Amazon Buys Whole Foods Market: Evolutionary, Not Disruptive
The big news this last week? Amazon buys Whole Foods.
Many in the press are thinking that this is a disruptive move. If you ask me, I’d say it’s more evolutionary than revolutionary.
A few years ago, I was doing some foresight consulting for a large brick-and-mortar retailer, who, at the time was (and probably still is) worried about Amazon. In fact, every brick-and-mortar retailer was and likely still is, worried about Amazon, although I doubt Whole Foods was one of those.
At the time, I held the opinion that these brick-and-mortar retailers did need to worry about Amazon, but not in the way that they were. They were placing themselves in a position of weakness when they should have been leveraging their strengths.
While the retailers were concerned about Amazon stealing their market share due to providing lower prices, I countered that soon, customers would be more concerned about quick possession rather than price. That they would gladly pay some premium to get their product faster, and since they already had solved the tough problems of getting goods to stores (which mean near to the customer) they had already done the heavy lifting.
It’s easy to set up a website or mobile app to sell stuff. It’s much harder to create and manage an effective inventory and distribution network. These companies had it down cold. That was their secret sauce – they could get products into people’s hands much faster than any eCommerce site could because they all still needed to ship stuff. That’s where Whole Foods is at.
I told them that despite the press, they were in a much better position than Amazon. They had the physical stores, warehouses, and distribution to get products close to customers so that they could get them the same day. They were winning. But they didn’t see it that way.
The key to eCommerce, in my view, is a seamless online/offline experience.
I spent a brief time doing sales when the company that I worked for hit on some hard times. While I had no idea how to start, I figured that going to business networking events might help. At the time, there was no LinkedIn or Facebook, so I signed up for a small business network called Ryze. They were very like LinkedIn, but with an offline component, line Meetup. You would join online, get to know people, then once a month, if you wanted to, you could attend face-to-face offline meetups in a local bar or restaurant. The power of the platform happened when both the virtual connection met the real-world connection – the combination of on and offline contact made those connections much greater. While Ryze is no longer doing offline meetups, it effectively grew my network and helped me to succeed in that role.
Instead of feeling “saddled” with physical locations, they should have thought of it as a strength.
Amazon keeps building warehouses closer and closer to major centers, where the retailers already are. They know that the physical retailers do have an edge. But that edge is going away, and with the Whole Foods acquisition, it’s gone.
However, all is not lost. Physical retailers can still win – and they can do this by creating the most compelling online/offline experience that they can. They need to move rapidly to converting most of their locations to showrooms/warehouses, where people can go to pick up products immediately that they purchase online, or can be used as a delivery point for both their and gig economy delivery people, places of entertainment, co-working spaces, or all the above. They need to assume that the business model is an online/offline blend, and only showroom those items which need to be showroomed. Most people will buy before they get to the store, or on terminals in store (see Panera Bread or Eatsa for examples) then pick up their products for immediate use. Or they will have them delivered, same day, maybe even same hour, and all because the product is already there, and not in some Amazon warehouse, a day away.
Speed and convenience will be more important than price. Being able to get the product in customers hands faster will win the day. It’s the natural extension of Amazon’s model, and retailers are already almost there. All they need to do is understand physical stores are their special sauce, not a burden to hold them down.