How Supermarkets Fell into Amazon’s Trap
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. The supermarket business is a good one — low margins, but everyone buys food all year round. Easy times foster a culture of “everything is fine, we don’t need to change.” When an industry is convinced it doesn’t need to embrace uncertainty and take risks, it is sitting bait for companies that love to shake things up.
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.
What did the supermarkets miss? Here are a few things they could have done to embrace change:
Oldies Club Membership and Customer Loyalty
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 impact my budget, or the value I receive from my local supermarket.
Like most of you, I do my shopping at a few supermarkets. None give me reason to spend all of my food budget at one location.
They should have paid me (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.
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 loyalty — especially with busy 30–50 somethings age demographic.
Online Supermarket Orders
Over the past 10 years, we’ve all gotten used to ordering products online. Supermarkets dabbled in this, and failed miserably. 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.
Supermarket Apps and Offline to Online, Anyone?
When is the last time you used a supermarket app? Supermarkets did nothing to connect customers to mobile, ignoring the entire mobile revolution. Whoever ignores mobile will be disrupted (taxis and music stores are two of many examples).
What about using the smartphone to “point at a product and receive more information?” Not a chance. Bar codes are only for employees and tracking. The grey supermarket executives never embraced risk taking.
They stayed in their comfort zone, while the world around them evolved and changed.
When you visit a supermarket, and want more info on a product, you Google it. You don’t use a branded app. As Uber knows, good apps are great ways to build customer loyalty.
Take Risks or Be Disrupted
When an industry doesn’t take risks, it is waiting to be disrupted — in a way, it’s even more dangerous not to take risks. Supermarkets did very little to gain customer loyalty, and even less in moving to mobile and online. Amazon and others who follow suit will create the first SaaS supermarket and massively improve 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 done by self-driving cars.
There you have it, zero product improvements in the 40 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.
Solid product development is the key to increasing revenues, and the food business is ripe for major improvements.
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Yonatan Levy is a product leader and the author of The Other Ideas: Art, Digital Products, and the Creative Mind. This post was originally published at yonatanlevy.co