Why the Amazon and Whole Foods adventure might mark the start of a retail revolution
Retail has a funny way of surprising you, just when you think there are set patterns and understood norms a left field acquisition comes out of the blue, one that now looking at it makes sense.
The way we shop as a result of the internet could change
The UK and large parts of North America were set on retail market including the upmarket store Whole Foods as a bit part player, struggling for real cut through and profit generation. A store that could as easily vanish as prosper. Wonderful displays, great product provenance, glitzy locations and rather poor profit (for poor in the UK read: none).
The supermarket was always ripe for a change, it needed more operational nous and some lower overheads. I always thought it would be a visitor to these shores or taken over by a larger retailer, it seemed the trajectory. I never would have thought that the retailer in question would be Amazon. Even saying Amazon is a retailer goes against the grain for a bricks and mortar zealot like me. Yet the more I look at it and the more I consider the ramifications the more I think the idea could be the saviour of Whole Foods and the leapfrog Amazon needs in gaining access to a market previously untapped.
The portfolio of 432 stores ( 410 in the US,13 in Canada and nine in UK) serves customers who are of higher than average disposable income, have a propensity to buy with a conscience and shop for immediate or that day consumption more than others.
If you factor in the desire for Amazon Prime Now being able to deliver these goods within two hours then there is undoubted synergy in metropolitan areas. The ability to collect Amazon product at store is another current factor that helps synergies. Yet this does not seem to be a small step, the largest acquisition Amazon has ever made is not just for an improved parcel distribution and immediate delivery solution. Something bigger is at play, despite what its PR would tell us.
Is it likely that Jeff Bezos is genuinely interested in playing traditional shops? Absolutely not. His motivation for his various business strands are about the use of the internet as facilitator. The development of a 'Robo-store' in Seattle is more akin to his vision of the future, where stores are warehouses for the provision of goods to the community that purchase without any interaction to store colleagues.
Speculation perhaps, as this store is currently still in development, yet do not be surprised if trials of this concept roll out to a recently acquired Whole Foods. I think the long term spells a real sea change in retail due to the way Bezos sees retail consumption.
Retail has been expecting a game changer since the internet appeared and yet we still see adoption of online grocery shopping stalling around 15%. With this acquisition, the way we shop as a result of the internet could change; going in a store, scanning a pass (or being facially recognised), selecting goods, putting them in your bag and walking out, being charged via your amazon account is a game changer.
No matter that you did not want to shop online, you didn’t. It was just that your shopping was facilitated by it, made easier by it, made swifter by it, all the things we were promised about the internet that never really materialised.
It would point to a real reduction in store staff and therefore a real cost reduction for stores, making the less-profitable, profitable.
There is a long way to go before this happens, but we may just have seen the start of a new retail revolution taking place.
Phil Dorrel is the managing partner of Retail Remedy