Amazon vs. Grocery: The Grocery Retail War Is On

kdolphin Jun. 13, 2018

It is no secret that the $800 billion dollar US grocery industry has been experiencing a period of upheaval since Amazon’s acquisition of Whole Foods last year. Angela Spivey, a food and beverage attorney at McGuireWoods LLP who is advising clients on how to quickly change their packaging and marketing to sell at Amazon-Whole Foods explained that the deal has been, “shaking up the food industry from top to bottom…Don’t be surprised if milk and cereal just shows up at your door based on your usual eating habits” (Wall Street Journal).

In response to stronger sales and the introduction of delivery services from Whole Foods since the Amazon acquisition, grocery retailers, manufacturers and other suppliers have all started to make significant changes to their selling strategies.

What makes Amazon so unique as a company is their desire to continually improve the customer experience. Instead of sitting back and letting retail competitors innovate and then play “catch up”, Amazon has set out on a mission to make improvements to an industry before consumers even realize they need them. This strategy has proven quite successful in their quest to conquer the retail industry and now poses a significant challenge to the age-old, relatively complacent grocery industry.

For grocery retailers looking to remain competitive, it is vital that they begin to make moves to outpace the pacesetters. The first step in this process involves asking themselves three fundamental questions:

  • How well do we know our consumers?
  • How can we make our consumer’s lives easier?
  • How can we work to make the retail experience a better one?

Amazon knows their consumers better than anyone. Using data collected from customers search and payment histories they are able to build up a complete view of their customers. Predictive analytics are then applied to this data to help Amazon make educated product suggestions to the consumer during their shopping journey. By creating a customized shopping experience for each customer, Amazon simultaneously establishes a personal relationship with their consumer while also driving up their profit margins.

For grocery retailers looking to compete with Amazon and create stronger connections with their consumers, customer data management solutions, also referred to as customer data platforms, offer them the ability to use the data they have collected from their consumers to create 360-degree profiles of each customer. By tracking purchases per customer over time, grocers can begin to recommend products and serve personalized offers to customers that are most relevant to them. By doing this, grocers begin to replace the generic weekly print-out flyer with engaging and unique offers on products that will grab their attention.

Another aspect of the acquisition that has been making headlines lately is Amazon’s introduction of a Prime-exclusive discount program. Amazon plans to deploy the discounts to all of its US stores this summer. It’s also the newest perk for Prime members at Whole Foods, which includes free two-hour delivery in some cities and 5% back on purchases when using the Amazon Prime Visa card. In response to this extension of discounts—which will continue to help Amazon gather data about shoppers’ preferences—analysts strongly emphasize that competitors will need to update their own shopper-loyalty programs. VentureBeat recently shared, “according to a recent survey, 70 percent of respondents said they would be more loyal to brands that integrated customization into their stores.”  By employing a customer data platform and targeting consumers on a 1:1 basis with customized recommendations based on shopper preferences, the customers will feel more connected to the brand. This personalized approach to loyalty, which has been proven successful by Amazon’s domination in the retail market, will motivate the consumer to choose that specific store over others who continue to throw generic discounts and rewards at them.

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Whether Amazon will win or lose their newest quest to conquer the grocery industry has yet to be determined. But according to the same article by VentureBeat, In 2017, 7,000 retail businesses had to cease operations, and 3,800 retail stores have already announced plans to shut their doors in 2018. Without a new strategy in place, retailers risk becoming victims of the ‘retail apocalypse’.” One thing we know is certain: grocery retailers will be forced to innovate during this on-going battle. By employing a customer data platform and better utilizing their data, grocers will be able to put up one heck of a fight.

To get more info on how a customer data platform can help your organization deliver modernized customer experiences, request a demo at sessionm.com