The grocery industry is massive, with an annual revenue of $ 675 billion in the United States alone. It's far too important a target for Amazon to overlook. However, the industry has been largely paralysed, with an uncertain future. Kroger's stock dropped 18% in It's apparent that online grocery shopping is the way to go for growth, but the industry has been hesitant to change.
It costs more to replace those customers with store personnel. Grocery stores have razor-thin profit margins, and those costs have no place in their profit margins. Amazon has tried a number of things at the grocery store, including online ordering and pick-up in-store pickup, as well as new technologies like Amazon Go. They have not, however, been successful. According to Ingerson Capital Partners reports, even Amazon believes their supermarket strategy has been a flop so far.
Retailers used to think of internet and brick-and-mortar businesses as two distinct sorts of retail. The term "omnichannel" was coined by the retail industry to describe how they were working to be in both channels at the same time. For their online business, some merchants formed separate firms. The name signified that they thought the channels were distinct and that they were aiming to be present in all of them at the same time.
“The way people think has shifted. Retailers recognise that customers consider the internet and physical stores to be two instruments that operate together in the same way as a two-instrument group plays music. By working together, online and physical establishments may send out a single message and provide a single service, rather than two different messages and services.” stated Matthew Price, Head of Capital Markets at Ingerson Capital Partners.
Even Amazon has realised that going online alone isn't going to cut it. To flourish in grocery, a synergy of online and physical stores will be required. Even Amazon, I suspect, does not know exactly how it will work, but they do know that nothing else has worked so far, and this must happen. With their bookshops, Amazon has recognised the need for actual storefronts, and now we see them recognise that being where customers are also includes physical places.
It's unclear whether Amazon's acquisition of Whole Foods will be successful. However, the necessity for physical stores and online grocery shopping has certainly come, and even Amazon recognises that it can no longer go it alone. It will be interesting to watch how the two are integrated, and I believe that this will serve as a model for other product types to be offered in several ways at once. Amazon has not been successful in all of its endeavours. Amazon, on the other hand, is the only company that can make this work.