The announced offer by Amazon to purchase Whole Foods for $13.4 billion hit me like a ton of bricks. An online retailer buying a brick-and-mortar? What is this world coming to?
Whole Foods has been rumored as an acquisition target for traditional food retailers like Kroger and Walmart for years. Their ultra-high margins were ultra-attractive to slow growth companies, earning 2% or less. Now Amazon will be a competitor unlike anything they have ever seen.
Perhaps we shouldn’t be that surprised. It may be less about the online channel winning the war, and more about the lines blurring and one omni-channel emerging.
Omni-channel suggests that multiple channels can actually be synergistic instead of the other way around. Amazon’s deal is sending shockwaves through the markets, and for good reason.
Retailers are actually the most protected of channels because of the last-mile-of-distribution rule: the management principal which dictates that the end of the supply chain is the most expensive. Once Amazon is able to blend local retail and online reach, the party is over for a lot of competition.
Imagine the improvements Amazon will make in the retail environment, such as paying virtually with your phone, or pre-ordering lunch. At the Consumer Electronics Show this year, Mercedes-Benz demonstrated a delivery vehicle outfitted with drones. It could make automated, just-in-time deliveries feasible without going all George Jetson, flying drones from a central warehouse.
While the likes of Macy’s and Sears have been selling online for years, their embrace of the internet has been pedestrian at best. It’s like their mommy made them sell stuff online after washing up for dinner. Some retailers have embraced omni-channel and are leveraging it for competitive advantage. Saks Fifth Avenue uses online tools for their personal shoppers (called Salesfloor) so their customers get a richer brick-and-mortar experience. Regional retailer Lamps Plus has kiosks in its stores (offering design capabilities and variety), which are supported by salespeople who receive commissions from online sales. We are not in Mayberry anymore.
Not only B2C (business to consumer) businesses will be affected by these trends. Many B2B (business to business) suppliers will end up competing with or being replaced by Amazon.
So, it’s time to embrace the internet and find ways to integrate more traditional distribution with online tools. Companies are using online education, configuration portals, design capabilities and all types of virtual tools to make online shopping more meaningful.
If you can’t beat ‘em, join ‘em.
For more, see Consumer Goods, Food and Retail and Technology and Engineering
[i] San Fernando Valley Business Journal- Kiosks Keep Lights On