This is not rocket science. Amazon is no longer the über low price provider. I don’t expect Whole Foods to become that way, either. But what Amazon is really, really good at is being in stock. Grocers are going to have to step it up all the way around. So are pet food companies.

Wow — if that picture doesn’t say it all about co-opting a brand. “Farm Fresh” for a product built halfway across the world in a factory. I think the jury is out on just how successful this marriage will be and what it shows grocers. National grocers have been aware of all of these things and have tried a range of changes from scan-as-you-go, to self-checkout to adding beer in their cafes. Becoming more like Amazon doesn’t help grocers beat them at their own game. Being better at their game using their reams of data is Amazon’s unique selling proposition.

Most of the spotlight on the Amazon/Whole Foods acquisition has focused on price cutting, but these were necessary to make Whole Foods more competitive. Look for more cuts to come to help Whole Foods overcome its “Whole Paycheck” brand reputation.

But longtime observers of Amazon know that the keys to its success are its assortments and its mastery of logistics. If I were a competitor, this is where I would focus my efforts before being run over by the Amazon juggernaut. Improving the efficiency of the shopping experience — whether through faster checkout, better execution of home delivery or higher in-stock rates — will go a long way toward dealing with the looming challenge.

Amazon is going to be the source of the retail equivalent of the “3G effect” for CPG manufacturers (3G Capital’s penchant for zero-based budgeting and drastic cost reductions when they acquire a company). But for retailers it won’t be so much “costs” in the traditional sense of people, departments and spending. Instead it is going to be inefficiencies and merchandising sacred cows. Maintaining the traditional checkout process in the name of “reducing shrink” and “impulse sales” is a good example — the equivalent of putting the milk in the back of the store to force shoppers on a fill-in trip to walk past the produce, bakery and deli in hopes of an impulse purchase there. Retailing will have to transition from a focus on serving consumers effectively to a focus on serving them efficiently.

This will be mainly a defensive strategy. Everything Amazon does in grocery needs to be duplicated at traditional grocers. And they need to encourage current shoppers to use these services BEFORE they try Amazon. Will they do this? Nah.

The U.S. grocery market is entering challenging times. Amazon’s part of this, but not the only ingredient. So too are the expansion of deep discounters, Walmart’s resurgence, disloyalty to brands, the growth of online and subscription ordering, and changing shopping habits. The sum of these things equals margin compression.

Grocers need to become both more efficient and better at securing shopper loyalty. It is not easy to square this circle, though the list provides a start point. To it, I would add: very clear price architectures and tiered ranges; flexible format stores; better use of customer data for personalization; possible consolidation through acquisition and the development of deep, dedicated e-commerce sites for specialist products like wine or pet food.

The U.K., which is a much more challenging grocery market than the U.S., provides both warnings and inspiration for U.S. grocers.

I think there are two ways to look at this. First, many consumers have never shopped Whole Foods and they never will, primarily because we still have many other choices. The possibility that the Amazon purchase of Whole Foods will be the end of grocery as we know it is not something I think will happen. However, the article makes good points regardless of the Amazon purchase. Because of the publicity, the Whole Foods takeover will and should make other grocers take notice. For example, the checkout lines today are the worst and after spending considerable time filling up the basket, the last thing the customer wants to do is waste more time on long lines. The simplest solution is to add more registers but, instead, we added self-checkout. Conceptually this is an excellent idea, but there have been many problems with the automated checkout machines not working properly. The area is often too small and there usually aren’t enough self-checkout registers available. Out-of-stock, I agree, is another issue grocers need to pay better attention… Read more »

I’m sure I’m missing something in this supposed food war. When did buying food become so complicated?

Yes I agree there are far too many SKUs and that’s driven by trying to accommodate any and all customer desires. So the choices need to be simplified based on what is actually being bought. And yes, a store needs to have the inventory to meet demands. Checkout needs to be reasonably expedient. But for goodness’ sake, hasn’t it been that way since the beginning of time?

Sure a few prices at Whole Foods went down — a dollar here, 79 cents there. But it wasn’t worth the drive. Let Whole Foods import the high-altitude Himalayan llama cheese and when I want some I’ll go there.

