Archive for April 15, 2013

Amazon Fresh…Changing the Rules of Engagement

MorningNewsBeat.

A news article posted by MorningNewsBeat speaks to RetailNetGroup’s recent analysis of the experiment in on-line grocery shopping that is Amazon Fresh.  I am always interested in those who are convinced that to-your-door groceries is coming into its own.  While Ahold’s Peapod, Fresh Express, MyWebGrocer, and others have carved out a sustainable yet small niche in the grocery industry, Amazon may just be the one to kick start the offering on its journey to a more pervasive service.

Unlike those other services, Amazon is seemingly prepared to expand this service without any sustainable profit in sight.  They likely mean it when they say Amazon Fresh is a strategic initiative, not a profitable tactical one.  Without the burdens of financial contribution, coupled with Amazon’s mastery of logistics, Amazon Fresh could conceivably be the service that finally breaks through to critical mass.mobile-shopping

If that is true, Walmart, and all leading traditional supermarkets will need to pick up the pace on refining and expanding the services.  It could also mean that delivery fees are lower, order size minimums are waived, and it certainly could mean that home delivery and in-store pick up will never pay out using traditional metrics and full allocated costs.  Amazon Fresh may dictate that all players in this space see it as strategic as Amazon purports.

Departments and offerings within the mix of the traditional supermarket that do not profitably stand on their on is not a new phenomena.  Just add on-line grocery shopping to the list and understand the indirect benefits of incremental shoppers and transaction size growth that these services can foster.  With Amazon moving in, and Walmart not about to be left out of the mix coupled with more time starved, tecno-savvy consumers, the stars are aligning for grocery e-commerce.  Let the games begin.

 

Supermarkets Doing Just Fine Says Kroger CFO | Retail & Financial content from Supermarket News

Supermarkets Doing Just Fine Says Kroger CFO | Retail & Financial content from Supermarket News.

Kroger’s CFO, Michael Schlotman reports that the traditional supermarket industry is “doing just fine” at yesterday’s investor conference in Orlando, FL.  I hope he is right.  Mr. Schlotman cites the viability of Wegmans, Hyvee, WinCo, HEB  and of course, Kroger as sterling examples of successful traditional supermarkets.  It is very difficult to argue with his logic or examples.

If we look deeper at his example retailers, they all share some very important business practices.  They are aggressive in capital investment, they have invested in human resources, they price competitively, they are deeply involved in local marketing, and consequently, they have all found a profitable niche in their respective marketplaces through innovation and differentiation.

One last comment about this elite group of retailers.  They all have taken the “long view” in terms of financial investments.  Not everything they do has to “ROI” immediately.  In fact, Kroger has taken “heat” from Wall Street for many of their investments in fuel programs and customer database marketing over the past few years.  Both of which are cited today as key elements of their on-going success.

I am still not convinced the traditional supermarkets as a group, are “doing just fine. Certainly those that take the long view and have a clear vision of what it takes to compete are positioned very well to continue to prosper.  However, dozens of other traditional chains continue to struggle, close stores, freeze wages, cut staff and continually retrench.  These chains would benefit from at least attempting to replicate the investments and practices of the successful few.  Easier said than done!