Tag Archives: omnichannel

Is Amazon’s bid for Whole Foods a big blunder, or another brilliant Bezos strategy?

In the past couple of weeks, the news from the United States has been filled with headlines about Amazon’s pending acquisition of Whole Foods.

Amazon’s current bid for Whole Foods is the largest acquisition deal attempted by far. CEO Jeff Bezos is paying a premium price ($13.7bn USD) for a marginally profitable retailer who has not been growing. And the price may go higher if other suitors consider higher offers for Whole Foods in order to block Amazon’s acquisition of a nationwide retail food store chain.

As omnichannel shoppers continue to seek convenience of home delivery, a major obstacle has been the vexing problem of the “last mile” – moving quality fresh food from the warehouse to the customer’s house. Will this be the magic marriage that enables Amazon to leapfrog the competition? Or is Amazon’s move to owning stores a recipe for failure by reaching too far beyond its core business?

In this piece, we explore the pros and cons of the Amazon deal with a perspective by Context’s Global Managing Director Adam Simon, and omnichannel strategist Chris Petersen.

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Reasons why Amazon’s acquisition of Whole Foods is a recipe for failure – Adam Simon

  1. Amazon’s business model is ecommerce, not running stores

Amazon has built a tremendously successful model based upon online ecommerce. It specializes in warehouse, distribution and logistics to deliver items directly to consumers. Aside from a couple of pilot stores, it has no experience, team or systems in place to turn around a chain of 440 bricks and mortar stores with relatively flat growth and marginal profitability. Rather than be saddled with a retailer’s legacy systems and real estate, Amazon would be better off growing its own version. Or it could have acquired a chain with smaller format stores which would have better fitted the click and collect model.

  1. Whole Foods is upscale pricing and not consistent with Amazon’s strength for the masses

The standing cliché is that when people shop at Whole Foods they spend their whole paycheck. By design, Whole Foods offers very unique items and fresh organic foods at premium prices. Amazon is aggressively competing with Walmart in the US who is focused on the mainstream and value pricing. Whole Foods product range and high prices do not offer Amazon a competitive advantage in acquiring stores with broad customer appeal. Whole Foods brand and pricing is also inconsistent with Amazon’s own “Fresh” approach already in market.

  1. Mixing Amazon and Whole Foods cultures are like oil and water

Previous Amazon acquisitions like Zappos were designed to expand categories (shoes and apparel) but were also consistent with and built upon Bezos philosophy of “customer first” and ease of use. It’s not that Whole Foods is anti-customer, but the stores and culture were built around product differentiation and segmentation. The management philosophy and pay scales of Whole Foods are quite different from Bezos’ empire in Seattle.

Why Amazon’s acquisition of Whole Foods is brilliant retail disruption – Chris Petersen

  1. Bezos is investing for 2024 … the play for Whole Foods is not about grocery stores

If you follow Jeff Bezos the CEO of Amazon, he operates with a long-term vision. He has discussed how teams are in the process of planning the first half of 2024 today. Dennis Berman from the Wall Street Journal perhaps best summarized the Whole Foods acquisition:

“Amazon did not just buy Whole Foods grocery stores. It bought 431 upper-income, prime-location distribution nodes for everything it does.”

To underscore the value of an Amazon total integrated play, Whole Foods 440 stores gives Amazon to refrigerated warehouses within 10 miles of the about 80% of the US population. That kind of reach goes a long way of delivering fresh food the last mile to your door.

  1. Whole Foods enables Amazon to rapidly disrupt with its ecosystem

The Whole is greater than the sum of the parts [pun intended] and the parts of the Amazon ecosystem are formidable. Amazon has 100 million Prime members. Imagine what they could offer Prime subscribers in terms of preferred discounts and services in 440 stores. Amazon just announced a $20 version of an Alexa device built for ordering food and getting recipes … a perfect recipe for the Whole Foods concept and persona of fresh and organic.

  1. A core category of all households and the Prime subscription model is “food”

Half of Walmart’s core business is food and consumables, and it drives more than 100 million customers through its doors every week. It makes perfect sense why Amazon would buy grocery stores as opposed versus another type of retailer. As far as Whole Foods notoriously high prices, Amazon is the world’s best at shrinking supply chain costs and negotiating with suppliers. What better way to launch retail stores than to go after a category that drives weekly traffic and is synonymous with a subscription model augmented by Alexa and Dash reorders.