What used to be an eagerly anticipated family adventure is now filled with angst, demands hours of price checking, guarding your family against chemical ingestion, surrendering your privacy to Big Data and on and on.

Nothing is more fundamental than air, water and food and we’re working hard to mess up all three.

I actually think that the only challenge grocers face is the ability to change faster. Right now they’re all built for business with Fortune 500 companies and optimized for logistics. Grocers (and retailers in general) need to cut processing time and get faster at recognizing consumer insights so they can move faster.

All the tactics that Amazon is employing — that’s all they are, tactics — are insight driven. NOT sales dollars and margin numbers alone, but actual consumer and psychographic data. The article covers some of the things consumers have been pining for — faster check out, or the ability to order online and pickup in store.

Retailers need to put consumers at the center of their decision tree and innovate!

I believe the Amazon/Whole Foods relationship will finally force traditional retailers to make necessary changes to stay competitive. Brick-and-mortar food retailers have struggled to compete with the noted online advantages of Amazon. However, this resulted in a bit of complacency since Amazon did not have a significant physical retail presence in the market until the Whole Foods acquisition. Now that Amazon has become a viable brick-and-mortar competitor, the focus of traditional retailers needs to be “think like a brand and act like a retailer.” The elements noted in the article are a great place to start. However, traditional retailers needs to take a complete inventory of their strengths and weaknesses vis a vis the competitive array and determine how they will positively differentiate their brand, namely banner. Some ways come to mind. Become the equivalent of the neighborhood store of years ago by working with schools, churches, local businesses, etc. Emphasize local products from farm fresh to other supermarket products sourced locally. In essence; out-fresh, out-local and out-service other markets and the brand will become… Read more »

What, nothing about the staff? The human factor has to be the point of differentiation for traditional grocers. The technology at Amazon and other e-commerce retailers hasn’t gotten to the point where their bots are as good as a human can be for a full range of services (yet!). Until they can empathize with a mother having a bad day with her kids, help a father get all the things on his list without meandering throughout the store and help carry out orders to the car, e-commerce sites are the one playing catch-up.

There is nothing on this list that does not pertain to operating effectively in the marketplace. This what retailers need to do to compete well it is not caused by the Amazon/Whole Foods relationship.

The obvious key is to make shoppers want to come to the grocery store. Ideas: Increase sampling; have live music on weekends (two- or three-piece band will do); have more events (Giant Eagle’s Market District has Food and Wine Fridays that make grocery shopping fun); have guest chefs for cooking demos; open a restaurant and/or bar as part of the supermarket.

Shoppers can’t enjoy any of those things while ordering groceries online. Are these events an investment for grocers? Yes, but what’s the alternative? Business as usual?

Be. In. Stock.

There’s nothing more fundamental for digital or physical retailers. On-Shelf Availability has been the great white whale for the supermarket industry for decades and complacency about poor performance has left the door wide open for innovative competitors. Luckily for the established players, store level inventory optimization is not that easily realized. We can expect Amazon to invent a solution for Whole Foods, but that leaves only a narrow window for the rest to get ahead of the curve.

Traditional grocers are going to have to break tradition if they expect to compete with Amazon — or any competition for that matter. First and foremost, the retailer must work to remove all friction tied to the customer experience. Checkout lines (the first on the list), is a perfect example of potential friction. Remove that, and anything else that gets in the way of a smooth, clean, fast, easy and convenient experience. Think “low or no friction.”

Other than redefining what kinds of crops grow in a farm (who knew Echo devices could be fresh off the farm … maybe you just have to ask Alexa to plant the seeds!) this is ultimately about one thing — convenience. Amazon has built their brand on consumer convenience (not always due to price) by mastering the idea of being customer-first to the extreme. Whether it’s due to a fast, pain-free checkout experience, time-saving delivery services, or just ensuring the product you want is in stock — grocery retailers need to realize the time has come to put their customers first and optimize the business around serving those needs. This is actually something independent grocers and small chains understand far better than the big brands and raising an interesting point left out in the article — store associates, aka the human factor. This is where smaller grocers since and larger grocers need to take note. Amazon Whole Foods will force them to differentiate sooner rather than later and at a much faster pace. As pointed… Read more »