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Amazon And Whole Foods: Amazon Joins The Ranks Of Unified Commerce Retailers

  • Written by  Gary Sankary, Esri

0aaGary Sankary Esri 1Retail stories don’t always make the national news, especially outside of the holiday season. Amazon’s purchase of Whole Foods however is a story that’s been impossible to miss. While this move has been anticipated for a long time, it’s such a big deal that those of us in the retail space can’t stop talking about it. The news is this: Amazon has joined the ranks of true Unified Commerce retailers and is now competing on the same playing field as the rest of America’s largest retail companies. What will the impact be on the retail market and how will best-in-class retailers compete?

For Amazon itself, this means some big changes. They’ll have to operate under a new expense structure that will fundamentally change how they can price and market goods to consumers, even if only through this new channel. They must worry about local promotions, local pricing strategies, localized assortment, and all the unique capabilities that come with staffing and managing a chain of brick-and-mortar stores. Amazon has proven themselves to be very adept at change. For those of us who cover retail closely, it’s going to be very interesting to see how they adapt and how the market reacts to this new environment.

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No one will be watching this development more closely than the grocers and food retailers who now find themselves competing with Amazon in a whole new way. Even before the Amazon acquisition, the market has been filled with doom and gloom stories about the so-called “retail apocalypse”. I can’t stress enough that reports of the demise of brick-and-mortar retail are, as Mark Twain once said after reading his own obituary, “greatly exaggerated”. Greg Buzek, principal at IHL Services, a leading retail supply chain consultancy, has even gone so far as to label these reactions “fake news.”

And yet, there is no argument that retail is in disruption. Disruption, however, is not an apocalypse. Creative destruction is a natural process in business evolution, and retail has been through it many times in the past 150 years. Companies that innovate, anticipate and manage change are the ones that survive and thrive. Companies that have difficulty recognizing threats or adapting to changing business models, do not.

The “disruption” of a Whole Foods acquisition gives Amazon the potential to move their products and services even closer to their very best customers. I’d be willing to bet that the overlap between Amazon Prime subscribers and Whole Foods’ best customers is very high. This move gives Amazon a new channel to reach these customers with products they already know and a brand they respect.

So how do best-in-class companies successfully compete in this new environment?

  • Understand the core value that they deliver to their customers.

  • Be relevant and engaging with their customers.

A location strategy — the notation of understanding why things happen where they do — can help develop and execute customer-centric strategies that engage customers and drive relevancy in retail. Powered by GIS technology, this approach enables retailers of all types to glean powerful insights, keep pace with market disruption and compete in an era of unified commerce retail. Specifically, it can help them:

1. Understand Customers

A fundamental principle in retail is that you cannot be relevant or engaging with people you don’t know or don’t understand. When it comes to customers, retailers must know who they are, what they like, what they need and where they are. Location intelligence tools can help retailers research, understand and find their best customers.

2. Manage Data, Lots of Data

One thing geography does best is bring together disparate data for analysis. A location, whether coordinates, an address, a ZIP Code or something bigger, provides a common attribute to data. An attribute can in turn be used to create unstructured joins of that data that unlock new insights. For example, if I know where my stores are, how my stores perform, where my customers live, where they shop and where the competition is, I can start to understand how opening or closing a store in a market will impact my enterprise.

Engage Customers

Customers reward retailers that provide value-added services and engage given their repeat business. Amazon has built a reputation of providing its customers with incredible services and great value. Any retailer can do the same by developing and/or extending capabilities that give its customers great experiences. This is precisely where GIS excels as it enables retailers to light-up these capabilities quickly, using their existing data, and in many cases, using their existing infrastructure. Some of these capabilities include:

  • In-Store, Location-Centric Applications: Retailers can create interactive applications that are contextual based on where a customer is standing inside a store. This capability could be the gold standard for unified commerce engagement! The execution can be anything from product maps, access to product information while they’re looking at the product, or personalized offers and extended assortments to influence purchases and add value.

  • Extended Aisle and Product Tracking: One of the most persistent causes of customer dissatisfaction in retail are out-of-stocks or the inability to find items in a store that a consumer expects to be available. In the unified commerce model, customers have access to a retailer’s entire enterprise assortment and inventory. Providing customers with the ability to find the products they want, purchase, receive and, if needed, return them anywhere does more to present a single branded experience for customers than almost any other capability. Maps are a universally accessible medium to provide people with answers about where things are; shipping options and level-of-service commitment would be impossible without them.

  • Value-Added Goods and Services: Home delivery remains one of the single most important differentiators in grocery. Enabling home delivery continues to be a difficult capability for grocers, especially smaller ones. It’s difficult to scale and quickly becomes expensive for the retailer to execute. A location strategy can help businesses optimize deliveries, route and manage moving assets like delivery trucks, and monitor schedules and supply chain service levels. This level of detail also ensures grocers can get out in front of a problem if something isn’t going quite right, such as a delivery delay.  

At the end of the day, in a disrupted marketplace, there will be many companies that thrive and grow. Those that are nimble, can manage and react to change while still holding true to their value proposition, have the best opportunity to excel in this new environment. Amazon’s entry into the physical grocery market might terrify other grocers, but smart retailers will weather this latest disruption, arm themselves with the right tools to embrace change and ensure they’re ready for the next big thing.


 

Gary Sankary is Esri’s Retail Industry Manager. He joined Esri in 2014 after a 25-year merchandising career in Tier One retail. He has been directly involved in developing and implementing initiatives to develop and extend retailers' core capabilities to digital channels.

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