It’s a Jungle Out There: How Grocers Can Compete with Amazon

The world of eGrocery is one of the fastest growing industries today, so surprises should come as, well, no surprise.

And yet Amazon made waves last month (March 2019) when it announced its plans to open a series of small-format grocery stores by the end of this year. (They're expected to be about 35,000 square feet, as opposed to the 105,000 square feet of an average big-box Walmart). Experts predict that these stores will offer lower prices and more conventional products than Amazon's Whole Foods chain, thus appealing to a broader customer base and competing against more mainstream stores – which causes alarm for grocers of all sizes.

There's still a lot we don't know yet about the stores, but many in the industry are speculating. Always on the cutting edge of technology, Amazon will likely create a multi-format shopping experience that integrates online with brick-and-mortar, including using "on-site robot driven storage and retrieval systems" (Brick Meets Click). It's unclear whether the new stores will utilize the cashier-less, automated-pay technology signature to Amazon Go stores, or the driverless delivery methods offered by "Amazon Scout."

Since the announcement raises more questions than answers, it doesn't give grocers a clear blueprint of how they can compete. (Perhaps a strategic choice on Amazon's part). But that doesn't mean grocers can't prepare. John Reily, VP and global commerce strategy lead of Publicis Sapient, writes that grocers can stay competitive if they "start building more modern and relevant brand equity and focusing on a customer-first approach, accelerating technology adoption and becoming more end user-friendly in their approach and offerings" (Digital Commerce 360).

It helps to break that down into concrete action items. Here are some ways grocers can prepare for the advent of Amazon stores:

Go omnichannel.

Data shows that retailers who invest in omnichannel strategies have, in fact, been able to hold their own against Amazon. In March 2019, Nielsen reported a decline in Amazon’s dominance in online retail; since 2017, "key retail players like Walmart, Kroger and Target have grown their online customer base—all by at least 90 percent more than Amazon."

If your company hasn't gone omnichannel yet, now is the time. That means offering a seamless shopping experience across all devices and in-store. Shoppers are increasingly expecting multiformat options – such as shopping from their phones, tablets, computers, via voice assistants, and physically visiting the store – so grocers must rise to the occasion.

Provide a variety of fulfillment options.

How exactly have Walmart, Kroger, and Target managed to grow their online sales 90% more than Amazon?

According to Nielsen, it's not about drone deliveries or having a snappy voice assistant. It's about giving customers the options they want. In fact, Nielsen goes so far as to say that "These merchants have succeeded, in part, because they’ve embraced the click-and-carry model." (This option goes by many names: click-and-collect, click-and-carry, BOPUS [Buy Online, Pick-up In-store], and others.) The research and data analytics company states that "the share of click-and-carry sales grew from 4 percent to 11 percent of all CPG e-commerce sales in just two years.”

Stay on top of customer trends.

Learn as much as you can about the changing tide of grocery shopping, and pivot your business model accordingly. If you haven't made the jump to digital sales yet, consider partnering with a third party (like locai) who can offer comprehensive, end-to-end solutions as well as guidance about eGrocery's changing trends. By partnering with a company who offers you services such as Endless Aisles and Meal Planning, you'll be able to grow with the changing trends, attract new customers, and keep your current customers loyal.

Address the barriers that keep shoppers away.

Neilsen reports that the two biggest barriers to customers buying CPGs (consumer-packaged goods) online are food quality and cost/fees. Other barriers include not trusting the process and the time it takes. How can your business address those barriers, and offer customers solutions that will set you apart from other grocers? By understanding customer behavior and acting accordingly, you can create a strategic blueprint to anticipate and address shoppers' needs.

Online grocery shopping is growing so much that it's projected to quadruple by 2023. That means that there's enough business to go around. Grocers need not panic about the coming of Amazon to the streets – they need only prepare.

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