Amazongeddon: The New Supermarket Battleground

Quartz: “In southwest Ohio, the prices of staple foods are hitting the floor. A carton of eggs in Cincinnati supermarkets are going for as little as 39 cents. And gallon-sized jugs of milk are selling for less than a dollar. The American grocery store is about to become a battleground—and consumers will love it.”

“Shoppers in the UK certainly did. Established companies such as Tesco forfeited millions in sales to compete on price with German discount grocers Aldi and Lidl, who began opening more and more stores. Now, those discount brands have made it to the US, and have opened hundreds of stores across the country … These telltale signs of a brewing US grocery-store war are happening just as online retailer Amazon has decided it wants to shoehorn itself into the grocery business by acquiring health food grocery chain Whole Foods for $13.7 billion.”

“But disrupting groceries will be a lot different than shaking up publishing, which is how Amazon got its start. Unlike bookstores of the late 1990s, clawing away at market share by driving prices down is a game supermarket companies are already good at playing.”

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How TJ Maxx Defies Digital Gravity

The Wall Street Journal: “Traditional retailers are in crisis, damaged by rapidly shifting consumer tastes, technological change and cut-throat price competition. And then there’s TJX Co., which is defying gravity with the simple idea that under the right circumstances people still like to shop in stores … Central to TJX’s success are its merchants. The company employs more than 1,000 buyers who buy apparel and other goods from more than 18,000 suppliers around the world. Each buyer controls millions of dollars and has authority to cut deals on the spot, unlike most department stores, which can take weeks to review and approve orders.”

“Stores typically get deliveries several times a week. The schedule ensures a continuous stream of products to lure shoppers. And because TJX doesn’t purchase the full range of colors and styles, stores have one or two items in a particular color or size, giving customers an urgency to buy … Its stores have no walls between departments, so it can quickly reconfigure floor plans. Similar clothes from different labels can be found on the same rack.”

“One area where TJX trails other retailers is on the Internet … Some brands won’t let TJX sell their products online because they don’t want the items to be easily searchable at lower prices. For certain brands that allow online sales, shoppers have to click on items before they can see brand names. The restraints are similar to those in the physical world, where some companies do not allow TJX to advertise their brands. Advertising individual labels is not part of TJX’s marketing strategy.”

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Zero-Margins & The Future of Retail

Vox: “Competing with Amazon is terrifying for any incumbent business because the company’s executive team operates on a radical model whereby the company’s overall net income is nearly zero quarter after quarter … That’s an enormous problem for every grocery chain in America, which already operate on razor-thin margins … A Whole Foods under Amazon’s stewardship will almost certainly accept lower profit margins than it does as an independent chain — and that spells trouble for everyone else in the grocery business.”

“Whole Foods could deliver value to Amazon without necessarily delivering profits. The stores would create a useful additional channel for selling Kindles, Echoes, Fire TV boxes and other Amazon hardware. And by linking discounts to Amazon Prime membership, it could drive sales of those. More subtly but perhaps more importantly, encouraging Whole Foods shoppers to in some sense ‘log in’ with their Prime accounts would generate tons of new user data that could feed the larger Amazon beast.”

“The bottom line is there are lots of ways that a cheaper, but fundamentally similar, version of Whole Foods could contribute to the Amazon gestalt even while run as a zero-margin business.”

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Amazon Patents Shopper-Control Technology

The Washington Post: “Amazon was awarded a patent May 30 that could help it choke off a common issue faced by many physical stores: Customers’ use of smartphones to compare prices even as they walk around a shop. The phenomenon, often known as mobile ‘window shopping,’ has contributed to a worrisome decline for traditional retailers.”

“But Amazon now has the technology to prevent that type of behavior when customers enter any of its physical stores and log onto the WiFi networks there. Titled ‘Physical Store Online Shopping Control,’ Amazon’s patent describes a system that can identify a customer’s Internet traffic and sense when the smartphone user is trying to access a competitor’s website.”

“When that happens, Amazon may take one of several actions. It may block access to the competitor’s site, preventing customers from viewing comparable products from rivals. It might redirect the customer to Amazon’s own site or to other, Amazon-approved sites. It might notify an Amazon salesperson to approach the customer. Or it might send the customer’s smartphone a text message, coupon or other information designed to lure the person back into Amazon’s orbit.”

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Robo-Shop: Will Cashiers Cash Out?

The New York Times: Our mental image of job-killing automation is robots in factories or warehouses. But the next jobs to disappear are probably ones that are a much bigger part of most people’s daily lives: retail workers and cashiers in stores and restaurants … Half the time worked by salespeople and cashiers is spent on tasks that can be automated by technology that’s currently in use, according to a recent McKinsey Global Institute report. Two-thirds of the time on tasks done by grocery store workers can be automated, it said.”

“Retailers say automating certain tasks doesn’t necessarily displace employees, but frees them to do other things that are more valuable to customers. Lowe’s, for instance, said its customer service robot answered simple questions so employees could provide more personalized expertise, like home project planning … But shoppers often prefer to save time by interacting with fewer people, especially when they just need coffee or paper towels.”

Erik Brynjolfsson, director of the M.I.T. Initiative on the Digital Economy, comments: “The bigger and more profound way that technology affects jobs is by completely reinventing the business model. Amazon didn’t go put a robot into the bookstores and help you check out books faster. It completely reinvented bookstores. The idea of a cashier won’t be so much automated as just made irrelevant — you’ll just tell your Echo what you need, or perhaps it will anticipate what you need, and stuff will get delivered to you.”

