Category Archives: retail

The future of Whole Foods: Why Amazon’s acquisition makes so much sense

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Amazon’s acquisition of Whole Foods makes sense. I enjoyed deconstructing why below.

1. Amazon will leverage their expertise in warehouse automation and delivery to eliminate the need for the ever popular “Task Rabbiter” shoppers who assemble pickup and delivery orders in the store. Visit a Whole Foods today, and you will see many contractor

In-store shoppers are extremely common and have been asked to stop wearing Instacart t-shirts so as to not change the feel of the shopping experience for other customers.

workers shopping for delivery-platform customers such as Instacart and Whole Foods own delivery service. These shoppers are extremely common in Whole Foods, and they have been ever since Instacart started doing deliveries from their stores. While they no longer wear t-shirts that indicate the platform for whom they are working (this isn’t an accident), these shoppers are pretty easy to pick out from amongst the crowd. They wear headphones, stare intensely at their phones as if reading a off a list, fill grocery carts with large orders, talk with store clerks as if they are colleagues, and move briskly from one item to the next. They become efficient shoppers, knowing where everything in the store is located and they have their own checkout lines in the store so that they can complete as many orders as fast as possible. But watching these shoppers go around and pick items to assemble orders, you can’t help but see this labor force as very replaceable by warehouse robots and machinery that Amazon already uses to assemble orders from large warehouses with thousands of SKUs.  Now that Whole Foods offers its own delivery service (delivery.wholefoodsmarket.com), expect Amazon to put its mighty marketing and operations competencies behind the delivery service to not only make them less dependent on Instacart going forward but to also move all assembly of delivery orders to a warehouse environment so as to improve the in-store shopping experience for  customers.

 

2. Overlapping customer bases enables better customer experiences for the Amazon and Whole Foods customer of the future.

Whole Foods stores are located in affluent neighborhoods of metropolitan areas.

Like Whole Foods stores, Amazon customers are located in more affluent neighborhoods in metropolitan areas. Walmart’s core customer lives in rural areas. Whole Foods and Amazon customers value convenience and a higher-quality experience over rock bottom prices; and they are willing to pay a higher price for it. Both Amazon and Whole Foods customers value pleasant and efficient shopping experiences that save them time. Amazon’s entrance into various product categories means that customers can efficiently procure many services and goods from a  single entity. Like Amazon customers, Whole Foods customers are accustomed to the convenience of high-quality, curated stores and SKU availability. As a result, many Amazon customers are already Whole Foods customers, so this acquisition will mean that Amazon can gain greater share of these existing customer’s wallet. With greater data collection and insight into each individual customer and their shopping history, Amazon will leverage this data to make better recommendations and inventory management decisions, both of which will also potentially lead to increasing total expenditures by each customer.

 

 

3. Massive cross-marketing opportunity to create new Amazon customers. Within the Whole Foods customer base, there a few segments who may not be Amazon customers yet. Imagine the older, not-so-tech-savvy segment of Whole Foods customers who shop there purely for the higher quality food and shopping experience. These customers are the type of people who don’t do a lot of e-commerce but regularly procure their food from Whole Foods because they have grown to trust the Whole Foods brand. Amazon will be able to leverage this brand equity, and cross market to these segments to attract new Amazon.com and Prime customers. And once the customer is brought into the fly wheel, there is a high likelihood that the customer will become a consumer of Amazon’s other stores and products, such as Amazon Video, Audible.com, etc.

 

 

 

The firm as a great listener… Do businesses underutilize reverse channels?

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In marketing, we frequently discuss distribution channels (how a manufacturer gets something to a customer to buy) but I rarely hear conversations about  reverse channels, which we can think of as the way a customer gets something to the manufacturer.

As marketers and business leaders, I think we are missing out on a large opportunity to: engage with customers, build brand equity, hear the customer voice, get ahead of trends, and create more sales opportunities through greater number of customer touch points.

One straightforward way of using a reverse channel is to recycle products when the customer decides they want to replace it.  DELL does this with their computer/electronics recycling program, and I think it is great.  Not only does it encourage environmentally conscious customers to buy new DELL products, but it creates brand equity with these customers who are rightly led to believe that DELL cares about the environment.  But this isn’t the only way in which a reverse channel be used.

