What Grocery Doesn’t Get About Amazon — From a Former Banker Turned Grocery Tech CEO
Jeff Bezos is going to win. ‘Started selling books now we here’. That’s right. This man started selling books online unassumingly and has since put a dent in so many industries that I don’t want to bore you by listing them.
But here’s something that a lot of grocery chains, who are going to be painfully slow to adapt, don’t realize.
AMAZON DOESN’T NEED TO MAKE PROFIT IN GROCERY.
In fact, what they typically do in new industries is burn money. They light it on fire by finding ways to cut costs and provide the biggest benefit to the consumer. This is the ethos of their company. They will gladly run at a loss and NOT MAKE MONEY.
Amazon doesn’t care how long you’ve been around or what your brand loyalty is. They are going to provide a better service, at a better price and bundle it together with their ever growing suite of additional services that will keep the customers coming back to wherever their platform lies. (spoiler alert, they can do this because they make so much money on web hosting they can lose piles of money elsewhere aka everywhere until they win and own the market)
Costco has been growing ridiculously the last however many years. But here’s the thing, Costco doesn’t have an e-commerce strategy (If they do, I can’t find it anywhere on the interwebs). The interesting thing about Costco (fact check: I read this in one article and don’t know the source so could be slightly incorrect) is that 60% of their customers are also already Amazon Prime members.
WHAT DO YOU THINK IS GOING TO HAPPEN WHEN AMAZON PRIME MEMBERS CAN BUY QUALITY FOOD AT THE SAME PRICE AS COSTCO BUT NOW AT WHOLE FOODS?!?
Here’s another story, about 7 months ago I met with a slew of grocer execs from a national grocery brand. These were all seasoned grocery executives. My CTO and I were pitching Flashfood, a mobile platform allowing grocers to post deals on surplus food prior to discarding (usually with 4–5 days of shelf life) so that our users could see deals through their phone, pay through their phone and pick their food up — same day.
9 out of the 12 grocery executives in the room had Blackberry’s. You read that correctly, 9/12. That’s 75%. After our pitch, one of the first questions was ‘Do you have this app for Blackberry phones?’. F**K, NO. Are you driving home from work in a horse and buggy? Do you listen to music on your walkman? Don’t forget to return your movie at Blockbuster on your way home!
The issue is, there has been very little, and I would almost argue, there has been no innovation in grocery in the last 30 years. It’s scary. It’s a scary place to be for innovation. Bless my soul.
Take our platform as an example, we’re providing grocers the ability to sell surplus food that they would otherwise throw out (usually 4–5 days before the best before date) mark the price down and sell directly to our millennial users. Our users see the deal through their phone, pay through their phone and pick their food up — same day.
Our users are spending 1.5x more money on full priced food when they arrive at the store!
So what we’ve managed to accomplish is we’re:
- Reducing the grocers disposal costs
- Reducing the grocers food waste
- Reducing the grocers GHG emission caused by food waste
- Driving new customers to the store
- Creating an entirely new revenue stream for our grocers
- Increasing incremental in-store sales for this new customer
The true reason why innovation is so lacking in grocery is this: we could barely get through the door at most of these places and when we did, there was every reason in the book thrown at us to not give us a chance in even one of their stores. The overall lack of willingness to innovate is impeding the growth of the industry and will potentially lead to its collapse.
Don’t get me wrong, this isn’t a pity party or a complaint argument. We’ve partnered with two incredible brands in Farm Boy and Longo’s who are seeing incredible results from our partnership which we are very grateful for.
We’re building dynamic pricing models to pinpoint what each item should be marked down to for the greatest probability of sale. We’re introducing machine learning to allow for speedier posting times and we’re doing all of this while having diverted nearly 10,000 meals which would have otherwise ended up in a landfill and produced the equivalent GHG emission of driving 12,000 km in a car.
But what I want to tell you, as a whole, is the grocery industry has been a gravy (see what I did there?) train for few for a very long time. They haven’t innovated because they haven’t had to. The industry as a whole is now faced with one of the most innovative companies in human history that has been trying for 10+ years to win in grocery before they decided to pay $13b ensure a victory.
What we are witnessing, my friends, is a fundamental paradigm shift in the way that you and I, and our children (I don’t have kids, I swear too much right now to have kids) purchase our groceries.
First, Amazon marked the price down on the groceries that healthy people actually want (avocados, organic bananas, healthy good green things!). Next, they’re going to provide increased savings to their prime members (genius, where do I sign up for a prime membership?) then they’re going to pull a few more rabbits out of their proverbial ‘hat’.
By the time it’s all said and done, the same execs I met with who asked about a Blackberry app (IN THE YEAR 2017!) are going to be retired somewhere, passing the torch to the next wave of management to battle the biggest challenges the industry will ever face.
The reason I’m writing this is that I don’t want the food deserts (Chicago) to appear that may happen with the innovation Amazon is going to bring to the table. At Flashfood, we’re giving grocers the ability to compete with this new threat and move quickly with us to drive environmentally conscious young people into their store by proving these chains give a shit about the environment.
So now, the ball is in the court of the industry.
Innov8 or die. Amazon isn’t going to stop until they’ve won grocery.
On a closing note, I used to play professional hockey before my banking and tech days. I got into the odd fight during my career. I’ve been hit in the nose more than once (it’s crooked and I’ve got scars if you look closely. If we meet and you actually do look closely — I will notice and likely be uncomfortable). I can tell from experience that this is going to be an all out war that Amazon will wage on the grocery industry.
An industry, that currently doesn’t have an open enough mind to be even close to competitively innovative.
Share this post, force their hand with your purchasing power and for the love of everything STOP WASTING FOOD.
Over and out,
Founder & CEO