How Amazon Is Transforming Retail

Amazon’s plan to buy Whole Foods Market has raised many new questions. If the company is successful in making the acquisition, and then successful in operating the business, it could transform the entire grocery industry.

If we pull the camera back, we can see how success on the grocery side could foreshadow Amazon’s success in many other parts of the retail environment, furthering the expansion that began two decades ago in the book business, when Amazon challenged Borders and Barnes & Noble.

However, as successful as Amazon is in many different arenas, it is not successful with everything it tries. Remember the Fire Phone Amazon released a few years ago? It was a big flop. Amazon pulled itself out of the wireless handset business so fast it made our heads spin.

Not that Amazon is the only company to fail at wireless. Comcast, Time Warner Cable, Facebook and others met with the same fate. Just because a company is a leader in its field, that does not mean it can be successful in other sectors. It must prove itself in each market it enters.

Still, the grocery business is part of the retail world, and Amazon so far has been very successful at turning the retail world on its head.

Amazon Go and Whole Foods

Amazon’s entry into the grocery business threatens current industry leaders like Kroger, Publix, Walmart and Target. Amazon began experimenting in this segment a while ago with a store called “Amazon Go.”

Amazon Go is a different kind of grocery store. Customers walk in, grab what they want, and walk out. Their smartphone app automatically rings up their purchases. Is that the model Amazon will roll out in Whole Foods? Perhaps. If so, many customers will like it, but many others will not.

If Amazon lets users continue to shop as they are used to, while adding a new way of thinking to the mix, I think its Whole Foods experiment could be successful. We are in the very early stages in the reinvention of the food shopping experience. One way or another, Amazon has poked the beast, and it will cause a marketplace reaction.

Warning Shot Across Grocery Industry’s Bow

Any way you slice it, Amazon has raised the bar with Amazon Go and the Whole Foods deal. This is a warning shot the entire industry should hear. It means every grocer has to up its game.

Grocery stores have gotten better in recent years, but there are still plenty of problems they need to fix. They have self-service aisles that let users buy without dealing with a cashier. In these cases, there is a vast difference between best and worst performers.

Companies like Whole Foods, Trader Joe’s and Sprouts let users charge to their smartphones quickly and easily. Companies like Kroger and Publix do not — not yet anyway. That will change as Amazon moves into and quickly transforms the entire experience.

Grocers Need to Pick Up the Pace

Grocers need to improve their shoppers’ experience. There is a noticeable difference between the Publix and Kroger self-checkout lanes. The system is much easier to use at Kroger than at Publix, where you must do things in the exact right order or the transaction won’t proceed. This annoys customers, which is something every retailer wants to avoid. Yet Publix has subjected its customers to this annoying experience for years, and there’s no sign of relief in sight.

That may change now that the Amazon threat is looming over the insdustry. There are many different areas where we can expect Amazon will raise the bar with regard to the retail shopping experience. Its presence in the market no doubt will cause some retailers to struggle, even fail. Those that can make the adjustment will continue to compete.

The bottom line is that Amazon will transform the retail grocery business, as well as the entire retail industry, sector by sector. It’s been doing just that for two decades, with no hint of slowing down. Stay tuned.

Jeff Kagan

Jeff Kagan has been an ECT News Network columnist since 2010. His focus is on the wireless and telecom industries. He is an independent analyst, consultant and speaker. Email Jeff.

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