We all love the quality and brand experience that Whole Foods offers, right? And we all love the convenience, value, and sheer efficiency of Amazon. So, when these two modern day success stories come together what does it mean for us as consumers, and perhaps equally importantly, what does it mean for retailers and other major brands in the electronics industry?
Disrupt or be disrupted
Not a new message, but it certainly doesn’t hurt to be reminded. We are in a period of rapid and accelerating change, where global megatrends like our aging populations, urbanization, political unpredictability, and technology advances are creating a perfect storm. Many brands tell us their greatest fear is irrelevance and the challenge of keeping pace with change, whilst watching for traditional and unexpected competitors is becoming increasingly difficult. When an acquisition like this one occurs, it reminds us that change happens. Retail outlets are closing on all sides of the main street, but Amazon is opening stores and it now finds itself in the competitive world of groceries.
Lesson: Collaborate with the right partner to explore every option and avoid irrelevance!
Every company is a tech company
Amazon has, and continues to lead the retail world with the use of technology. Further, it continues to be a leader in the development of new retail technologies. Whether it is drone delivery, driverless vehicles, or high speed supply chain agility, Amazon is without doubt one of the pioneers in the retail world. Technology drives much of what Amazon uses to stay ahead, to stay current, to lead a hugely competitive race. It only takes a glance at a list the world’s most valuable companies to see that half of the top twenty and 100% of the top four are technology companies.
Bringing a product to market is no longer just about the product, it’s about the entire ecosystem. Creating a good user experience and a community of users, that become brand ambassadors can be the difference between market leadership and being an ‘also ran’.
Lesson: Everyone, from the smallest startup to the largest corporation, needs a nerdy best friend!
If artificial intelligence is the answer, what’s the question?
It is becoming increasingly clear that we underestimate the importance of artificial intelligence (AI) at our peril. Data is the lubricant for commerce, and the diligent use of real-time data, particularly in self learning systems, can be the route to retail nirvana. Amazon has used this effectively to suggest other purchases, to understand buyers’ habits and to stock the items that people are likely to want when they want it. This doesn’t just mean in the warehouse, this means deployed stock of popular items that can be delivered same day, competing with in store retail head-to-head.
A recent study by McKinsey found that “U.S. retailer supply chain operations who have adopted data and analytics have seen up to a 19% increase in operating margin over the last five years.” The survey concluded “To say the least, machine learning is changing retail for good. It makes hyper-personalization possible, as it takes big data based on demographics further.” Machine learning improves decision making by bringing in more accurate data to inform crucial business decisions. Big data played a role in the selection of Amazon’s partner, with Whole Foods leading in terms of customer overlap with Amazon Prime members.
McKinsey also commented “The network effects of digital platforms are creating a winner-take-most situation in some markets. The leading firms have remarkably deep analytical talent taking on various problems, and they are actively looking for ways to enter other industries. These companies can take advantage of their scale and data insights to add new business lines, and those expansions are increasingly blurring traditional sector boundaries.”
Lesson: AI is everywhere and data is power. Get onboard or risk being left behind.
Shopping is a mixed reality pursuit
If we’ve learnt anything from acquisitions in recent years, it is that it’s no longer online versus offline. Hybrid solutions rock! And retailers that understand this are fast becoming the rock stars of the retail world. Mixed reality and the blurring of the lines between the online and the in store experience are all having an impact on the shopping experience. How often do you explore products online before seeking them out in a store? Or check out a garment or product in a shop whilst surfing online to find the best deal nearby or online? The store might provide us with the instant gratification of immediate purchase, but you can order on your smartphone whilst you’re out and have the product delivered by the time you get home, nicely packaged and with a return policy that is simple and economic.
Virtual reality (VR) is now being embraced by retailers as part of the online and even the in store experience. GAP is committed to using a new augmented reality shopping experience to win back consumers’ waning interest amid Old Navy and Banana Republic store closures and declining sales. GAP sees its online “trying on” experience, as a way of closing stores but keeping the dressing room. This is all part of trends to use augmented reality (AR) in retail, with clothing being only slightly behind furniture in its adoption of the technology, according to data from eMarketer. Ikea saw this trend in 2013, creating an AR catalog app using any device’s camera. Once a customer has taken a photo of their room, they can then browse the IKEA catalog and place each item in their virtual home.
Lesson: Hybrid solutions rock! Multichannel retail, leveraging AR is the future.
Supply chain superiority is paramount
We’ve talked about supply chain orchestration as a competitive advantage forever. It’s been part of our digital transformation, and it’s also a huge part of what makes Amazon tick. Use of technologies in the supply chain is paramount for retail businesses whether they exist largely online or on the main street. Grocery retail is perhaps one of the most challenging supply chain spaces and Amazon will have to blend its online excellence with the management of dynamic retails spaces. This is especially important when part of the retail brand is based around freshness and local production.
Lesson: Excelling in supply chain is essential to success everywhere.
Packaging is key to retail success
Packaging is playing an increasingly important role in retail and not just because it helps a product’s shelf appeal, but often because it’s the first physical and tactile experience a consumer has with an online brand. Everyone loves unwrapping gifts on a special occasion. Which brand wouldn’t want to deliver that joy every time a consumer receives its product?
In a recent survey conducted by Dimensional Research, entitled ‘Trends in E-Commerce Packaging’, almost all (95%) agreed that packaging impacts on the purchase experience, citing the condition of the package on arrival, lack of waste, and ease of opening as the key factors. Most (over 70%) agreed that bad packaging can ruin a customer experience, whilst good packaging can create a memorable customer experience, enhancing the brand in the eyes of the consumer.
Smart packaging is also playing an increasingly important role in retail, both online and in store. The ability to highlight the need to replenish, and connect that with a simple route to repurchase offers greater potential brand loyalty as well as real time data that can influence marketing and of course supply chain.
Lesson: Packaging can create brand brilliance.
What makes Amazon special?
Service, service, and service. Amazon lives and breathes service. Everything it does is geared around the customer, their experience, their loyalty, and their habits. From online book retailer to its vision of “being earth’s most customer centric company; building a place where people can come to find and discover anything they might want to buy online”, to its foray into bricks and mortar retail, Amazon has been customer focused and fearless in its pursuit of excellence and dominance. Fearless of disruption, and fearless of change!
Amazon pursues grandiose ideals, like “taking a cut of all economic activity”. Entering the grocery business is part of that. After all, grocery is the largest retail sector, representing more than 20% of consumer spending. With the Whole Foods acquisition, Amazon moves its strategy forward with one large leap, winning new customers and basking in the reflective glory of a successful grocery brand associated with healthy eating, convenience and quality.
The morals of this story are clear: be the best you can be; drive customer value; improve the customer experience at every turn; build a community, not just a customer base; embrace change, new challenges and new technologies; be bold and occasionally disruptive; focus on service, service and more service; and glue it all together with data to drive continuous improvement, user insight and operational excellence.