Having a very clear view of your customers, their problems, the business you're in and how this may be restructured to deliver enhanced value has never been more critical. Agile startups are harnessing innovative technologies to disrupt, transcend and pick off the lucrative elements of businesses posing a threat to every industry.
For Australian retailers, one of the greatest perceived threats is the imminent arrival of Amazon - no longer a startup but a behemoth - which continues to pursue a relentless program of agile, lean start up style experimentation as it strives to win across all categories of retail.
Amazon's ambition is to be the 'everything retailer', to generate more revenue that Walmart, and in order to do so knows it has to succeed in two broad and recurrent categories of expenditure, fashion and grocery.
In pursuit of the former, Amazon has recently given sight to Alexa, an is testing the Echo Look and secured a patent for an on-demand clothes manufacturing warehouse, whilst in the latter, they are testing technology to eliminate the tedious in-store checkout procedure...and enable ever faster delivery.
Let's focus on grocery, given Australian supermarket retailers Woolworths and Coles (Wesfarmers) rank, by revenue, as third and fourth largest in the world.*
It's important to frame up. We've all got to eat, and we've never had more choice in how to fulfil this basic need whilst at home. Supermarkets are but one player in the larger food delivery game, where e-commerce is driving convenience for those of us disinclined to personally select and pick up the ingredients. In order of increasing convenience:
- Brick & mortar supermarkets now offer increasingly flexible e-commerce options, with recipe integration / inspiration beginning to reduce the time from need recognition to checkout
- Hello Fresh and Markey Spoon are battling it out in the space for fresh food recipe kit subscriptions for those of us who are aspiring, but time poor Masterchefs, with an eye on minimising food waste
- And for those of us with less ambition, or urgent need to satiate an appetite, Deliveroo and Uber Eats are just two of the more visible restaurant delivery services pedalling their solutions to us.
Broad insights indicate that food is increasingly seen as more than sustenance, more of a culinary experience, fundamental to health and wellbeing. There is an urgency for incumbent supermarket operators to explore how to satisfy our appetites, nutritional and wellbeing goals through more delightful and expedient journeys, whilst shoppers are still experimenting. US research indicates that compelling online customer experiences in this sector become habit forming - satisfaction with online grocery shopping is very high as is retention.
For now the incumbents have the significant advantage of owning considerable consumer data through their loyalty programs where Amazon has, as yet, none. The imperative is to leverage this data together with robust insights and to envision and design journeys that makes it supremely easy, convenient and rewarding to satisfy our food needs in the moment.
Alexa, the voice assistant and Echo / Show, the home hub device, are central to Amazon's aim to do to the grocery industry what Apple did to the music industry – to create a full grocery-to-home ecosystem.
E-commerce penetration of grocery in Australia is currently a low 2.5%. Many of us have yet to form an online grocery habit. But we're primed to ask Alexa. Amazon famously see incumbent margins as their opportunity, and their operating model, with it's focus on free cash flow rather than EBIT, poses a significant challenge to retailers whose shareholders are used to large dividends.
To compete with amazon requires matching their innovation ambition. But innovating differently. Winning will not be down to the technology itself, or delivery times, but to the added customer value that technology enables you to deliver. Insights into what customers truly value are the key.