For those who think Amazon is a mildly successful, online retail sales machine, consider this: Forrester Research has concluded that Amazon’s $13.7 billion acquisition of Whole Foods should “raise a red flag for all retailers.”
In a quick report issued shortly after Amazon’s announcement of the Whole Foods deal last month, Forrester analysts illustrated how the acquisition of a minor U.S. grocery chain may overturn the shopping cart in supermarkets. Groceries amount to an $850 billion business and it’s ripe for disruption.
Shoppers have been going to the grocery store for decades to employ their personal taste in the types and condition of food they want to take home. The success of smaller supermarkets with more of an individual touch, such as Whole Foods, Mollie Stone’s and Trader Joe’s, has already illustrated how grocery shopping can be disrupted The German-based Aldi chain wants to grow from 1,600 stores in the U.S. (Trader Joe’s is an Aldi brand) to 2,500 Want to learn more about Amazon’s disruptive force? See Can Amazon Disrupt More Markets? Let Me Count the Ways.
If these chains can create a new grocery shopping “experience” and make consistent quality and online ordering part of that experience, the more traditional, check-out line supermarkets may find themselves in the modern consumer’s rear view mirror.
Not that many people order their groceries online for home delivery just yet – about 12% of existing online shoppers, according to the report It’s that combined 23% that Amazon threatens to rapidly expand with Amazon Fresh and the Whole Foods acquisition. Whole Foods gives it 450 business points with an existing culture of healthy food offerings, and the same number of package pickup locations.
Those who do use online ordering systems are getting less than half – 41% — of their groceries through that process. Predictable, non-perishable, packaged goods are the typical target of an online order. Amazon is seeking to add fresh and perishable foods to that list through its same-day delivery capabilities.
In San Francisco, Trader Joe’s shoppers fight to get in and out of its stores’ parking lots, a sign of the degree of engagement that the chain enjoys, compared to Safeway, Lucky or Andronico’s (recently acquired Thinking about Amazon expanding into groceries is beside the point. What it does with Whole Foods, it could repeat across almost any sector of retail it chooses.
What’s more, it’s shown that it’s skilled at mining customer data and reading customer intentions as they arrive at its website. If Amazon affinity engines already know a lot about you from your book and clothing purchases, for example, think how much more depth of knowledge they’ll gain Amazon is not just in a position to know what categories of goods you like to buy but also at what level of brand you prefer to spend. Are you a bargain basement or luxury goods shopper? It can tailor its retail presentation to appear to be a cost-saving approach for one consumer, a luxury goods provider to another.
Or consider this level of engagement as cited Amazon will use the send-it-back box for more direct data on what you want and recalibrate the Echo dot system to come closer next time. Now that’s customer engagement. If there’s some way to combine it with a pleasurable, in-store shopping experience, where consumers go to learn something new, see the latest trends, sense what others like themselves are buying, then Amazon will be a formidable force in whatever area of retail it chooses.
The Forrester analysts urged retailers to think of their future competition in such terms. “Playing defense will just prolong your demise,” they warned.