How Supermarkets Fell into Amazon's Trap

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In 2017, Amazon bought supermarket chain Whole Foods for a whopping $13.7 billion. The stagnating supermarket industry is in for a rude awakening. I will leave it to others to predict the future, and will discuss what the supermarket business could have done to avoid becoming prey for Amazon (and perhaps other online conglomerates).

A Culture of Embracing Certainty

Industries are often disrupted when they are profitable. Easy times foster a culture of “everything is fine, we don’t need to change.” When an industry is confident it doesn’t need to embrace uncertainty and feels most secure, it is sitting bait for companies that love to shake things up. The supermarket business is a good one – low margins, but everyone buys food all year round

The supermarket experience hasn’t changed much since I was a kid in the 1980s. Same non-digital experience – grab a cart, and walk through the aisles. Then wait in line to pay.

What did the supermarkets miss? If only supermarkets had product managers, here are a few product improvements they could have done to embrace change:

Better Retention Plans

Supermarkets did almost nothing to encourage customer loyalty. Many have “club memberships” with yearly fees that save you 5-15%. But they never went out of the box. I always feel strange when paying money to receive an ongoing discount. I’m handing over my personal information – email, phone number and address – for a minor discount that doesn’t significantly impact my budget, or the value I receive from my local supermarket.

Most of us do shopping at a few supermarkets. None give us a good enough reason to spend all of our food budget at one location.

Let’s look at it that way - they should have paid us to keep shopping at their stores! There are all sorts of models for this – giving customers a 10% discount for joining the club (and accumulating points and rewards based on money spent). Instead of gamification, the industry used the old model of “you pay for small discounts”. That game is over, folks.

Better Deliveries

Everyone has a supermarket delivery nightmare story. Most people won’t take the risk in buying refrigerated or frozen goods via delivery. You can end up with liquid ice cream. Quality deliveries in the supermarket industry would have instilled customer retention as well – especially with busy 30-50 somethings age demographic.

Flawless Online Ordering

Over the past 10 years, we’ve all gotten used to ordering products online. Supermarkets dabbled in this, and failed miserably, especially on mobile. They never really put their heart and soul into online ordering. Meanwhile, Amazon perfected the art of online ordering. I am sure that Amazon will implement online ordering and deliveries with Whole Foods. Better yet, my Ben & Jerry’s will arrive frozen, and when I am home to receive it.

Help Customers to Choose Products

What about using the smartphone to point at a product and receive more information? I’ve seen various attempts at this feature but it never worked good enough for me. Bar codes are mainly for employees and tracking. When you visit a supermarket, and want more info on a product, you just Google it. You don’t use a branded app. As Uber knows, good apps are great ways to build customer loyalty. The grey supermarket executives never embraced risk taking. They stayed in their comfort zone, while the world around them evolved and changed.

Take Risks or Be Disrupted

When an industry doesn’t take risks, it is waiting to be disrupted. In a way, it’s more dangerous not to take risks, than to actually take those risks. Supermarkets did very little to gain customer loyalty over the years, and even less in moving to online and mobile. Amazon and others who follow suit are creating the SaaS supermarket and massively improving the experience. You may not need to visit the supermarket much anymore.

In 10 years, the supermarket may transform into a massive refrigerator and freezer + shelf space for deliveries. And in 15 years, the deliveries will be executed by self-driving cars.

There you have it, zero product improvements in the 30 years that I have been visiting supermarkets. Add to that a culture of zero risk taking and creativity, and the result is disruption from above.


 
 
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Yonatan Levy