When Amazon.com announced plans to acquire Whole Foods in mid-June, the news caused a huge stir. Airwaves and water cooler conversations were overrun with speculation about what it all meant and what could possibly be next. And with good reason. The move was both brilliant and game changing.
What better way to grow your position in the $600 billion grocery business?
Pay $13.7 billion for one of the leading premium players and accelerate your combined 2 percent share of market in one fell swoop
Win at all costs with a breakeven retail pricing strategy that prevents even the strongest rivals -- from Walmart and Target to Best Buy and Kroger -- from gaining a foothold with the consumer
Create an order fulfillment with 365 brick & mortar stores across the country and expand the assortment of options to include generic & premium for all price and preference options
Leverage 52 percent Amazon Prime penetration to capture market share fast with free shipping enticement
Capitalize on algorithm technology and frictionless ordering convenience through Amazon Alexa and Echo to further market dominance
Offer discounted products to drive adoption, usage and dependency through Alexa
Allow brilliant algorithms to recommend products to the consumer that are good for Amazon, causing brands to lose “voice” through Amazon-driven purchasing behavior and preference
And that’s just the tip of the iceberg. Frictionless convenience means consumers will soon buy everything here. It remains to be seen, but the writing is on the wall. Amazon has added $64 billion since 2010 alone and today accounts for 20 percent of all online retail sales. Clearly the epic e-tailer will stop at nothing to win the hearts, minds and wallets of the purchasing consumer.
The word that comes to my mind over and over is WOW. It may sound crazy, but I love this stuff. Jeff Bezos has us all on the edge of our seats fascinated by the business strategy and behind the scenes wheeling-and-dealing that goes on to create the retail disruption that was barely a twinkle in the eye just a decade ago.
At Jabil Packaging Solutions, we were among the many rushing to examine the impacts of such a powerful move – one that would not only turn the world of our Food & Beverage customers upside down, but also require a 360-degree review in the way we think about our own business. Here are a few thoughts that bear consideration for us all:
Increased Competition: Brands will face unprecedented competition from private labels and locally sourced options. And, premium brands that used to command higher prices will no longer have the edge as algorithms take away their “voice.” In the face of this competition, we believe innovation will be ever more critical to ensure market share is maintained in the face of generic and private label competition. That means “smart” packages that deliver information (spoilage, expiry, etc.) and auto-replenishment capability to give brands back their voice to the consumer.
Partnership: Until direct-to-consumer digital channels can be devised - brands must recognize that partnership is critical. While Amazon may seem like the shark in the water today – swimming with it until alternative channels can be devised is table stakes for staying in the game.
Disruptive Technology & Marketing Insight: Amazon will have unprecedented data on when, how and why consumers buy. They will leverage discounts, coupled with algorithms and Alexa/Echo to drive unbeatable convenience/further consumer preference dominance. Likewise, brands lose their voice as Amazon drives purchasing behavior and preferences. Brands must challenge the data disruption from Amazon, leveraging smart and consumer devices to gather new and different data. And, they should seriously consider device-to-consumable options to drive convenience and loyalty as well as repeat, frictionless purchases. Further, innovative packaging has not lost its power to drive desire and product purchase behavior as choices become more and more competitive.
Less is More: Consumers will buy more frequently and less in one shot – and they will care about the efficacy of what they are buying. We believe this is an opportunity for brands to set themselves apart with products and packages that are “good and good for you” from a sustainability perspective, and we encourage smart choices as it relates to sustainable and recyclable packaging solutions as an important value statement.
Freshness without Coldness: Brands will require packaging that minimizes the cold chain requirement, allowing shipment through the mail and on trucks without refrigeration. We believe this opens the door wide for a barrier packaging technology revolution – if you’re not looking at it, you should be!
Direct to Consumer Launches: Launching products through Amazon diminishes the requirement for extensive testing, advertising, etc. Faster or cheaper options mean brands must create more second moment-of-truth packaging impacts. We believe speed-to-market will become even more critical as instant gratification becomes the norm for buyers in all walks of life – but especially millennials. As such, Jabil recommends that brands seriously explore faster NPI and smaller, faster launch strategies to achieve that customized, constantly innovating flair consumers are looking for.
Food for thought. Let’s keep a dialog going to support collective success in the face of disruptive change. It’s Amazon this month, but it’s just a matter of time before the universe reveals who’s next!