Last Friday morning, a collective gasp was heard ‘round the retail world as it was announced that Amazon was buying Whole Foods in a $13.7 billion cash deal. In the days since, I’ve heard everything from “Oh sh*!” to “Bravo, Amazon” to a lot of “What does this mean?,” and from a neighbor mom, “My two favorite retailers in one place, that is amazing.” To say that the reaction is mixed is an understatement.
It’s certainly no secret that Amazon has physical store ambitions and that it has been actively trying to gain share in the grocery segment. From that perspective, the acquisition makes a lot of sense. Amazon has the financial muscle to shape pretty much any category – so why not start with one of the biggest? And, of course, grocery has been a segment ripe for disruption – there has been little to no evolution of this vertical, and in spite of some technology innovators, there is still a lot of friction in the experience. So what, exactly, are Amazon’s plans? Well, that is still to be seen, but my guess is they will involve some (or all of the following):
- Cashier-free retail: The Whole Foods of the future will likely have no cashiers – but as we have discussed previously, this is difficult to do and probably some ways off from a scalable technology perspective (possible).
- Amazon order distribution: You can pick up your Amazon order at your local Whole Foods – it’s one of the most reported on synergies of the acquisition. Amazon now has 450 new distribution centers (probable).
- Whole Foods is your Amazon Fresh order: Amazon can now deliver even more goodness to your front door – including Whole Foods orders along with their 365 private label (probable).
- Subscription food: It’s easy to imagine a scenario where Amazon will go after the wildly successful food subscription businesses (possible).
- Lower prices at Whole Foods: If Amazon can bring some of its analytics and purchasing muscle to Whole Foods, it will be a big win for consumers (probable, although hopefully not at the expense of quality).
- As Amazon has repeatedly taught us … almost anything is possible.
There is plenty of talk about what Amazon’s pending acquisition means for grocery and Whole Foods’ competitive landscape. And, while I think the dynamics of the grocery industry are unbelievably interesting and in one of the biggest transformations of a lifetime, I am far more interested in what this acquisition means for retail overall. I personally don’t believe Amazon bought Whole Foods to simply dominate the grocery space.
If you think Amazon is spending close to $14 billion to enter physical retail and keep the status quo, you should eliminate that painful twisting in the wind and just close up shop now. This is the data-driven era of physical retail, and if you’re retailing like you did in 1990, you’ll no longer be relevant.
In my humble opinion, the Amazon/Whole Foods story is so much bigger than grocery. It’s no secret Amazon reinvented how we shop several categories, and if the Amazon/Whole Foods combo can do half of what I outlined above, just imagine what they can do in the even more embattled department store space?
So what do retailers do? In December I wrote my perspective on what retailers should do to compete against the Amazon Go concept. The Whole Food acquisition is so much bigger. Amazon Go is a small hobby, essentially a pet project at this point. Whole Foods is obviously a well-established business with millions of raving fans and hundreds of locations. So, with that in mind, let’s update some of those December tips, below:
- Don’t Panic. Hey, it’s not like Amazon has built thousands of stores overnight across a variety of retail segments. But, then again, they have bought over 400 storefronts overnight. So maybe it is time to panic, just a little bit … see #2.
- Panic. Amazon has a proven ability to change how we consume products. Remember, they started with one simple thing – and not only did they disrupt how we buy books, they changed how we consume the written word altogether. That’s big. Now it’s grocery, and I can’t help wondering if department stores next.
- Make a plan. If you aren’t thinking about how you collect, analyze and action data in your stores, you are definitely behind. The good news is we are about to start a whole new retail cycle. Be ready to create some of your own magic in Holiday 2017, and above all else, speed up the plan! Call your analytics provider and step up the plan. Without data analytics, and without an investment in your stores, you are fooling yourself into thinking you will not feel continued pressure from Amazon.
- Focus. Start with your shoppers’ biggest pain points and work from there. Don’t try to boil the ocean, but do try to remove some of those points of friction from their experience.
- Be bold. Yes, I know, I just said to make a plan and focus. But, part of that plan should be to go way outside of the box. Will all of the technology work? Probably not, but you will learn a tremendous amount and you may even find a big, disruptive idea of your own.
- Engage. Bring your business partners into the conversation and try to find ways to leverage data and information across silos – or better yet, tear those out-dated silos down.
- Educate yourself. Understand some of the in’s and out’s of the technologies available – even if you aren’t a “technology person.” When I started working at RetailNext, I had no clue what technology could do. But, I did know the problems retailers needed to solve. Now that I understand both to a certain degree, it’s so much easier to think about how to solve the problems of today.
- Go shopping and develop baselines and benchmarks. I can’t tell you how many times I talk to retailers who admit they spend almost no time in stores other than their own. Learn from the digitally native or otherwise innovative brands or that are all disrupting in their own way – Warby Parker, Lolli & Pops, Rent the Runway, etc. are all great places to start.
- Start. There’s no better time than the present, and laggards will soon discover that getting started later will turn out to be too late. If you haven’t pulled the trigger on in-store innovation and developing a better understanding of the data you can collect about shopper, associate and product movement in store, you need to get started. And, resist all temptations to stop. The worst thing retailers can do is get their internal teams and their shareholders excited about the direction they are moving toward and then abruptly pull back. Target had a much publicized plan they backed away from earlier this year and, in my opinion, it was the absolute worst thing they could of done. On the day of Amazon’s Whole foods announcement, Wall Street tended to agree.
- Strategize with you analytics partner. RetailNext, Intel, Salesforce and an endless list of other companies are thinking about shopper experience, its challenging problems and abundant opportunities every single day. A conversation doesn’t equal a commitment, so call your contacts at these organizations and set up some conversations to help guide your internal plan and strategy.
Forget grocery. Amazon’s acquisition of Whole Foods is a shot across the bow for all of retail, regardless of segment and format. It represents the fusion of digital and physical shopping experiences, and it accelerates the pace of change for everyone. The “future” of retail is becoming much more of a today thing then a tomorrow thing, and it’s time for the industry to respond. Now.
- Amazon Go – Time to Panic? Blog
- Amazon Go Delay Is No Victory for Physical Retail Blog
- An Amazon Go Q & A with RetailNext’s Arun Nair and Bridget Johns Blog