Amazon is aiming at the vertical integration. It now owns many private brands. Lately, Whole Foods has been added to the list.
a) To dominate the grocery industry, Amazon has to leverage the strengths of both the Amazon and the Whole Foods. First , let’s try to understand what each is good at. Amazon has an ability to know and understand its customers the best. It is a master in the process of upselling. Amazon is a trusted name in the market. Whole foods is a very good private brand. It has rich data of Whole Food’s current customers. Whole Foods is best known for its organic products.
To be the best in the grocery industry, understanding of factors important to grocery industry is critical. After a proper understaing, a detailed strategy has to be framed about how to deal with each fcator.
b) Identification of key factors governing grocery industry:
(i) Distribution
(ii) Inventory systems
(iii) Retail experience
(iv) Logistics
(v) Consumer buying pattern
Distribution strategy:
With acquisition of Whole Foods, Amazon would have access to around 460 stores. Traditional grocery businesses have an interlocking system of distributors. Then there are wholesalers who generally specialize in a particular product.
Since Amazon is an online space, it can cut out most of the wholesalers which has already been done is case of books. Through this strategy, Amazon would have a better control of supplies and aslo there is no need to share the margins. Effective ware housing and leaner suplly chain which Amazon already has can help in achieving this
Inventory systems:
Amazon has the ability to locate and track the movement of millions of items. This is a very great advantage for inventory planning, especially, in case of the perishanble goods. With this advantage, Amazon can directly tie up with the farmers which would ensure fresher and faster supplies. Eliminating middle men would make easier to streamline the processes and yes, margin need not be shared.
Retail experience:
There are two types of customers: One who like to physically touch the product and then make a purchase. Second , who would like to shop online.
First type of cutomers would be serviced by the Whole Foods itself. Second type of customers would be serviced by the Amazon. Streamlining online ordering and delivery process is very essential. User Interface should be very easy to use to encourage more shopping online.
Logistics:
It has been decided earlier that dealing directly with farmers is more beneficial. In such a scenario. logistics is the most important factor. Transportation time should be as less as possible between the producer and the final customer.
Consumer buying pattern:
Most important decision is whom to sell what , in what quantities and when. Whole Foods has rich amount od data regarding buying patterns of its cutomers. This data can be thorighly analyzed and tailor the experience according to each individual. It would be easier to upsell too as Amazon has a complete idea of buying pattern of the customers. Groceries are purchased generally in a particular pattern and it would be easier to predict. Acuurate predictions is the key.
To achieve the goal of being the best in the grocery industry, involvement of many teams from different domains is required. This makes proper communication of stragegy to all the teams very important. As all the teams are interconnected, there should be seamless flow of information at any point of time. If any of the teams are not aligned, the entire strategy would go for a toss. For ex, your planning team has predicted patterns acuuratelt, your farmers are ready with the produce but your logidtics team has no proper communication on when and where to pick up what. This would fail everything.It is very important that every strategic plan be tightly coordinated in such cases where many interconnected teams are involved