Reverse Channels Facilitate Dialogue

In this information age that we are living in, channels also serve as the means for information gathering and sharing.  In the same way a manufacturer’s forward channels serve as a means for educating customers about product information, a reverse channel can serve as the means for customers sharing feedback about the products with the manufacturers, for example.  Customer service/support is an example of a reverse channel that almost every company has, but I still think marketers are under utilizing reverse channels.

Consumers use Twitter, Facebook, and other social media tools to have a dialogue with each other, and brands use these these tools to talk to consumers, but I feel like the digital-marketing conversations I hear these days are focused on how brands can effectively communicate a message to their target audience.   I propose that marketers would be wise to also focus on the reverse channel, both physical and digital, so as to facilitate a two-way conversation.

Reverse Channels Add Value Pre and Post -sale

Reverse channels can serve as the means for sharing product feedback with the manufacturer after they have purchased and used the product, but couldn’t customers use a reverse channel to share ideas for new products that they want but that are not currently offered for sale?   In a sense, a reverse channel could be used to augment product development functions.

The Firm As a Great Listener; Not Just Great Speaker

To me, what this all suggests that smart firms will try to be great listeners as well as great story tellers; and we should think about how we can create reverse channels that provide the means for us to efficiently hear the customer voice.

Facilitating Customer-to-Customer Dialogue

Lastly, eBay goes a step further by enabling its customers to speak with one another.  eBay does not serve as an intermediary between these conversations, which act as free advertising and promotion.  To extract further value from this kind of customer-to-customer communication channel, I think it makes sense for the brand to strategically design the communication channel so that it can efficiently harness and mine this information.  The brand could perhaps monitor customer sentiment and get ahead of market trends.

Why I am short Walmart

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As someone who feels strongly about a good retail experience and that retailers can offer a lot of value to consumers, I realized that I really can’t stand Walmart.  I find the business uninteresting and lacking in providing a value-add retail experience for consumers.

From an industry perspective, I worry and hate the idea that Walmart is putting other, perhaps smaller, retailers who add value by educating consumers and curating product inventory, out of business.  In my mind, the retailer serves a wonderful primary function of being a trusted solution provider.  This involves curating product inventory, educating the consumer on how to use products to derive desired solutions, and lastly, providing customer service when the product maybe doesn’t solve the problem.    Does Walmart do this?  Overall, I would argue, no.   Walmart’s business model and strategy is instead focused on everyday low prices and being a one-stop shop for almost everything.  Eye glasses, auto-repair, groceries, televisions, etc.   How can a retailer specialize in all these different product categories?  Answer: They can’t.  And service suffers as a result.  Essentially Walmart is the brick-and-mortar version of Amazon.com, but Amazon.com probably adds more value because they can at least recommend things you might be interested in buying.

customer service is terrible   Don’t blame Walmart employees for this either.  It isn’t their fault.  The Walmart business model doesn’t focus on the potential value that its employees could add to the consumer’s shopping experience.  Walmart doesn’t care that non of its employees are not experts in any product category, and they don’t care about employee turnover, as a result.   How can we expect this employees to be excited and informed about the products being sold in the store?

penny wise, dollar stupid    When people go to Walmart, they go there expecting to save money.  Instead, they end up buying more than they had originally planned and spending more money than they would have likely spent had they gone to a specialty retailer for the specific item that they needed originally.

no curation value-add    Walmart’s idea of curating its product inventory is looking at suppliers who can supply the large enough volume at low-enough prices.  Where does fit of product features and consumer preferences of different market segments get factored into store buying/merchandising decisions?    Am I finding anything unique in the Walmart store located in my hometown versus another Walmart store location?  Am I finding anything unique at all in the Walmart?  I would argue no.  The shopping experience is void of any taste and style…it is a colorless experience, from my point of view.   I prefer spending my money with retailers who are passionate about their products and business, and who help tell me what I should want.   Walmart presumes its customers already know what it wants, and it just provides it a low price.  Boring.

boring business model    Congratulations Walmart, you’ve become an expert at supply chain and economies of scale.   This business model existed and was well utilized in the 1900s.  How exciting it must be to be all about size and volume, and that’s it.