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New Realities of the Grocery Experience

The Wall Street Journal: “The challenges for grocers today include a new reality: The days of shoppers filling carts during a big weekly trip to their neighborhood supermarket appear over for now. Consumers are more targeted in their shopping habits. They are less loyal to retailers and more willing to buy groceries online. And they are buying more from stores at two poles: ones with cheap prices, and ones that offer high-quality fresh food, often at a premium.”

Natalie Kotlyar, a consultant, says shoppers expect “convenience, selection and the right price and they want it now. Everyone is trying to meld those concepts to create the perfect shopping experience.”

“Chains that don’t adapt quickly to the changes in consumer behavior and business dynamics won’t survive, say analysts, who, along with some supermarket executives, expect more consolidation in the coming years and predict more grocery stores will close. To compete with Amazon, Wal-Mart is offering curbside pickup and home delivery in test markets. Kroger is expanding its platform for customers to order groceries online and pick them up at the stores. It also said it has invested $3.8 billion in lowering its prices over the past decade.”

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Future Sausage: Fruit Salami?

Quartz: “Swiss product designer Carolien Niebling was not a sausage fan, at least not until she spent three years tasting 50 to 70 different types of sausages from all over the world. She took everything she learned to create what she calls ‘the future sausage.’ Among her futuristic sausage collection, you can find the fruit salami, a dried sausage made of berries, dates and almonds. Or there’s insect pâté, a sausage made with insect flour and a tonka-bean infusion.”

“Niebling’s goal is not only to create new types of sausages with less meat in them, but also to use her designs as a message to encourage people to expand their palates. She believes the rise of supermarkets has distanced people from the natural production of food. As a result, the only food many consider ‘edible’ is the food they see on a supermarket shelf.”

“Though Niebling used substitutes to reduce the meat content of her future sausages, she says she’s not interested in using vegetables to mimic the taste of meat. On the contrary, she hates the idea of faking meat.” She comments: “What I’m trying to say with my design is that changing your diet doesn’t have to be, ‘instead of meat, you eat carrots.’ There’s so much else out there. There are hundreds of different grains, there are so many plants and flowers that we haven’t fully explored yet.”

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From Baking Powder & Cardboard to Amazon

The Washington Post: “A&P Baking Powder was an important product in the history of retailing,” Marc Levinson wrote in The Great A&P, a history of the company and grocery stores. “With it, the Great Atlantic & Pacific Tea Company, and many of its competitors, began a transition from being tea merchants to being grocers. It was a transition that would dramatically change Americans’ daily lives.”

“The branding of baking powder was important because most merchants back then were just essentially selling, as Levinson wrote, ‘generic products indistinguishable from what was for sale down the street.’ And in selling their powder in a tin, the owners were ahead in another important way — packaging.”

“The invention of the cardboard box changed everything. The company could now make, brand and sell its own condensed milk, butter, spices — just about any staple of the kitchen … There was difficult, transformative work ahead. The company needed to upend an entire culture of shopping built around neighborhood stores … A&P’s business model began to sound a lot like the one pursued by its retail descendants — Walmart and Amazon … Amazon’s tea was books. Then it diversified.”

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The Ikea Recipe Series

Fast Company: “The Ikea Recipe Series … is a collection of posters that you can use to cook your dinner–literally. The posters serve as both a recipe sheet and a cooking wrapper for meals that range from salmon to cobbler to ravioli with meatballs.”

“Each recipe resembles a paint by numbers sketch. Rather than list the ingredients as a long string of text, you’ll see circles in which you sprinkle a tablespoon of salt or a half teaspoon of pepper, and outlines of proteins where you can place the salmon. All of this is drawn with food-safe ink on parchment paper … all you do is roll up the paper and toss the dish into the oven.”

“The recipes are all created with components from Ikea’s own frozen foods available for purchase at its stores … parchment paper traps in moisture as food bakes, making it a forgiving and flavorful way to cook that requires no skills with a sauté pan. It’s also clean. Just toss the wad of paper into the garbage at the end of the meal, and the dishes are done. And perhaps most importantly of all, the Recipe Series looks fun, like an adult coloring book that you can eat.”

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Nike Goes Local & Gets Physical

The New York Times: “Nike shaped itself into one of the globe’s most recognizable brands. Now it has a new idea: Go local. Facing pressure from investors and competitors like Adidas, Nike said Thursday that it was shaking up its organization to focus more on consumers in just a dozen cities around the world and on releasing new products faster in those places.”

“To keep its products relevant and make its service more personal, Nike aims to develop what it called a ‘local business, on a global scale’ and ‘deeply’ serve customers in 12 cities, including New York, Paris, Beijing and Milan. Those places are expected to deliver 80 percent of the company’s growth over the next two and a half years.”

“Despite the move to online shopping that is transforming retailing, Nike is not giving up on its physical stores. Instead, the company will use the stores to try to foster relationships with customers and further link the shops to its digital efforts. Nike, which is known for sponsoring star athletes like LeBron James and Rafael Nadal, will also try to speed up how quickly it designs and works with its suppliers to deliver new gear. The company wants to cut its product-creation cycle time in half.”

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