The future of retail is “hybrid”. Bricks and mortar retailers have been racing to build an online presence. Ecommerce realises the need to build a physical presence to complete the customer experience and establish an outpost for the last mile, especially in categories like food.

Will the Amazon big bet of 13.7 billion USD on grocery stores pay off? Chances are we won’t have to wait 7 years to find out. The “food wars” are already underway and we have a ring side seat.

It’s a great time to be a consumer! A very challenging time to be a retailer bridging both the digital and physical world.

 

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Filed under omnichannel, Retail, Retail in CONTEXT

TCG Retail Summit – Top Themes for Future Retail Success

Guest blog by Chris Petersen, IMS

The TCG Summit represents a very unique gathering of top European Executives from across Europe. This year’s TCG summit, which was held at the end of March in Berlin, was particularly noteworthy in terms of the dominant recurring themes for future retail success, not only for technology, but all categories of retail. Even though the audience was primarily technology retailer and vendor leaders, innovations highlighted were less about the application of technology in the retail store, and much more about adapting to the most disruptive force in retail today – the omnichannel consumer.

Omnichannel is the New Normal
The underlying theme present in most of the presentations and panel discussions was omnichannel.   The TCG Summit in fact kicked off with Christophe Biget’s presentation focused on “innovation throughout the customer’s journey”.   From “walking in the customers shoes” to “customer centricity”, thought leaders were squarely focused on today’s consumer as a driving force of change in today’s retail.

If anyone had any doubts about omnichannel, it was key topic in almost every presentation and follow up panel discussion. The consensus in many discussions seemed to be that retailing is now moving beyond “omnichannel”.

“Experience is your product”
A top theme of both the presentations and panel discussions was focus on the customer experience as a key differentiator.   Jeffrey Sears from the Modernist group perhaps captured it best with his concept that “your [retailer] experience is your product”.   For traditional bricks and mortar retailers, the DNA now required is creating exceptional store experience as the new differentiator producing disruptive results. Despite all of the disruption from omnichannel, no one was predicting the demise of the retail store anytime soon. Many of the discussion panelists called out the need for new levels of partnership between vendors and retailers to “bring products to life”, particularly in stores.

Indeed, smart home products were frequently mentioned as the “poster child” for requiring hands on customer experience in store.   Smart home products are the growth category of the future that technology retailers are poised to lose … IF retailers don’t deliver an exceptional experience that connects products to the consumer’s life style.

Engagement – Yes we can!
The other underlying theme for future retail success is that retailers must develop internal DNA focused on customer engagement.   In the product centric past, it was enough to build stores, run ads and wait for consumers to come shop.   In today’s omnichannel world, consumers are very proactive and in control of their journey.   To be successful, retailers must focus on innovative ways to move from a passive display to proactive ways to engage customers where they are and how they want to purchase.

Perhaps the highlight presentation of the TCG 2017 Summit was from Nilesh Khalkho, CEO of Sharaf DG. Khalkho provided an amazing visual journey of Sharaf DG’s mantra of “Growing through Differentiation” in an omnichannel environment.   This journey included numerous examples of how retailers, especially technology retailers, will survive and prosper by truly differentiating on customer experience, engagement, and service.   The Sharaf DG story was a highlight that became a “Yes we Can!” rallying cry for what is possible in transforming technology retailing.

The Bottom Line – Results still Count
It is one thing for an executive team to say they are transforming to omnichannel, it is quite another to be able to execute omni-presence, experience and service 24/7/365.   There were a number of speakers and commentaries on the tremendous investments required to be able to create the experience and engagement demanded by today’s consumers.ETCG-Flashback-2017-43-2

As Adam Simon from CONTEXT highlighted, investors in tech retail are still looking for a return on their investment.   But achieving that return will require more than fiscal, operational expertise.   The successes, and the future of technology retail will require innovation on how to leverage talent in new ways that generate connected, customer relationships based upon a differentiated customer experience.

The bottom line for the future retail success – future success will not depend upon the sales transactions made today, but rather upon the customer relationships earned through engagement and services that will generate customer lifetime value.

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Filed under Connectivity, Home automation, IoT, Market Analysis, Mobile technology, Retail, Retail in CONTEXT, Smart Technology

Allez Les Bleus in Tech Retail!

