Is Amazon-Whole Foods the killer application the grocery industry has been bracing for?
The merger between the online giant and the organic and natural foods pioneer could change how consumers shop for groceries
Anton Xavier is the co-founder and executive vice president of strategy for Label Insight, an organization helping consumers understand what's in the products they use and consume.
The grocery industry has been somewhat resistant to the digital disruption that has fundamentally changed so many other industries over the last 20 years. Going back to 2001 when Webvan famously filed for bankruptcy —while operating in 26 cities and after raising almost $400 million in venture capital investment — the grocery industry has repeatedly proven to be a bastion for traditional brick-and-mortar retail.
Despite being by far the largest market by sales at over $600 billion in 2015, the food and beverage industry still remains relatively unaffected by e-commerce, which in 2015 was stagnant at less than 1% in the U.S. There are several inherent reasons for this, from logistical challenges of shipping products with short shelf lives, to preserving freshness, to a reluctance of consumers to buy fresh foods without being able to touch, smell and curate.
The killer application?
There are many reasons for the industry to sit up and pay attention to the Amazon-Whole Foods merger and much has been written about this already. Some have a perspective on how Whole Foods will be a dedicated customer that Amazon can leverage to build out a new operating system for grocery, which it will then sell to the rest of the industry. Others describe the acquisition from the context of the battle taking place between Amazon and Walmart.
While those perspectives are both important and fascinating to consider, it is also important to examine the consumer perspective. Is it possible we could finally see the game-changing killer application that the industry has be bracing for ever since those early days with Webvan?
One way this partnership will impact the consumer experience is that Whole Foods will bring its brand of trusted curation to the Amazon e-commerce platform, helping to break through consumer aversion to e-commerce grocery shopping. At the same time, Amazon will bring its brand of logistics to the Whole Foods experience, solving the perceived challenges with shipping of fresh produce and non-shelf-stable products.
The final result will combine these two strengths into a new killer experience that will engage consumers and stand the chance of accelerating e-commerce adoption. It’s now possible to imagine an experience where the trusted Whole Foods curation experience is replicated and augmented online, giving shoppers super powers to curate their own stores, creating personalized shops for a family, or even for an individual — think the Netflix of grocery curation — while at the same time leveraging the Amazon Prime delivery experience to ensure the convenience of on-demand delivery.
Personalization and product
Clearly, the big battle here is between Amazon and Walmart. Although each is addressing the challenge from two different perspectives, they are going head-to-head in an effort to accelerate and capture e-commerce adoption.
The rest of the industry is now on notice. As the third player in this battle, it will be largely served by Instacart.com, who will now, more than ever, be viewed as a partner to quickly and effectively drive the adoption of e-commerce. While many may have written off Instacart, it would be a mistake to discount the unique advantages this solution provides. With 160 different retail partners, it offers shoppers a wide range of choices and ensures they can always find what they want. Instacart has an engaging and constantly improving user experience, which is where the battle for the consumer will be fought.
Regardless of how one might interpret this development, it’s hard to ignore the fact that we’ve taken one giant leap into the future. The industry is close to a Netflix-for-grocery moment — the killer application that creates a sustainable market by gaining a critical mass of user engagement. Innovation around user experience and engagement will lead to a new level of personalization and rich, smart shopping experiences. And it will all be powered by data, and in particular granular product data.
Product data will evolve from being commoditized static content that is a basic requirement for doing business to being dynamic and personalized, unlocking powerful search and filtering capabilities. It is here where the industry must start to grow proficiency, by driving data-driven experiences not just online, but in-store, at the warehouse, and at headquarters. Those that do will remain competitive by discovering new ways to engage and serve their shoppers with information and knowledge that empowers better decision making. Those that don’t will struggle to hold on to their customers.
We’ve been bracing for a long time. The disruption is finally here.