With the news that Amazon will acquire Wholefoods for $13.7 billion, industry pundits are weighing in on why the eCommerce giant would buy a chain of grocery stores. The theories are wide ranging:
Which theory is correct? All of them – Amazon is all about growth and innovation. The Whole Foods acquisition will allow Amazon to use the 400+ stores as distribution hubs, to enter the grocery market more efficiently, to give Prime customers more value, and to keep on innovating and coming up with new ways to provide great customer experiences.
Amazon is a force to be reckoned with and it does not matter what retail segment you are in – Amazon is coming for you.
That is why it’s surprising that Moody's retail analyst Charles O'Shea would comment that it is too soon for Walmart and other large grocers to be worried that Amazon is entering the grocery sector. I wonder if Mr. O’Shea actually remembers what happened to the retail eCommerce players that Amazon left in its wake?
In reality, retailers of all kinds need to respond now. Recent forays into fashion should be a wakeup call to fashion retailers. Grocers should now be sleeping with one eye open. The best defense for these retailers in Amazon’s sights? Fight fire with fire. Make sure your product selection is right for your customers’ expectations. Get your cost structure in order so you can compete on price. Make the customer experience compelling so that loyal shoppers stay with you.
As evidenced by grocers like Carrefour and Tesco, the golden ticket is increasing the share of wallet you have with customers by broadening your assortment without increasing inventory or logistics costs. To do this, both companies launched a marketplace where trusted third-party sellers offer products alongside Tesco’s and Carrefour’s own. This provides these grocers with profitable revenue growth and allows them to quickly meet the needs of the weekly grocery shopper (either for groceries or complementary items) so that customers remain loyal and spend more.
Find out why Forrester says retailers should seize the marketplace opportunity now.