Last week at Paris Retail Week I met a number of French people who all repeated the same mantra to me – you are so innovative in retail in the UK. Well sacré bleu this is French negativism at its worst. The reality is the French are darned good at inventing new retail concepts – the hypermarket was an invention by Carrefour in the 60’s; international food retail was pioneered by Carrefour and Auchan in the 1970’s and 80’s; recently Auchan piloted the shop and collect drive-in format which was taken forward by Leclerc. And if you look at the area of retail which really interests us, a trip around Paris should remind any Brit that French creativity is not to be ignored in tech retail, and particularly connected objects.

Here is what I saw on the Paris Retail tour and in a visit yesterday to some additional stores:

  • the new Orange store in the Champs Elysees – you walk into a store with VR demonstrations on Samsung Gear headsets happening as you walk in (or at least you did last week, this week they were sadly missing) – this is a tech destination showing off smart home, health, connected car, fun gadgets, and a workspace for repair. The layout is airy and modern, the displays very Apple. My only disappointment was that the “coach” experience did not work as it should and I was left to wander round by myself. This concept store being rolled out all over Europe is part of an omnichannel strategy linking the on and offline journey of the customer. 8/10
  • Fnac Connect is on the Champs Elysees and has a small selection of connected objects and a large space dedicated to mobile phones. There is little visibility of store staff and it has not moved on since it was introduced nearly two years ago. But it is there and is being invested in as new stores are being rolled out over France in the Connect format. Inside the main Fnac store on the lower ground floor was excitement – the first display of Oculus headsets, on sale only in Fnac stores. I was underwhelmed as they were piled high next to a similar pile of HTC Vive. This is the biggest opportunity for tech retail to bring in the crowds as the Orange store has proven with the Samsung Gear and as clearly highlighted in our consumer survey on VR 7/10
  • Darty – I went to the Beaugrenelle store as I had read that it was a concept store for them. It has a dynamic welcome with a connected back to school campaign, and had a very full offer of connected objects ranged over multiple gondolas and displays. There is no doubt that Darty means business with connected objects. But what is still missing is the engagement with shoppers. What does it all mean? You are left to work it out for yourself. 7/10
  • Boulanger’s flagship store in Opera was our last visit and was a true delight. The welcome was a huge smile from the security guard – very un-Parisian. The prominent space on arrival is the collection point for the click and collect goods. Evidently this is a new generation omnichannel store. The gondolas were beautiful, airy and the signage was clear. The connected objects range was not as great as Darty but the store makes you want to shop and find someone to explain. Even as we left, the cashiers smiled at us. Boulanger has brought the warmth of the North of France to Paris and that is an unforgettable plus 9/10

On this visit I did not go to Lick, another specialist store for connected objects which we have covered previously in our Paris visits. The news is that Lick is extending its reach through a recent link-up with BHV to bring the flair of connected objects to this rather old-fashioned department store. I also saw the flagship Publicis store on the Champs Elysées which has introduced a connected objects offering (placed between champagne and wine on one side, and perfume on the other). I am not sure that they will get much traction from this as the selection of products was small and eclectic, but the overall conclusion is that the French are experimenting with tech retail, and for that I give Paris 10/10 – allez les bleus!

 

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Filed under Mobile technology, Smart Technology, virtual reality

How Virtual Reality can provide the perfect test-case for a retailer omnichannel strategy

The evolution of online retail has happened quickly. By the mid-1990s, shoppers were told that they could order a product in ‘just a few clicks’. Then with the smartphone revolution introducing the app, it became ‘just a few taps’. Now Amazon’s Echo can place Prime orders for you with ‘just a few words’.

The trouble is that very few retailers have had the time to evolve at the same pace of the digital world. The dots of the traditional store and online often remain unconnected.

Why a move towards ominchannel makes sense

This is where omnichannel fits in. For those not yet familiar with the term, it’s about retailers focusing on how the customer shops, and how the shopping experience is from their point of view.

The modern shopper’s path to purchase isn’t as clear-cut as it used to be, and shoppers value retailers that cater to both digital and physical. This means retailers need to think about how their customers research, try out, buy, return and talk about products.

How is an omnichannel strategy different to a multichannel strategy?

A multichannel retailer is one that has both online and physical stores. Many retailers, whether small-scale or household names, are multichannel retailers.

However, omnichannel goes far beyond the channels of how a customer can buy a product. It is about making entire process as seamless as possible, understanding that customers likely start online, visit a store, and increasingly want to click & collect to a destination of their choice. The customer now sets the terms, and retailers have to adapt. This means being much more joined up in how inventory is managed, evolving customer interaction across Web, social and email, and ultimately treating each customer in a more personal fashion.

