The expansion into food and groceries over the last decade by big box department stores, like Wal-Mart and Target, had looked like the last nail in the coffin towards 100% market saturation by grocers. Food retailers can only go in a few directions: offer discounted values (Price-Rite, Aldi’s), distinguish yourself with brands (Trader Joe’s), or find upscale specializations (like organic-food centric Whole Foods). Supermarkets are already fairly commoditized – with very thin profit margins to go around this competitive and mature industry. Given this deeply competitive environment, what potential for disruption can there really be?
We are about to find out. You may have heard that Amazon is expanding; the e-commerce giant is buying Whole Foods for $13 billion. For those of you paying attention to our latest monthly articles (The New Retail, Navigating the New Retail) about the increased rate of change of traditional retail, this latest move should be a huge shock to the supposedly mature grocery store business. Amazon’s purchase of Whole Foods is remarkable for a few reasons. First, it gives Amazon another logistic infrastructure channel to move physical goods, and there may be cost saving synergy here. Second, it gives Amazon access to physical store locations where high-end customers already shop.
Wal-Mart started as physical stores and recently expanded to a greater online digital presence. Amazon is taking the reverse approach by augmenting its online reach with brick-and-mortar locations. This dual-sided approach may be what is necessary to compound disparate consumer shopping habits into deeper brand loyalty. Wal-Mart and Amazon seem to think so at least. Could we be seeing the next phase of retail change: consolidation and conglomeration of online and offline retail?