Last month the online retail giant made the announcement that they were purchasing the upscale grocery chain for $13.7 Billion in cash. As a part of the deal Amazon will also acquire more than 450 brick-and-mortar stores across the country.
The Grocery Sector – Ripe for disruption
The Grocery Store Sector in the United States is the largest consumer sector at over $750 Billion. While the majority of other consumer shopping experiences have vastly changed over the last 20 years – grocery stores for the most part have stayed largely the same. Companies, including Amazon, have made serious attempts to provide online grocery options for consumers but these efforts have been met with varied success and could hardly be described as disruptive. Increased regulations and the perishable nature of the goods create barriers that make it very difficult to enter and navigate.
The Master Plan
No one yet knows what the full implication of the Whole Foods Acquisition will be. Some speculate that it is an opportunity for Amazon to expand its own brick-and-mortar presence and create a hybrid grocery and retail space. With Amazon introducing more and more of its own products such as Echo, Alexa, Fire Stick, and Kindle it makes sense for Amazon to have physical space for consumers to try out and gain confidence in the products. In this way Amazon could emulate Apple’s extremely effective retail approach.
With Amazon rolling out AmazonFresh in only a limited number of markets (I’ve used it in Denver and while the selection was pretty minimal, the quality and the delivery was excellent), the purchase of Whole Foods could lead to a much faster ramp up time. Importantly Whole Foods stores are located where affluent consumers live. Walmart owns the low end consumer and Amazon has consistently targeted the higher end, so another good match.
What We Could Learn From Amazon
Amazon’s has been the most successful pioneer of online shopping. Many would go so far as as to attribute the decline of traditional brick and mortar retail stores to the growth of Amazon. Nevertheless, the purchase of over 450 retail stores demonstrates that brick-and-mortar is not going away, only shifting. “Amazon is an ecommerce retailer who has evolved in understanding and accepting the strategic value of physical retail stores,” said Brittain Ladd a former Amazon Exec. What Ladd alludes to is a valuable lesson that we shouldn’t’ forget. While it is important to keep an eye on emerging platforms and to always remain ahead of the competition, there is value with the tried and true marketing platforms that exist already such as print marketing and traditional SEO.
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