So how does VR come into it?

Virtual Reality is one of this year’s breakout products. High-end headsets from Oculus and HTC are on the market to critical acclaim, Sony is launching one for PlayStation in October, and Samsung has a popular version called Gear VR which uses their Galaxy smartphones.

The interesting thing about this technology is that it is an entirely experiential product. Until you try it out, you just cannot understand how effective it is. And as it is so new, people are extra eager to see it for themselves.

Our latest research into VR revealed that that nearly four in five people would value a demo opportunity when deciding where to buy a headset, and over half would seek expert advice. A retailer that created a dedicated area to let shoppers experience VR could not only drive greater footfall to stores, but also increase cross-selling opportunities for other products.

This ability to offer consumers the chance to try out the tech that they’ve heard so much about—and three quarters of European consumers already know about VR—is a crucial advantage over ecommerce only stores.

VR presents a perfect opportunity for shrewd retailers to pair this immersive in-store experience with online content that shows them more about its possibilities. The riddle for retailers, as ever, will be to stop customers from using the store as merely a place to browse, and going elsewhere online to complete their purchase.

This is where an omnichannel strategy comes to the fore, by forcing retailers think about what customers value. Our research showed that post-sales support for VR is valued by almost half of those surveyed, home installation by four in ten. Additional services like these, can be combined with social engagement initiatives—such as asking customers to tweet or share Instagram pics of them using their VR kit—to keep the retailer relevant to the customer. Retailers can also promote in-store exclusives, and develop an online click and collect model that takes VR from being just another commodity product.

Developing an omnichannel strategy is difficult, and requires investment and a mind-set change for some retailers. However, not focusing on the customer experience and standing still is no longer an option. New challenger brands, unencumbered by legacy processes, are running with the idea of omnichannel already. Virtual Reality, because it sits at the intersection of digital and physical, is ideally suited for those retailers looking to evolve how they engage with customers.

by AS

 

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Filed under Retail, Retail in CONTEXT, virtual reality

Full service in ICT Retail

One idea which captured the imagination earlier this year was the Darty panic button – you hit the button and you are put in touch with a call centre which can help. There are many ICT retailers who are going to press a panic button if they don’t get their service model right, because they risk losing out.

A whole new generation of products is emerging with wearables, smart technology and connected devices for the home. Cisco estimate that in 2018 there will be more than 7 billion machine-to-machine devices in the world, almost twice the number of smartphones. That is a lot of devices to sell. Some retailers are also targeting small and micro-businesses with a Retail-to-Business or R2B Channel. The winners know that they have to put in place a full service offering whilst maintaining a keen cost structure:

  • listening to customer needs with skilled in-store staff
  • holding a broad enough range of products to meet those needs
  • providing an omnichannel solution which allows customers to go from web to store and back again
  • and the all-important after-sales service of installation, warranty and general hand-holding

Here is why. Traditional retailers are already losing market share to etailers, but new threats are emerging: utility companies such as British Gas are linking the installation of new boilers to the creation of a smart home, with, for example the installation of smart thermostats and other kit. DIY retailers are trusted for service and installation, so how long will it be before they create a smart package with the installation of a new kitchen. Specialist retailers are emerging which are dedicated to the sale of wearables and connected devices. One of our keynote speakers at the Smart Channels Summit in DISTREE Monaco in February 2015 is Stephane Bohbot who has set up the Lick stores in France – in an interview with him in the FT he said that his salespeople are “coaches”. In the world of connected devices, a practice which was once taboo is now becoming commonplace –manufacturers are establishing direct links to end customers – unless retailers find a way to maintain their customer intimacy as retailers like Staples and Lowe’s are doing with the creation of a hub, retailers will lose out.

This journey involves investment in people, training, product availability, partnerships with other providers. Currently I am trying to order a Nest Thermostat so that I can walk the talk of a smart home myself. Two leading bricks and mortar retailers offer a solution through their call centres and websites but none has been able to assure me at the moment of passing an order that I would have both the product and an installation date. One of them told me I would have to go in store to get it ordered. No-one I spoke to really knew what a Nest Thermostat was. The question is – who is prepared to give full service to their customers, and win the prize of a new generation of products and customers.

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Filed under Retail in CONTEXT