a Lock to Dominate Grocery,” Sarah Halzack states that while many retail categories have seen a significant share of spending move online, grocery remains largely a brick-and-mortar business. This gives CPGs and opportunity to present themselves as data-savvy partners to their retailers through analytical insights. Amazon has long since learned the power of data and uses it to entice customers and generate revenue. By also adopting an analytical mindset, CPG companies can compete with Amazon’s disruption by making informed decisions of their own with the power of quantified post-event analysis and predictive planning.
It’s worth considering a combined compete/collaborate approach may be in order as Amazon flexes its muscle in the grocery world. Nike recently brought its iconic brand onto Amazon, offering limited apparel and equipment through the online behemoth. Yet, Nike continues to compete with Amazon for online sales by continuing to sell the majority of its products through its own online platform. Is there a similar hybrid model for grocery?
In an increasingly interconnected digital world, the “If you can’t beat ‘em, join ‘em” dichotomy may no longer apply. Win-win partnerships that combine the customer loyalty of established brands with the logistical and distribution power of Amazon may be the way of the future.
*This article originally appeared in Smoke Jumpers magazine. Subscribe today to get you free copy.