Amazon’s purchase of Whole Foods has generated a lot of virtual and real ink in the last month, with pundits of every stripe trying to figure out what it means for the food market industry and for the U.S. consumer market in general. Did Amazon want to expand its physical footprint in one fell swoop rather than organically? Did Amazon covet Whole Foods’ 365 store brand for its online grocery business? Did Amazon want access to Whole Foods’ suppliers and distribution system? It was probably all of the above.
Now other industries are staring nervously towards Amazon’s Seattle headquarters, wondering if they are next. Let us put that fear to bed. You are next. So what are you going to do about it?
Brick and mortar retailers like Barnes and Noble and Best Buy are still trying to figure this out. While they have barely survived by virtue of being the biggest players in their respective niches, they continue to struggle with show-rooming (where Amazon customers use their stores to see merchandise before ordering it through Prime), price competition (Barnes and Noble actually prices their products higher in their stores than on its website–because of Amazon–antagonizing their customers further), and relatively low (to Amazon) website traffic and clunky site-search engines.
The problem for Best Buy, Barnes and Noble, and most others is product uniqueness. In short, they stock their stores with merchandise that Amazon already sells. Part of this is because chain stores seek strong brands to offer their customers. Another part of this is because they wish to offer the low prices that high volume brand manufacturers can offer. Every one of their local markets already have competition from small stores that sells expensive premium brands that cannot be found on Amazon to status conscious consumers.
Thus the solution to Amazon is fairly obvious. Sell quality branded products at low prices that Amazon cannot offer. Granted, this is easier said than done. Some chains like Costco and Sears have achieved this by introducing high quality house-branded products. Other chains like Home Depot and Lowes have the clout to demand products from global brands that are unique to their stores.
Amazon has overcome these tactics in the past by surreptitiously purchasing uniquely sourced products directly from their competitors and selling them for a loss on its website. But this is unlikely to be effective against a national or global retail chain.
Of course it should be obvious that Amazon’s competitors should be working to improve their customer experiences. Delivery time and cost, return policies, and ordering convenience should all be paramount.
Amazon can be beaten. Their competitors need to be as innovative and hard working as they are.