Amazon Changes The Game Again Making Retail Survival of the Fittest
Free shipping. Free returns. Next-day delivery. Same-day delivery. One-click ordering. Locker drops. Drones. Amazon isn’t shy about setting the bar for e-commerce consumer expectations, and they may have done it again with their intent to acquire Whole Foods for $13.7 billion.
If the deal goes through, the latest addition to the Amazon empire would expand the company’s distribution network for fresh and pantry items nearly overnight, turning every Whole Foods store into a miniature Amazon distribution center.
This move is in addition to Amazon’s new apparel disrupter program, Prime Wardrobe, that allows clothing to be ordered without upfront payment. And, its on top of recent announcements by Nike and IKEA that they plan to sell products on Amazon.
Each chess move by Amazon causes shockwaves through the rest of the retail world, just ask booksellers.
Bookstore chains such as Barnes & Noble and Borders were the first retailers to feel the “Amazon effect” on consumer expectations, grocery store chains are the most recent. Just as those book giants were left to wonder why the promise of Starbucks and comfy reading nooks was no longer enough to lure shoppers into stores, grocers are going to be asking themselves if their customers will still be enamored with online ordering and curbside pick up when they can have breakfast, lunch, and dinner delivered right to their house by a company they’ve come to associate with immediate purchase gratification.
Similarly, clothing and consumer goods retailers have been pushed forward in their e-tail evolution by Amazon’s early adoption of free shipping and returns. While Amazon can afford to absorb the $7 billion that the “free” shipping and returns costs them annually, other retailers must take those costs on the chin (and bottom line), and small businesses often put off or eschew e-commerce altogether because they can’t afford the squeeze on margins to offer the kind of convenience consumers are used to.
Amazon’s strategic placement of warehouses outside and in between major urban areas has pushed many retailers to transform their brick-and-mortar operations into functional distribution centers, shipping out of back rooms and storage spaces so they can offer shorter, faster delivery windows in order to clear the bar Amazon has raised.
Yet, even though Amazon is the driving force in e-commerce, one of its competitors managed to catch up, which might have been the straw that led to Whole Foods. Walmart’s success with Jet.com has recently become a pacesetter for at-home delivery of pantry and fresh food orders. And, Target just launched a pilot program for next-day delivery of household essentials and dry grocery items ordered online.
Online grocery had been previously reserved for urban hyper-adopters (think Fresh Direct and Peapod’s early dominance in New York City) with disposable income to spend on convenience, and Amazon’s selection of Whole Foods is doubtlessly a grab for the middle-to-high income consumers who aren’t predisposed to prefer the Walmart brand. Together, Walmart and Amazon will bring e-grocery delivery to the masses much faster than analysts anticipated, and with that will come expectations of what an e-commerce fresh-food delivery experience should be.
Every time Amazon moves the goal post for consumer experience, the whole game changes. And with a new game comes new rules. Rules for how much things should cost, how fast they should arrive, and how easy it should be to send them back.
Secondary packaging has to play by new rules as well. Namely, consumers have expectations for how to open it (no tearing, no cutting, no cursing), how it should look (neat, organized, mess-free), how to get rid of it (curbside recyclable), and how to use it for returns (same package, self-seal).
What used to pass for an acceptable delivery experience could now be deemed a dud, and what it takes to delight a customer during unboxing is changing by the day. It’s no surprise, then, that Amazon is putting effort into improving and perfecting its approach to packaging with waste-reduction initiatives such as Frustration-Free Packaging and Ships in Own Container. If Amazon’s ability to set the standard for consumer convenience continues, then all retailers should be prepared to look at packaging as a competitive advantage – and as something they cannot afford to ignore if they want to stay in the game.