The major advantage that traditional retailers had over Amazon was the availability and immediacy of stores. You could see and touch products and take them home the same day. You could return products more conveniently than shipping them back to Amazon.
Over time, however, Amazon has chipped away at these advantages with Prime, Prime Now, Lockers, prepaid returns, and finally, with its nearly $14 billion purchase of Whole Foods. On the first full day of Amazon control over the high-end grocer, it cut prices over 40 percent and started selling Echo devices in Whole Foods stores.
Is that a surprise? We’re in a smart speaker/virtual assistant land grab right now — and Amazon is winning.
Amazon Prime members will see additional pricing and other benefits at Whole Foods. Reduced prices and Prime benefits will bring new customers into Whole Foods and add new Prime memberships, reinforcing loyalty to both Amazon and Whole Foods.
Other grocery chains should be very, very afraid.
Amazon will also likely use Whole Foods stores for other purposes beyond selling Echo devices. For example, the 400+ stores could easily (and will likely) become Amazon return centers.
In some ways, Amazon is now the ultimate omnichannel juggernaut — no other single retailer or internet company can match its infrastructure or distribution. Only a small number of companies, among them Google and Facebook, rival Amazon in brand strength and consumer affinity.
The Whole Foods acquisition is a “come to Jesus” moment for retailers, which have been wringing their hands for years over declining store foot traffic and other challenges. They will be forced to make some dramatic moves — or else. One such example is Walmart’s voice-commerce alliance with Google Assistant and Google Home. It’s both an offensive and a defensive move for Walmart.
All of this points to something larger for traditional retail: the need to more fully embrace Google and Facebook as partners and channels to compete with Amazon. (Some retailers may want to sell through Amazon as well.) While this will not be sufficient, it now appears necessary.
Google and Google Express may soon become a retailer’s best friend. Whole Foods is part of the Google Express roster, but it may not be for long.
Local inventory is still a significant weapon traditional retail has over Amazon. However, local inventory is not uniformly exposed. I imagine we’ll see many more retailers adopting Google’s Local Inventory Ads, and beyond this, utilizing a wider range of tools that Google and Facebook offer for visibility and targeting. For example, they should be using store-visitation analytics to connect online ads to foot traffic in stores.
They must also improve the in-store experience, emphasize service, enhance their mobile sites/apps and offer compelling loyalty programs. In short, traditional retailers will be forced to step up across the board if they hope to survive, let alone thrive.
Where retailers may once have been ambivalent about giving their data to Google, they now have little choice. The enemy of my enemy is my friend.
With Amazon crossing over from online into the real world, they need to execute without hesitation. An existential moment has arrived.
Winter is coming.
Comments