Amazon and the Changing Grocery Game

So called “traditional” grocery players have long operated in a competitive landscape with a fairly straightforward structure. Like a chess game, there were a set number of players in a market that made similar types of moves and counter moves, all designed to capture the shopper’s attention and ultimately, their dollars and loyalty. But the rules of the grocery game are changing faster every day. In fact, the rules aren’t just changing, the whole game is.

The key player making the most game-changing moves is undisputedly Amazon. And while Jet will also be one to watch, Amazon has positioned itself as a committed innovator, creating profound disruption in every sector it enters. Its moves toward disrupting the current grocery model continue to pick up speed. Some of the most recent examples include the Dash button tests, Amazon Fresh, Pantry Prime service expansion, and now the rumors it is planning an actual brick and mortar drive-thru grocery location in none other than Silicon Valley. It should be noted that while Amazon commands only a small fraction of grocery sales today, it took under 20 years to virtually decimate the entire retail books category, and that was before it’s fully formed prime membership, now reportedly between 30-40 million strong in the U.S. alone.

So what should more “traditional” grocery players do in the face of the growing competitive threat of Amazon (and perhaps also, Jet)? The answers won’t be simple or easy. They will require creativity, flexibility, and a stomach for risk and failure. And while moves will be somewhat different for every player, there are a few strategies worth considering:

  • Think more like Amazon — Don’t just sell groceries, make it easier for shoppers to buy your groceries
  • Identify friction points – and work to minimize or remove them (hint: it’s not always price)
    • The shopping journey is connected and evolving with new technologies – test, learn and leverage them. Your shoppers are already going there, especially the coveted millennial demo
    • Do Loyalty differently. Grocery partnerships (a la Starbucks loyalty card and Lyft) that create added value beyond the store could be key opportunity worth exploring.
  • Prioritize offering relevant, inspiring shopper solutions — individual items are almost always part of a larger mission
    • Holistic solutions can make an assortment seem more curated, enhance Shoppability and convenience, and oh yeah, build baskets
  • The live shopping experience is a strong POD for traditional grocery players (for now) – capitalize on it by offering sensory experiences and inspiration. Make the shopping trip FUN.
    • A recent Nielsen survey found a majority of global respondents actually do find grocery shopping “enjoyable and engaging”. From food halls to farmers markets, shoppers have proved very receptive to more experiential food shopping.
    • The fresh perimeter is an ace in the hole – deliver high quality, localized, artisanal and on-trend items – make it an engaging experience then link perimeter to center-of-store through compelling shopper solutions. There is no doubt the grocery game is changing. Regardless of whether it’s ultimately successful, Amazon is on track to be a major disruptive force in the industry, just as it has in every other industry it has entered. The traditional grocery players who are willing to change how they play it while maintaining an unyielding commitment to the shopper will be building a new set of competitive moves for the long haul.

 

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