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With the news that Whole Foods stockholders have okayed the Amazon deal, the pressure on Grocers ratchets up as they brace for Amazon’s entry into their market. Some are finding creative ways to retain and attract more shoppers.
Many grocers are tackling the Amazon challenge by reassessing their inventory based on sales and consumer behavior. and stocking a wider range of goods in order to retain and attract more shoppers. This is a good move.
I think one of the keys to the future of retail, besides consumer-centricity and responsiveness, is that brands have to distinguish themselves in some way. They have to offer unique products, services, or experiences to the consumer, and ones that the consumer values.
Some grocery retailers are doing by extending their offers beyond the grocery isle. USA Today reports on some of these tactics.
With retailers like Target branching out in to grocery, it seems natural for grocers themselves to extend into the non-grocery categories. And the profits outside of the grocery category are certainly attractive. According to USA Today:
Markups for grocery items are generally in the 12% to 23% range. By comparison, the profit margins can run 60% to 100% for apparel, 35% to 50% for consumer electronics, 40% to 65% for sporting goods and 35% to 55% for home improvement items.
With those kinds of margins, why stick to grocery?
Another way for grocers to differentiate themselves from Amazon and other retailers, is to offer locally sourced produce and products. These could be anything from bread and craft beer to apparel. Grocers embedded in the local community have a distinct advantage in terms of relationships and logistics in dealing with local suppliers.
I was delighted when I stopped at a Kroger store in Florida a few years ago, and discovered they carried a whole section on South African foods, including breakfast cereals, curries and candy. They had rows of old brands that I hadn’t seen in years. Stores can boost their service by tailoring their inventory to the local demographics and ethnic makeup.
“It wouldn’t surprise me that customers would be in the store eating but they would use an app to order what they want. When they are finished, [the store clerk] would deliver the groceries to them. It will be so easy because we’ll be able to predict a lot of the things you want.”
– Rodney McMullen, CEO, Kroger, on what shopping at Kroger will be like in 2025.
(Source: Wall Street Journal)
But there’s a lot more that grocers can do right now to regain a foothold, and grow their market share.
In a recent Inbound Logistics article, Bernard Goor, retail supply chain specialist with One Network, warns that retailers have to act now and decisively to respond to the Amazon threat:
Grocery retailers need to completely rethink their business model. Simply stated, their current mode of incremental innovation is not going to succeed against the disruptive innovations led by Amazon.
Goor goes on to make specific recommendations for grocers, steps they can take now to reduce costs and better serve their customers. Read the full article: