Amazon and Whole Foods just did traditional Grocers a big Favor

How to beat them at their own game.

news
June 16, 2017

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Amazon has been preparing to move offline and disrupt the grocery industry for a long time.

In October last year leaked internal documents revealed Amazon's intention to open 2000 grocery stores over the next 10 years, leaving many wondering what the tech giant could offer in the already crowded space. Then in November they announced Amazon Go, their solution for eliminating checkout lines, putting the industry on notice that they were going to have to innovate on customer experience to stay competitive.

Now, with Amazon’s purchase of Whole Foods, they’ll be competing in the grocery market much sooner than expected - and raising customers’ expectations all the while. The timeline for traditional players to innovate looks a lot shorter.

Consider the following:

  • Amazon Go, the company’s solution to offer a convenient line free checkout, would supercharge Whole Foods’ already good customer experience. While the technology will take some time to adapt for Whole Foods proper, Whole Foods' new 365 store format would be easier. Targeted at millennials and following the Trader Joe’s model, the 365 stores, which began opening this year, are already a natural fit for Amazon Go.
  • Amazon Fresh may get a boost using Whole Foods stores as more than 400 new hubs to deliver from, expanding their online grocery footprint from 12 cities to most of the US. Whole Foods’ focus on fresh allows shoppers to use Amazon Fresh for the basics and pick out their produce and meats in person. What this might mean for Instacart, the ecommerce provider Whole Foods’ took a stake in, is unclear.
  • Amazon Prime memberships, held by more than ¼ of US households, represent a key asset to be leveraged with Whole Foods, a company that has traditionally struggled with loyalty programs.
  • Buy online, pick up at Whole Foods is a powerful new option to boost both Amazon sales and Whole Foods visits. It serves as a way for Amazon to reduce shipping costs and provides Whole Foods customers added value. Shoppers order any kind of goods from Amazon, including the grocery basics, then head into Whole Foods to pick out their produce and meats.
  • Speed is Amazon’s Strength. Amazon and Whole Foods will start training consumers to expect better convenience and technology as soon as next year. Many grocers have taken a conservative approach to technology in the past, but now that Amazon is setting the pace they will have to adapt quickly.
  • Wall street is betting against traditional retailers, divesting more than $37 billion dollars as of this posting. Many grocer stocks dipped more than 10% including Kroger, SuperValu, Target and Sprouts. Whether you perceive stock prices to be more echo chamber or collective intelligence, the shift signals the buzz around the move.

The good news is there’s still time for traditional retailers to beat Amazon at their own game.

Today’s announcement is the starting gun for the race to the next generation grocery experience, and Amazon / Whole Foods will need at least a year to deliver on it.
Traditional brick and mortar retailers can use this time to get that next generation shopping experience into customers’ hands before Amazon does, and that’s exactly what WalMart, Tesco, Sainsbury’s, Ahold and more are doing with their nascent line free checkout programs.

There’s still time for retailers to get ahead if they:

  • Start now and go FAST. The traditional retail technology upgrade cycle is too slow to compete in today’s market. Rather than spending months (and often years) to get to a pilot, retailers need to focus on being agile: Release early and release often. Try multiple solutions at once. Use real pilot data and not gut feelings to make decisions.
  • Focus on Customer Experience. Once you got used to broadband you wouldn’t go back to dial-up internet. Similarly, once you get used to line free checkout you won’t go back to waiting in line. Retailers who are the first with new customer experience innovations receive shoppers’ praise and business - but shoppers are fickle. As soon as they adapt to it, praise turns to expectation and they punish retailers who fail to meet expectations. Retailers need to expand on the advantages of brick and mortar stores by incorporating advantages from eCommerce including personalized recommendations, 24/7 accessibility, and most importantly an improved checkout experience.
  • Get closer to their customers. Retailers' single greatest asset is their existing customers and strengthening those connections is the surest way to protect their business. Amazon knows what shoppers like, it can personalize specials based on past orders, demographics and other factors. But so can any retailer if they can digitize the shopping experience. It works with loyalty cards, but even better if shoppers use a personal app to do their shopping - generating unique data and providing the opportunity to communicate with them while they're shopping and between trips. The phone is both the most intimate device and the most powerful tool. A great mobile app is the optimal way for retailers to invest in strengthening their connections to their customers.
  • Embrace Startups. Developing tech in house is expensive and time consuming, with projects like a shopping app taking at least 2 years to develop and test. At the same time, legacy POS companies have been slow to offer modern solutions, leaving a gap that has been filled by innovative startups. Working with startups retailers get an innovative approach and a dedicated focus that can’t be had elsewhere. Retailers can get the best out of startups by inputting their own retail experience to the design process and helping guide growing systems to fit them best.

Beating Amazon won’t be easy, but at least the roadmap is clear. Amazon has given the grocery industry a big early warning, and retailers who take that head start will be positioned to win. By introducing customers to next generation shopping experiences now, retailers not only prevent Amazon from seducing their customers next year, but increase the chances Amazon will be met with a collective yawn.

So, yes, maybe Amazon did do retailers a big favor.

New York based FutureProof Retail develops next generation shopping experiences featuring line free mobile checkout, order ahead and advanced marketing capabilities. FutureProof's technology can be easily retrofit to a wide range of retail formats and has been live for more than 2 years in formats including grocery, fast fashion and fresh market. Retailers interested in trying FutureProof's line free shopping experience can schedule a demo here.

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