Amazon Redefines the Grocery Store; the Industry Should Pay Attention

Posted by Robert Flynn on Aug 12, 2015 2:14:10 PM
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Online Grocery Shopping

As a youth, back before mobile phones and customer segmentation, I earned my allowance delivering orders to local customers, from the Mountain Heights corner store, a neighborhood grocery in New Haven, Connecticut. In those days, loyal customers – mostly elderly and all within a few blocks – would use the telephone to place an order for the usual array of soaps, cosmetics, and paper products. I’d earn a half dollar for my efforts. Mountain Heights had its corner of the city, while other grocers serviced their allotted section of the city. An idyllic setting.

Disruption: Grocery shopping moves online

Today, the grocery industry is less tranquil. The San Francisco Business Journal reported that Amazon, the world’s largest online retailer, is aggressively pursuing the grocery business by allowing consumers to order grocery items online and then schedule a pickup at a dedicated facility, or to receive groceries through the company’s same day delivery option. Amazon's use of a warehouse distribution model is not news, of course. What is new is the application to the grocery aisles, creating the first in the industry integrated business model that optimizes mobile, speaks to the future demographic base, and provides the company with efficient operations.

If confirmed, this new customer engagement strategy – together with Amazon Dash - can only be described as a bold competitive maneuver that could take market share from other traditional grocery giants including Walmart, Krogers, Safeway, Target, Publix, Costco, and Tesco in the UK.

Analyzing the potential impact is difficult for players in the grocery industry, all of which have their normal assortment of day-to-day competitive issues to manage. But Amazon's actions raise the stakes and it’s time for grocery industry companies to re-prioritize their competitive strategies to assess the ever-growing use of mobile devices, the behavior and preferences of the highly demanding millennial generation, and the ability to gain data and efficiency through massive scale.

Mobile shopping backed up by infrastructure

Mobile has, of course, been front and center for some time. Walmart, Krogers, Safeway, all the major chains and even regional stores have apps for customer engagement, particularly for in-store shopping. What has changed now is simple but dramatic – scale of distribution. In Sunnyvale, Amazon is reported to be behind the construction of an 11,600-square foot building and customer pick-up center. Such scale of operations, staffed by fewer employees and more robotics, will refine the shopping experience, presumably in line with customers’ preferences. It will also impact profits.

It is time for competitors to take stock of Amazon’s plans, assess their own activities in light of this strategic move, and revamp or accelerate their competitive strategies. It’s no longer the world of the corner grocery – Amazon is redefining the term “store.”

Topics: Competitive Intelligence, Consumer Goods, Brand Insights, Innovation, Market Analysis, Scenario Analysis, Product Positioning, Competitive Strategy

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