Amazon's one-Two Punch: Retail Marketing on the Ropes
Gary Hawkins, CART
Amazon, through its proposed acquisition of Whole Foods, is poised to surprise and delight shoppers in brick & mortar retail by helping them discover new products while relieving shoppers of the mundane burden of replenishment. Amazon’s one-two punch.
For the past decade Kroger has indisputably led the industry in its ability to collect and use customer data. The company’s ‘Customer First’ initiative, anchored by targeting relevant promotions to each customer household, has grown customer share-of-wallet, helping Kroger grow sales while reinvesting margin in lower prices and service.
As a Kroger shopper my household enjoys weekly emails calling out relevant ad items along with targeted offers and coupons on products we buy. And Kroger nails it, each product surfaced to us is one we regularly purchase. But here’s the rub: we’ve come to expect that relevancy. Receiving the weekly email is no longer exciting, it has become routine.
Kroger has perhaps been lulled into complacency in its personalization efforts as other traditional supermarket competitors are so far behind. But Kroger, let alone the majority of retailers who are clearly customer un-intelligent, are about to learn that providing savings on regularly purchased products is no longer enough as Amazon enters brick & mortar retailing.
Consider Amazon’s ability to cull through millions of products in realtime to present those most relevant to you when you visit Amazon’s site. Amazon is masterful in helping the shopper discover new products, and in doing so, grow the customer’s lifetime value. Now take that ability and extend it into a Whole Foods store, an environment tailor made for helping foodies ‘discover’ exciting new foods and related items. Receiving savings on the same mundane products purchased each week from Kroger is boring by comparison.
But there is more. While traditional supermarket retailers are still moving online or thinking about moving online, Amazon is positioned to use Dash buttons, its Alexa voice-based shopping assistant, and subscription services to relieve you of the weekly routine of replenishing consumables. Smart appliance makers have already integrated to Amazon’s automated Dash Replenishment Service; the washing machine automatically reordering detergent when it runs low. Amazon can extend that capability to your pantry and refrigerator, automating replenishment of regularly used products.
Put together automated replenishment with helping the shopper discover exciting new products and retail marketing enters a new paradigm; a world where even targeted offers on products regularly purchased is perceived as ho-hum. Marketing relevancy is now table stakes; product discovery and replenishment is the new tie-breaker. This is Amazon’s one-two punch that will have traditional retailers on the ropes.
Supermarket retailers are woefully unprepared for this looming battle as a majority of retailers do not capture customer identified purchase data, and even amongst those that do, their efforts are weak at best. Traditional retailers have little to no defense against this powerful one-two punch and Jeff Bezos must be salivating at the thought of leveling Amazon’s marketing machinery against the (by comparison) neanderthalian marketing of so many brick & mortar retailers.
And to those retailers scattered across the vast American landscape thinking they are safe because there is no Whole Foods store nearby: Location is no longer a competitive barrier. Amazon will repackage Whole Foods private label products to make them easier to ship (think snacks, cookies, etc.), making many Whole Foods products available to shoppers regardless of location.
It is ironic that Whole Foods earlier this year engaged with Dunnhumby to bring to the company the same customer focus that was so successful at Kroger. The approach used by data consultancies like Dunnhumby and similar providers is massively expensive, relying on dozens or even hundreds of data analysts. What’s more, the approach based on customer segments and aggregate scoring along with iterative processing was formed with the constraints of technology available a decade or more ago, not using today’s tools.
And think of the potential to link the Amazon shopper online to the transaction inside the store, something easily done by enabling customers to pay with their Prime account at checkout. Amazon’s big data marketers are probably drooling over the insights enabled by connecting purchases made online with purchases in the store and then leveraging those insights into growing customer lifetime value.
But there is more to Amazon’s success than marketing relevancy. Amazon understands the importance of the complete digital user experience, from suggesting products of interest to the shopper to personalized search, making relevancy and discovery pervasive across their user experience. Traditional retailers will be challenged to replicate this seamless, personalized experience across the disparate solutions used today to power websites, eCommerce, mobile apps, loyalty, and more.
There is a glimmer of hope for traditional retailers. New capabilities leveraging the latest tech - AI, machine learning, big data, and the cloud - are entering the market. Solutions like that provided by Birdzi give retailers the ability to stay continuously connected and engaged with shoppers through using hyper-personalization driven by vast knowledge of the individual shopper and realtime personalized search via the retailer’s website and app. Combined with the ability to extend that personalization into every digital channel including eCommerce through APIs and powerful white-label apps gives traditional retailers a fighting chance to blunt Amazon’s one-two punch by providing their own cohesive customer experience.
Solutions like this, combined with other capabilities entering the market such as AI powered promotion optimization by companies like Daisy Intelligence, robotics as a service for distribution centers and picking online orders, delivery robotics like Starship Technologies, along with AI powered bots like provided by BoodsKapper for customer service, can help traditional retailers innovate their way out of the corner of the ring where they are sure to be pummeled.
About the Author
As Founder and CEO of CART, Gary Hawkins has an unparalleled view to current and future innovationin fast moving consumer goods retail.
CART is Advancing Retail by connecting the industry to innovation. Retailers, wholesalers and brands utilize CART to find, research and connect with solutions appropriate for their businesses. Solution providers use CART as a go-to-market tool that connects them directly to their target retail audience, all the way into the brick and mortar store itself. CART has unparalleled insight into what’s next in retail and shares this information regularly through multiple channels.
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