Amazon, Whole Foods and the future of supermarkets in Australia

Amazon, Whole Foods and the future of supermarkets in Australia

Jul 26, 2017 | Category, Change, retail, Strategy

Amazon would not have paid $13.8 Billion for Whole foods without a plan. The purchase came as a surprise to most, but it should not have, they have been evolving into bricks and mortar for some time, with books, Amazon Go, The Washington Post,  and a few other dabbles.

Most commentators look at Amazon as a digital retailer, but when you think about it, they are not: they are a Platform that manages supply chains. Those supply chains just happen to end with consumers, rather than a B2B transaction.

Looking at the purchase of Whole Foods through the lens of a supermarket retailer will lead you to wrong conclusions, as you will be looking for the efficiencies that can be squeezed out of the existing model, with a few wrinkles added in.

Wrong lens, wrong model.

Amazon will reinvent the Whole Foods supply chains, and extend them straight to consumers, probably using Blockchain technology. Wal-mart is experimenting with Blockchain in their Pork and Mango supply chains, and I would be astonished if the work Amazon has been doing developing Blockchain technology in finance markets leveraging Amazon web services in collaboration with IBM was not applied very quickly to Whole Foods.

Amazons success (I predict) with Whole Foods  will be enabled by their efficient systems, great technology, engaged workforce and all the other stuff parroted around, but the real reason is far more strategic.

In the ‘old world,’  whether it referred to supermarkets, newspapers, personal transport, or accommodation, success came with the control of supply, which required capital to be in the game. In the digital world, success comes from the control of demand.

Amazon has demonstrated its mastery of demand management, and has demonstrated that this mastery can be leveraged backwards into the physical world, as they deliver a huge range of goods from their warehouses.

The mission statement on Amazons site states:  “Our vision is to be earth’s most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online.”  No mention I can see of digital, or technology, just customers!

By any measure, Bricks and mortar is on the slide, but on-line sales still amounts to a small proportion of retail. Just what the percentage is depends on whose numbers, and what they classify as retail, but it is less than 10%, 8.3% according to this study but will be more based on the huge number of filings for bankruptcy current in the US. According to this 2017 Nielsen study, online sales of FMCG accounts for 8% of dollars.

 

 

The split sales between on line and in store is very wide across different categories, but the growth of 80% in digital while off a modest base, is a statistic that should scare the pants off Coles, Woolworths, and other ‘traditional supermarkets around the world. Sainsburys in the UK has suffered in the share price stakes as their profitability has slipped, while they seem to have done a pretty good job with home delivery, and digital generally. Amazon could buy them from cash flow. Just a thought!

 

What will the digital/bricks & mortar split be in 20 years?

Will the current 90/10 reverse itself?

Perhaps not, but 50/50 would not seem to be outrageous when you think of the developments in Virtual reality emerging, where you will be able to visit your supermarket from the convenience of your couch at home.

The future is in personalisation, we all seem to accept that. However, the existing supermarket business model is intent on homogenising the experience in the pursuit of low costs.

Do you see a paradox emerging in this? Retailers are doing exactly what consumers do not want, at least outside commodity categories, as is evident in the foregoing graph.

I think  the era of big box retail is coming to an end, and in its place will be experiential retail. Alibaba, the Chinese version of the combination of Amazon and Ebay has stayed away from owning anything beyond the platform that enables connection and sales, but that is also changing. There are now 13 Hema supermarkets around Shanghai, delivering a step towards experiential retail, and using technology to drive then enable the transactions.

If I was running Coles, I would be experimenting with ‘MasterChef’  sections in some stores. Have a chef, cooking the fresh produce in  the stores, simple recipes that shoppers can see in use, and certainly purchase pre packed bundles that have all  the ingredients along with prep notes. Similarly in the Coles owned Bunnings I would have workshops teaching ‘do it yourselfers’ how to use the tools and materials, running classes that use them to make something. Customers  can then buy the tools, blueprints and product packs to make a work bench, toys for the kids, or whatever they wish. In Bunnings currently, if you want to be stocked, you need to have merchandisers that fill the shelves. The next logical stage is to have branded sub stores, where there is only branded product on sale, and with an ‘advisor’ paid by the supplier, on hand.

