Five pain points grocers must address to survive in an Amazon/Whole Foods world
Grocery was renowned as a thin margin high volume category, struggling to leverage m/e-commerce profitably. Then Amazon.com acquired Whole Foods Market.
So, for competitors that want to stay viable by the end of the decade, transformation starts with five crucial elements they must implement immediately, no matter how challenging, no matter how costly, or else they will remain shark bait.
- End the checkout time suck: Nowadays, disrespecting a person’s time is reckless. Amazon Go did not pioneer ending the checkout line. Whole cart RFID checkout has existed since at least 2001. Grocers have had years to solve this had they shown the will and the leadership to find ways of working with suppliers to make it cost effective. It must happen now.
- Prevent out-of-stocks: Food shopping is made especially burdensome when one or two needed items on the shopping list are not on the shelves. Inventory/logistics models need to be revamped to keep shelves full — incontrovertibly with non-perishables — and prevent shoppers from heading to other stores.
- Cut SKUs: While carrying 40,000 or more different items may meet the demands of a wide swath of customers, resilience and profitability are more achievable by targeting a narrow band of customers with a reduced, highly relevant product mix and operating more like a vertical that serves that segment superbly. Being average to everyone is no longer an option.
- Rethink major brands, especially in CPG: Nowadays, peddling anything commoditized or commonplace is vexing. Diversifying and developing a trusted and possibly lower priced private label brand, while not easy, provides some insurance against price wars. Purveyors counting on loyalty and profits from past brand associations will be left hung out to dry when distribution models recalibrate.
- Innovate the last mile bi-directionally: BOPIS (buy online pickup in-store), BORIS (buy online return in-store), drive-through pickup, third party delivery, lockers, partnering, reduced free shipping thresholds, shuttle buses, mobile apps, etc. — whatever methodologies that get groceries into the arms of customers without them feeling friction or return remorse are table stakes now.
- Five Pain Points Grocers Must Address Immediately to Survive in an Amazon/Whole Foods World – Ken Lonyai
DISCUSSION QUESTIONS: Do you agree that traditional grocers must make big changes to compete effectively with Amazon‘s aggressive move into the food channel? Which points on the list do you see as most crucial? Would you add any other urgent transformative steps?