Amazon's supermarket sweep
Amazon is making inroads to challenging the supermarkets at their own game with the takeover of Whole Foods, as it looks to transform the supermarket sector with its corporate might.
Capitalism, once again, is playing its magic: old incumbents that thought they were protected by large barriers to entry – the need to buy and develop expensive sites in the right places – are being displaced by new players as the economics shift.
Hybrid model ahead
One of the intriguing elements of Amazon’s move, of course, is how digital is merging with bricks and mortar. The original online model – a pure digital set-up – is turning into a hybrid approach.
Again, this is for good reason: people want to be able to shop in more than one way, and it’s implausible to think that stores will ever disappear completely. The success of companies like John Lewis in recent years has been built on a multichannel approach and concepts such as click and collect. At the same time, discount retailers that almost entirely shun the web are also thriving: Lidl has just entered the US market, for example.
Needless to say, Amazon will now be able to use many Whole Foods sites as delivery bases, not just shops, as well as pick-up sites for all of its offerings, not merely fresh food. In the UK, the move may actually help Morrisons, Amazon’s online grocery partner, at least in the short term: the US giant may feel that it doesn’t need to buy anybody to grow.
So where will all of this end? It may be that in a decade’s time, as a by-product of Amazon’s triumph, retail and distribution will become an ultra low margin, almost commoditised part of the economic system. If so, the power could return to producers and brands.
In the meantime, however, the story is much simpler: Amazon’s rivals must adapt or die.