A shop within a shop if you like, which is not a new idea, department stores have had fashion brands running sections in their stores for years. Experiential retail.

The supermarkets are going in the opposite direction, commoditising everything in the name of efficiency.

The industry has consolidated and consolidated, fewer brands, retail options, and producers. Perhaps there is a tipping point, and we are just passing it.

The consumer is increasingly looking for natural, local, assured provenance, and  environmentally sustainable product, all mixed in with a new shape of ‘value’ less dominated by price than has been in the past. Communicating and delivering these attributes are the foundations of branding, and the delivery of ‘value’ to a purchaser.

Woolworths will live to regret the closure of Thomas Dux,  but it is just another in a long line of strategic blunders. it started so well. Their in store  ‘Foodies’ were a hit in the stores I visited, but the weight of the Woolworths machine drowned them. Bring it back I say, it may be your saviour, or try and buy Harris Farm again before Amazon come in and offer the Harris family enough to retire in gilded luxury to Monaco.

I like Ray Kurzweil’s observation that ‘The future comes very slowly, then all at once’.

This is classically the emergence of AI and combined with the Gartner Hype cycle makes a compelling case. Gartner’s 2016 Hype cycle has several technologies that relate to and are integral to the development of all the AI and VR stuff being hyped. Amazon has the grunt to bring all this to the table and disrupt the comfortable supermarket duopoly that exists in Australasia.

If nothing else, it will be fascinating to watch

 

Header photo credit: Eli Christman via Flikr.

How to ensure your copy does not get read.

How to ensure your copy does not get read.

Jul 21, 2017 | Communication, Marketing, Small business

Copywriting is easy.

That is what you tell yourself, after all, you can write, you are a professional, very used to communicating, and doing it successfully.

My sister is a writer, and every now and again she grabs one of my posts over which I have slaved (yes, it is OK to have family subscribed) and goes into what I call her ‘Teacher mode’

Out comes the red pen and professional editor and she rewrites my posts.

They are subtly altered, so the intent of the post is clearer, makes a greater impact on the reader, and ends up being way, way better.

It galls me a bit that it is a skill beyond mine,  but on the other hand, she makes me feel better by telling me she could never dream up the topics and angles that I do, all she does is polish it a bit.

We are inundated with copy, it comes at us at all times, through all our devices,  and now is increasingly visual  as a means to fight the war for your attention. However, like most things the volume going up does not have any real impact on the quality, if anything the average has dropped as we become ‘do-it-yourselfers’ in order to keep the volume up.

The headline is the most important element of copy in any piece. If you fail to cut through, catch attention, and create an urge to read on, it does not matter how good the rest is, it will not be seen.

There is piles of advice around on how to write a great headline, most of it pretty good, but also so much that we tend to get tunnel vision, and forget most of it, so following are 4 basic things I see continuously that ensures I do not open a piece.

Talking about yourself.

Nobody cares about you, except perhaps your mother, or in my case, my sister. They care about themselves, their lives, and their problems. A good headline reflects those needs, pain points, and offers help to a specific group that you wish to communicate with, and at  the very least, creates interest.

If you are a dentist, do not talk about how modern your equipment is, or how many degrees you may have, address the reason someone  may be looking for a dentist. They have broken a tooth, their child has a crooked bite, or they have a toothache that needs attention.

Using jargon.

Every industry has jargon, it acts as shorthand for insiders, so if you want to grab the attention of your competitors, use the jargon they understand, but if you would rather catch the attention of those who might want to act on what you say, avoid it like the plague.

Last week I saw a headline that promised: ‘to deliver a sophisticated customer centric e-commerce solution to SME’s’ . How much better would it have been if the headline simply promised to make it easy from small businesses to get paid.

