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Amazon, Whole Foods and the day retail changed

Amazon’s move to buy Whole Foods Market will shake up retail around the world. And it should shake retailers into asking big questions about how they engage with shoppers.

Remember the date: June 16th 2017.  Perhaps not quite the day the world changed, but certainly the day the retail industry around the world was shaken on its axis.  And, yet again, it’s Amazon doing the shaking by announcing their deal to acquire Whole Foods Market for US$13.7bn, subject to the usual approvals from shareholders and regulators. 

Although it’s Amazon’s biggest acquisition to date, the price isn’t especially huge.  But this deal is hugely significant.  That’s because the world’s pre-eminent online retailer is buying a store-based food retailer. It seems inconceivable that Whole Foods will be left alone to continue, as Jeff Bezos put it in Amazon’s press release, its “amazing job” of “satisfying, delighting and nourishing customers”. Amazon will soon have access to over 460 Whole Foods stores, which will surely become an integral part of its click and collect grocery operations. 

This acquisition is the clearest sign yet that Amazon doesn’t see the future of retailing as a competition between the online and bricks-and-mortar worlds. Instead, it will be about which businesses are best at letting shoppers engage with them in whatever combination of digital or physical touchpoints they wish to use. The winners in the new landscape of retailing will be those businesses which are most skilled in putting the shopper at the centre of a web of engagement that effectively combines a whole range of physical and digital touchpoints. How very binary and irrelevant the notion of channels competing against each other now looks. The point now isn’t just to have a presence in shoppers’ physical and digital worlds, but to be able to bring those worlds seamlessly together in the almost limitless combination of ways that shoppers now want to engage with a retail business.

Three things this deal tells us

  1. Amazon’s own stores aren’t the route to build meaningful market share. Unstaffed grocery store pilots in Seattle are all very well as an innovative ‘live laboratory’. But they won’t make much of a contribution to Amazon’s relentless ambition to embed itself ever more deeply into our lives and wallets.It’s not a big stretch to see the rationale for buying Whole Foods – strong brand equity, relatively affluent shoppers– applying in other categories of high interest to Amazon, including perhaps like fashion, health & wellness, sports goods and entertainment.

  2. Strong brands still matter in retail. Whole Foods hasn’t had the best of times in recent years. But it’s clearly a very credible brand which extends Amazon’s reach in customer and retail segments where it wants to be strong.

  3. Amazon’s ambitions are boundless. Or rather, boundary-less. We’re used to the (at least slightly spurious) notion of geography being irrelevant in an internet-enabled world.We now need to get used to channels being irrelevant in the world of customer engagement.Be in no doubt: omni-channel is dead.In fact, omni-channel should never have been part of the conversation in the first place. It’s far too much about the channel and far too little about the shopper. The Amazon-Whole Foods deal demonstrates forcefully that all retailers need to look again at their approaches to customer engagement and sales fulfilment. And they need to focus not on channels but on putting shoppers at the centre of the business and building out from there.

Four questions for retailers

This deal’s implications go way beyond the US and US grocery retailing. It should force retailers to ask themselves questions which go to the very heart of the business:

  1. Is the way we engage with shoppers truly optimised around the shopper?
  2. Are we set up in the right way to give shoppers a joined-up, seamless experience?
  3. Are we agile enough to respond to unexpected, highly disruptive competitive challenges?
  4. Is our relationship with customers strong enough to withstand the challenge of greatly intensified competition from unanticipated competitors? 

It’s not a given that when Amazon enters and disrupts a market, all the established players roll over and die. But established enterprises and their leaders must revisit the fundamentals of their businesses, be open to radical change and, crucially, do this without compromising current performance. In other words, they need to be able to ‘fix the plane while it’s still flying’. On June 16th the agenda for retail enterprise leaders became even more challenging. But while change is hard for enterprises and their people, not changing is harder still.

Contact the strategy team

Andy Katz

Andy Katz

Alan Treadgold

Alan Treadgold

Cesare Gussago

Cesare Gussago

Thomas Bjørnstad

Thomas Bjørnstad

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