Amazon once again drew the attention of the business world on Friday with the purchase of Whole Foods for $13.7B. While people have suspected that Amazon would like to expand into physical stores, many — such as myself — thought Amazon would take that step with the creation of its own stores, instead of acquiring a grocery giant.
Related: Five trending retail topics from IRCE 2017.
As I discuss in the video below, the move has a large impact on the retail/CPG industry.
Let’s also take a deeper look at three key areas of impact from the news, and what it means for retailers moving forward.
Speed of Delivery
The speed at which customers receive their products is a key factor in the purchase decision, especially for millennial shoppers. Grocery was one of the few areas where Amazon simply couldn’t compete with traditional stores, as the company still had no answer for the customer that needed the one or two urgent items. Not only does Amazon enter this area, but it will also be able to use its shipping expertise to make improvements to the speed of deliver of groceries, while competing with other grocery delivery innovators like Blue Apron and Hello Fresh.
Value of Brick & Mortar Stores
One of the biggest takeaways from Amazon’s purchase is that physical stores aren’t going to die anytime soon.
One of the biggest takeaways from Amazon’s decision is that physical stores aren’t going to die anytime soon. Amazon has proven that brick & mortar locations can serve as distribution outlets, and I would guess Amazon is not done using physical stores to distribute its products.
How Can CPGs Compete in Advertising?
What will be fascinating to watch with this move over the coming months and years is what trends Amazon will spark with other CPG brands. CPGs have long tried to mine for customer data, and Amazon will now own more insights on its customers than anyone. It will also be interesting to see how CPGs use marketing dollars. Will some of the dollars typically used for shelf space and in-store displays now be spent on paying for space on Amazon?
So, What Does This Mean?
The real impact on Amazon’s move may not show itself until we see how the brand utilizes its new Whole Foods brand, but one thing that seems certain is the direct-to-consumer competition is about to get more intense. It’s also likely that we see a revolution in how food is packaged, sold, and delivered — and you may be surprised how quickly this happens. Finally, Amazon is going to extend one of its biggest strengths, which is its ability to use data to target customers in new and exciting ways.
You can bet there will be much more to talk about as we learn more about Amazon’s strategies regarding Whole Foods. Check back with us on the blog and on social as we continue to track this deal and the ensuing effects.