Showing how clever you are.

For your potential customer, clear beats clever every single time. It may not get a chuckle from your mates in the pub after work, but so what, they are already your mates, and not required to pay your bills. The most common offender is the use of a pun, never as funny in a headline as in the pub, followed closely by the use of ‘digital shorthand’ such as ‘gr8’.

Allowing grammatical and spelling errors.

Perhaps it is just my age, but a spelling or grammatical error in a headline or sub head ensures I do not open it. Not only does it offend my sense of what is right, it demonstrates that the writer is either too stupid to understand the basic rules of written communication, or that they have so little concern for my time that they did not make the effort to get it right. Why would I read it in either case?

The difference between ordinary copy, and great copy is a big bagful of money, and a lot of effort, experience and specialist skill.

 

The value of an engaged employee.

The value of an engaged employee.

Jul 14, 2017 | Branding, Customers, Marketing

We all talk about the necessity of ‘engaging employees,’ but rarely truly achieve it, or see it in others. However, when  we do see it, we just know in our guts that we are looking at the way we would always like it to be.

Yesterday I spent 90 minutes in a suburban McDonalds store killing time between appointments, reading the daily rag, drinking an excruciating coffee, and fiddling with the language in a client report. All this time I watched a young bloke in the store make everyone he came into contact with feel special, even great.

He was just a casual employee, whose job it is to clean the tables and mop the floor. He did this, but he also did much, much, more. He opened the door as people were coming towards it, he high-fived the little kids, he helped a lady fold a stroller after extracting her baby, he joked and pranced, and he did all this with a huge smile on his face.

Every single person he interacted with smiled back, and had a word, he threw some light on everyone’s day.

As the store manager delivered a meal to the person at the table next door, I observed to him that this young bloke was worth much more than they were paying him, to which the manager responded, ‘We give him as many shifts as he wants, and we love having him here’

Despite the excruciating coffee, and other sometimes annoying human traits on display from time to time at Maccas, I know I will be back at this one, and hoping to see this young bloke loving his work, and making the day of others again.

 

 

 

Sustained Marketing success requires managed mindset change

Sustained Marketing success requires managed mindset change

Jul 12, 2017 | Change, Leadership, Marketing

We marketers, and usually sales people talk endlessly about putting ourselves in the shoes of those to whom we are communicating, and seeking to serve. It is absolutely right that we do, but then we stuff it up.

We do that by the way we define the industry we are in.

Go to any network meeting, and I (almost) guarantee nobody will define the industry they inhabit from the perspective of those they are seeking to serve.

They are lawyers, or Architects, or Insurance brokers, and so on. None will define what they do by the outcome for their customers.

Examples of the great miss-definitions abound, but two stand out.

Kodak was in the late nineties one of the great successful companies sitting on a mountain of cash, dominating an industry they defined as ‘Film’. They were so successful their advertising slogan persists to this day, we all know what a ‘Kodak moment’ is, well all over 40 do anyway. In 1975 Kodak engineer Steven Sasson invented the first digital camera, which Kodak patented, and later collected billions on the royalties until expiry in 2007. They even commercialised the technology for Apple under the brand ‘Apple QuickTake’, and even then failed to see the writing on the wall. In 2012 Kodak was made bankrupt, although it has since emerged as a different company.

Blockbuster, what a Lulu of failed strategic sight that is, although it is always easy with the benefit of hindsight. At their height, Blockbuster had 50 million members worldwide, thousands of stores, and were a critical link in the movie money making chain. In 2001, the fledgling  Netflix approached Blockbuster, seeking to sell their business into them, and run the online part of Blockbuster, for just $50 million. CEO John Antico had been looking at ways to experiment with on line delivery, and supported the idea. He had made some changes to blockbuster,  like removing the profitable late fees that penalised customers, but failed to get the deal with Netflix through his board, and it ultimately cost him his job. His successor led the business into oblivion by bowing to  the board, reintroducing the hated late fees,  and allowing the power of incumbency, and the aversion to change, to prevail.

