The "Fight of the Century” occurred Saturday night in Las Vegas. Floyd Mayweather, the professional boxer, won by TKO over Connor McGregor, a UFC champion, in the 10th round. The pair fought under traditional boxing rules which made it tough on the octagon cage fighter McGregor, who was used to a street brawl, not traditional boxing.Two days later, another battle began. Monday marked the start of the Amazon/Whole Foods battle with traditional grocery. Unlike the Mayweather v. McGregor fight, there are few rules and the battle will be fought in local markets across the country.
Amazon, armed with their newly acquired 460 store locations that mirror zip codes of their Prime members, is ready to take on Walmart, Kroger, Target, Costco, Albertsons’s and thousands of local grocery banners. Who will win the battle for the grocery shopper?
Amazon threw the first punch by lowering prices on several key items on Monday. Bloomberg reported Amazon lowered the price on Fuji apples 43% from $3.49 to $1.99 in their Mid-Town Manhattan location. They also reduced prices on 14 other items ranging from 7-38%. For Whole Foods regular shoppers, they welcomed the discounts, but is price alone enough to lure the throngs from traditional grocery?
Source: Bloomberg News
Grocery is a new opponent for Amazon, who has already pummeled durable retailers such as Sears, HH Gregg, Radio Shack and others. They have the department store retailers on the ropes. Can Grocery survive the battle?
For one thing, Grocery is different. People buy groceries all the time vs. considered purchases such as coffee makers and televisions, which one might buy once every 5-8 years.
For the past 30+ years, Fast Moving Consumer Good companies (FMCG) have had a static playing field with an attainable goal using the traditional 4P’s of marketing: Price, Product, Promotion and Place. For Promotion, they could rely on the retailer’s weekly ad to drive meaningful incremental sales and unit growth.
The retailer’s weekly ad has worked for the following key reasons:
- It is a profit center for retailers, so they have a large interest in producing ads on a consistent cadence.
- It serves as a communication device from retail headquarters to store managers and logistics teams. Retailers know what products are going to be advertised to consumers so they are ready with product in stock, on display and priced to meet the demand.
- DSD suppliers know about the retail ad and are equipped with inventory and display execution.
The retail ad also provides FMCG companies and their retail partners with agreed on pricing, product assortment and static place—the retailers’ physical store locations. Each week a retailer promotes between 600-2,400 products of the 40,000 items on the shelf in a typical grocery store.
Because Amazon can use their Whole Foods locations as mini distribution centers, bringing their full online product, it makes all 4 Marketing P’s completely dynamic.
Grocery retailers need to realize they are in a new fight. The old way of marketing and pricing is not going to get it done.
In order to win the fight grocery retailers need to:
- Localize their assortment to with local suppliers
- Upgrade offerings on prepared meals
- Consider dynamic pricing for different times during the day
- Go beyond the circular and make promotions meaningful to regular shoppers
- Make their store easier to shop
Scott Whalley is the SVP of Promotion Solutions at Market Track, a leading provider of marketing and business intelligence. He can be reached at firstname.lastname@example.org.