Back in June 2017, CNBC’s Jim Kramer predicted that Amazon, with its purchase of Whole Foods, would dominate the grocery industry in two years. At that time, I wrote that Amazon’s eventual domination wasn’t necessarily assured.
With Amazon’s announcement of free two-hour home delivery to Prime members in six markets, it is time to ask the question again: Does Amazon’s purchase of Whole Foods disrupt everything?
There have certainly been changes in the eight-plus months since the announced purchase. Prices are generally lower. You can buy Whole Foods store brands on Amazon, and there are even more discounts if you are an Amazon Prime member.
On the other hand, some of the changes haven’t been as positive. Eater.com ran a story in January 2018 that noted more empty shelves, fewer samples, and less sourcing of local products. In other words, Amazon is bringing what it does best – technology and logistics – to Whole Foods, and Whole Foods is potentially losing some of what makes it unique.
In response, none of the legacy grocers have closed shop and run away. It is just the opposite. Walmart teamed up with Google, and Kroger is talking to Alibaba. The “Amazon Effect” in this case is competitors being forced to adapt and change quicker.
The most important lesson, however, is how Amazon’s strategies potentially transform all of retail. Here are two hints of what the future holds.
- Amazon is building an ecosystem – not just a network.
The blending of brick-and-mortar stores with digital access is only the beginning. The company announced that it would launch a deliver service to compete with UPS and FedEx one day after revealing the first four markets for food delivery. Less than three weeks later, it announced the purchase of smart doorbell maker Ring. Its desired move into on-line banking adds yet another piece to the puzzle. What is shaping up is an Alexa-driven environment where customers can live and manage every aspect of their daily lives within the world of Amazon.
- The Amazon Ecosystem is focused exclusively on making things faster, better, cheaper, and friendlier for the customer.
The Walker Sands 2017 Future of Retail report offers a glimpse into why two-hour food delivery is such a big deal.
- Only 16% of consumers have purchased groceries on Amazon in the past year.
- Consumers say they would purchase more groceries online if it was less expensive (40%) and if delivery times were more convenient (23%).
On the surface, the small percentage of current online grocery buyers doesn’t bode well for use of the new Whole Foods delivery model. That changes, however, when you factor in reduced prices from supply chain optimization, additional discounts for Prime members, and free delivery. Add in the ability to monitor food delivery with your Ring doorbell app, and you have provided an exponential improvement in the customer experience.
What This Means for You
It is safe to say that Amazon is pushing the boundaries of what’s possible not just in grocery but in every aspect of retail.
Scott Webb, president of the digital services and solutions firm Avionos, told me that “As we saw with the introduction of Amazon Go, Amazon is always looking for ways to add new seamless experiences to engage customers. Their move to start delivering Whole Foods groceries via their Prime Now service speaks to how the company is driving the convergence of physical and digital experiences.”
The customer-facing challenges of building a seamless customer experience ecosystem are only the beginning. The logistics and execution requirements behind the scenes are equally as daunting.
Andrew Park, Sr. Director, CX Strategy at InMoment, shared with me that, “The launch of Whole Foods grocery delivery via Prime means Amazon will have full control over the end-to-end customer experience. Brick-and-mortar grocery brands have attempted to launch their own delivery programs, but Prime’s proven ability to execute consistently could be the tipping point to the adoption of online grocery.”
It is still to be determined if they totally dominate the space. Walmart has 5,000-plus stores, an incredibly sophisticated logistics system, and a large customer base. It, too, has long eyed entering the banking world. Google contributes its Nest Smart Home products, Google Home, and a future in driverless vehicles. Together they would make an intriguing and potentially formidable competitor.
The message is clear: There is no longer a separation between digital and brick-and-mortar retail channels. There is only the customer experience. You need to own as much of the entire process as possible and constantly innovate to improve it.
Randy Pennington is an award-winning author, speaker, and leading authority on helping organizations achieve positive results in a world of accelerating change. To bring Randy to your organization or event, visit www.penningtongroup.com , email info@penningtongroup.com, or call 972.980.9857.
Randy Pennington does not have a financial interest in either InMoment or Avionos.
