What’s Next For Amazon?

November 2017

Following Amazon’s March acquisition of Whole Foods, the e-commerce giant is now firmly straddling both the physical and online worlds of shopping. Since then, we’ve seen Whole Foods stock its shelves with Alexa and competitor start-ups shed employees and profits.

Amazon’s move to enter grocery is not a shocking one. While the website excels in most other areas of retail, grocery has always been a struggle. For a while there were talks and renderings of Amazon Go, the grocery store of the future. Amazon Fresh is a go-to service for millennials and people in urban areas, but that service doesn’t quite reach middle America like the trusty grocery store.

Consumers crave the “touch and feel” experience of a grocery store, something neither of those delivery services can provide. This is not only reflected in the food-buying experience as it relates to grocery, but also in the growing popularity of meal kits. Now with the network and brand recognition of Whole Foods at the company’s fingertips, an expanse of grocery possibility lies ahead for Amazon.

Last July, Amazon signaled its interest in the grocery space by applying for a trademark to provide customers “prepared food kits.” Amazon already carries meal kits, including Marley Spoon, and definitely has the delivery capabilities. Subsequently, mere months after Blue Apron’s IPO, the company announced it would be laying off hundreds of employees flustered by competition from Amazon and supply chain issues. The addition of Whole Foods to Amazon’s arsenal expands its supply chain, increases consumer touch points, upgrades its reputation by offering local, organic fruit and vegetables and should theoretically add to the company’s meal kit successes.

What’s ahead for the company? According to a presentation at the 2017 Texas A&M Retailing Summit by Sri Rajagopalan, VP of eCommerce at Johnson & Johnson, Amazon’s revenue increased from $355.9 billion at the end of 2016 to $475 billion through Q3 2017. Many attribute its revenue boost to its acquisition of Whole Foods, and see no end in sight to its growth. By the end of 2020, Amazon is planning to increase the number of distribution centers from 151 to 418 and growing revenue as well.

Rajagopalan recommends going with the current rather than trying to fight against it, “Don’t try to compete with Amazon on the basis of price. Embrace the [e-commerce] change and adopt to the now.” Companies can persuade consumers to move toward online shopping by touting its advantages; the ability to read customer reviews, research and find exact products and compare prices across a huge selection of outlets are just a few of its benefits.

In addition, Amazon will surely make use of its vast stores of consumer data. The presentation by George Murray, Chief Retail Insights & Strategy Officer for Signet Jewelers, noted that advanced data analytics drives successful organizational strategy—and Amazon has lots of it. Following a customer’s journey via data allows companies to identify patterns and predict behavior. Amazon is able to make use of its huge selection of products to provide best in class customer service, something all retail brands strive for.

As retailers work toward improving omnichannel and easing the divide between brick-and-mortar and e-commerce, Amazon will continue to be one to watch. How the company will channel its efforts and manage its explosive growth may direct the future of the retail grocery industry.

For more information on Amazon and the future of retail, contact Ted Vaughan at [email protected]. And, be sure to keep up with the latest retail news by subscribing to our blog on the Consumer Business Compass homepage here, and follow us on Twitter at @BDOConsumer.