Starting a few months ago with Amazon announcing the purchase of Whole Foods, I have been taken by the blood-letting Wall Street has bestowed across the industry. In fact; the financial punishment for most in the retail space since this announcement.
My personal disclaimer on this post: I am not a retail operator, nor an investment banker. But I am a successful supplier of consumer goods to retail. Durable goods, not consumable goods (drinks, chips, etc.). My thoughts are not to claim supreme answers, but more to offer thoughts from a 10,000 foot view with 3 thoughts.
1. Stick To Your Knitting
Kroger Co. (KR) has become the poster-child for what Amazon could do to the grocery industry by acquiring Whole Foods. Kroger could do itself good by focusing on making their business (stores and digital) the top-of-mind consumer destination. With 2,800 stores, multiple store front brands, spanning 35 states, Kroger has a great platform to do mind-blowing things. Amazon’s Whole Foods has some 470 stores and at some point will leverage the power of the digital platform. I believe Kroger could make some very progressive moves to not only hold share, but grow dramatically.
I do not discount the power and prowess in operational and supply chain proficiency Amazon has proven. They meet the consumer “right where the customer wants to be”. Amazon will certainly carve out their fair share of the grocery market.
About a month ago, Kroger announces they will launch a restaurant business called Kitchen 1883. Hmmm. Is it me, or does that seem like a lack of focus? The first prototype is a stand-alone store. But even if the thought is to integrate a restaurant into stores, is that what the consumer wants? Another restaurant, particularly one inside of a Kroger?
Kroger should stick to grocery and take advantage of building a compelling digital model and enhance the in-store experience to serve the consumer.
2. Meet The Competition Head On
Things change. Consumer likes and dislikes change. Technology has proven to be a great enabler. Grocery competitors are making moves to prepare for the future.
Walmart buys Jet.com in 2016, and recently Parcel, which has a model for rapid delivery to consumer’s front door. Both significant in Walmart’s goal to compete with fury in the digital retail space.
In the pure play grocery space, Albertsons announces the purchase of the meal-kit delivery service, Plated. This is very logical for grocery to have a hand in the meal kit business. Experts expect this food home delivery service sector to grow more than 70% in the next 5 years.
With all of this recent activity, Kroger showing no signs of making a correction in course.
3. And, It’s Not Going To Get Any Easier
The slim margins in the grocery business make things tough, no doubt about it. As competition heats up margins will be under increased pressure.
Add to the mix the entry and expansion in the US market of two powerful German grocery retailers - Aldi and Lidl. The pressure on traditional grocers will be intense. These are serious competitors and have the balance sheet and competitive will to gain significant market share.
The evolution of how the grocery industry is going to take shape will be interesting. There will be winners and losers. I am not convinced Amazon will rule the world, but they will put points on the board in grocery. The losers – some will falter. I have visions of how Kmart could not shift to compete with Walmart in the early days. Where is Kmart today?
Business leader and continuous learner in consumer durable products sold through various partner channels; retail, capital goods, infrastructure product. www.davidkearsley.com
The 2017 holiday season is shaping up to possibly be a real winner for retail in North America. Consider the much-improved economic climate, stellar stock market performance, low unemployment, and favorable consumer confidence sets a pretty good stage. The battle-lines of where and how the consumer will choose to make holiday purchases is most intriguing. I believe this holiday season will begin to etch a meaningful shift in what retail will look like for years to come.
2017 Holiday Expectations
Predictions, expectations and estimates are all to the upside vs. last year according to numerous organizations that track this information.
Generally, there is a consensus that holiday sales (excluding travel and event purchases) will increase in the range of 3.6 to 4.5%. That is particularly good news, as the last couple of year’s growth has been quite dismal.
That is the broad swath of retail market predications. And that should bode well for all. A rising tide lifts all boats, as the saying goes.
Not surprising, growth in e-commerce retail sales for the coming holiday season are estimated to be somewhere between 11 and 21% (2016 online sales grew roughly 14% over prior year). I am in the camp of closer to the 20% growth for 2017.
Where there is momentum, there is growth.
The e-Play of e-Commerce
The digital era is in full swing and promises to only gain in momentum. Amazon is certainly the bell-weather for online shopping and the e-commerce segment in retail. It will be the focus of the overall direction of e-commerce as we step into the holiday season.
Consider some of the market analysis published by Fung Global Retail and Technology –
At the root, convenience and ease remain the two most significant advantages of e-commerce shopping. The advancements in smartphones, wearables and other wireless technology will keep us constantly connected. That brings the essence of convenience and ease within a fingers touch. In fact; 40% of holiday purchases this year will be made on mobile apps. That is nearly double from 2016. The next evolution (and coming quickly) will be the technology of the truly “connected” Smart Home, that will go beyond the Google Home, Apple HomePod and Amazon’s Echo devices we know today.
Brick and Mortar Retail Play
It is important to keep in mind; the e-commerce segment includes the online sales of traditional brick-and-mortar retailers too. There are exciting initiatives underway.
There are many very well managed retailers, and although playing catch-up, great strides are being made for developing the integration of online into their operational platform.
The baseline advantages for traditional retailers are quite clear.
I am excited for what will come from the traditional retail sector for true deployment of an integrated, omni-channel build out. The power of what a seamless consumer purchasing platform of the physical store and online experience. The true merging of the personal touch, convenience and ease. Here are just a few things that will shape the next advances in retail as we know it.
Business leader and continuous learner in consumer durable products sold through various partner channels; retail, capital goods, infrastructure product.
Seeking senior leadership role with a company with a vision to grow, innovate, and create a sustainable value-proposition. www.davidkearsley.com