Third-party e-commerce fulfillers: Friend or foe to the grocers?
Ask any retailer to name their most valuable assets and they will put their customer base at the top of the list. Not too far behind, likely in their top five, will be both their brand and their merchandise (or “assortment” in common grocery parlance).
With this in mind, I watch in wonder as the grocery sector hands over its most treasured assets to questionable “partners” waiting with open arms.
The growth in grocery e-commerce is finally happening in the U.S. Other than Walmart and Kroger, and a small handful of others such as Meijer and Hy-Vee, however, few grocery chains are offering e-commerce under their own brand name.
Instead, some large chains — perhaps Whole Foods most notably — allow branded third parties, such as Instacart, Shipt, Google Express and Amazon Prime Now, to enter their stores and pick-and-pack customer orders for delivery to the customer. That former grocery customer is now placing their order on a third-party site and having service provided by the third-party. They are effectively becoming that third-party’s customer.
Might recent retail history offer an analogy to what is happening in today’s grocery landscape?
In the late 1990s, two established retailers — Toys “R” Us and Borders — were floundering with their online strategies while upstart Amazon.com was growing quickly. In 2000, Toys “R” Us and Amazon entered into a pact in which Toys “R” Us effectively handed its online business over to Amazon. In 2001, Borders, the defunct book seller, in a similar deal that Bloomberg subsequently called “tragically shortsighted,’ contracted with Amazon to run its entire online business. Fast forward a few years and the once dominant bookstore chain was filing bankruptcy and the toy store chain was in an acrimonious legal battle, trying to untangle itself from its disastrous relationship with Amazon.
Meanwhile, Amazon, as the recipient of the gifts from Borders and Toys “R” Us, has marched its way to being the largest e-tailer in the world. Are today’s grocery chains headed down the same path as Borders Books and Toys “R” Us of the 1990s?
DISCUSSION QUESTIONS: Does it make sense for retailers to partner with third-party brands to directly serve their e-commerce customers? Will customers remain loyal to those retailers, or are they likely to move their business to those third-party brands?