You do not have to be a huge business to be caught by this definitional challenge that pervades the way you think, unconsciously driving the decisions you make. A client of mine is a printer, a modest sized family business that has been around for 60 years. They see themselves in an industry that has been significantly disrupted by digital, and while there is still plenty of printing being done, the volumes are modest compared to those of a decade ago, and  the prices and margins are very slim. They acknowledge they are printers playing a role in the communication industry, but they still think and act like commodity printers. At least however, they have made a start in the mindset change which drives behaviour, and which eluded Blockbuster and Kodak.

Blockbuster saw themselves in the video rental industry, not as a part of the entertainment industry to the end, and Kodak was in the film industry, not the memories industry, until they weren’t.

Marketing Myopia, a term coined in 1960 by Theodore Levitt in his seminal HBR article of the same name remains alive and well, just harder to recognise.

 

 

 

 

The marketing flip, with pike & twist.

The marketing flip, with pike & twist.

Jul 5, 2017 | Branding, Marketing, Small business

The marketing degree of difficulty has exploded, making getting a good score  exponentially more difficult.

There used to be a few TV and radio stations, newspapers and magazines by which to reach potential customers, and supply them with the information you thought they needed to buy your stuff.  It was mass marketing, with little to no ability to customise, personalise, or engage.

The name of the game was scale.

Scale of capital to control the means of communication and mass produce products for sale

Scale of financial resources  to afford the advertising costs demanded by the communication owners

Scale of markets, mass consumers

Scale of intermediaries like supermarket chains, and suppliers of capital and equipment.

Scale had all the power.

In 15 years, less than half my working life, marketing has flipped.

Individuals now have all the power

Marketing has to be personalised, one on one, or it will be ignored

Media channels are now virtually infinite, and the cost can be modest to free

Brands are only as good as the last delivery of value to the individual

However, the objective remains the same, just as with the fancy dive. It is to go through the surface with as little splash and disturbance as possible, a good old fashioned, well executed and relatively simple swan dive can achieve that objective as well as the fancy risky, and hugely complicated combinations of tricks.

Next time you are contemplating a complicated marketing dive with a pike and twist, consider the benefits of simplicity.

 

Will Amazons venture into book stores rewrite history?

Will Amazons venture into book stores rewrite history?

Jul 3, 2017 | Branding, Change, Marketing

I love books, thousands of them infest my home, and I have spent years of my life browsing. I may be one of the last “heavy consumers’ of books, and particularly coming towards Christmas, my local Dymocks and Berkelouw’s which have so far survived, welcome me with open arms.

There is a physical tactility to a book that you cannot get on a ‘device’, no matter how great the design, which has the potential to generate an emotional attachment.

Perhaps it is just me?

As a result of this I am on the Dymocks mailing list. Every month or so, I get an email outlining the deals on the best sellers, books of interest, and new releases.

Now, I do not mind the odd romance, or light ‘love and discovery’ adventure, I have probably read 2 or three in my time, but they are not my normal fare.

Nowhere near my normal fare.

Despite a couple of emails, and even a phone call to them indicating my absolute lack of interest in their hit list, and observing they have access to a significant amount of purchase data should they choose to use it, I still get this crap filling my inbox.

Meanwhile Amazon is opening book stores, bricks and mortar book stores.

Unthinkable a few years ago that having disrupted and almost destroyed book stores, they then venture into them.

Shades of the Washington Post turnaround under Jeff Bezos

They will be doing all the stuff in bricks and mortar stores that Dymocks, and all the other retailers now disappeared had the opportunity to do, but lacked the foresight and understanding of their customers to be able to do, despite having 15 years head start.

Book stores have a place, long live real books, and the stores that sell them, I guess they will be branded ‘Amazon’, and Jeff will keep laughing.