Amazon’s Purchase of Whole Foods Provides Uncharted Collaboration Opportunity for Manufacturers and Retailers

Topics: Analytics, Innovation, Leadership

What started out as whispers of the potential impact Amazon’s acquisition of Whole Foods will have on the grocery market, has quickly turned to screams of shareholders from the largest retailers to respond to the inevitable shift in the way consumers shop.

As Phil Lambert, founder of Supermarketguru.com, states in the June 19th USA Today article, “What Grocery Shopping will Look Like Now” by Zlati Meyer, ‘”June 16th is going to go down in the industry as the day the grocery business changed.”

For better or worse is yet to be determined, but the inevitable changes that are anticipated with Amazon expanding into the retail brick-and-mortar space mean that both manufacturer and retailer will need make changes to survive.

“They might see completely overhauled stores – small footprints and a larger assortments of exclusive brands,” writes Meyer of one speculated change.

"Both manufacturer and retailer will need make changes to survive."Whole_Foods_Market_logo_big.png

Whether it is this change or a predicted shift away from the traditional center store as a revenue foundation towards an expanded produce, bakery and meat/seafood sections to compete in an area where Amazon’s foothold is less stable, every decision made by the stores and the manufacturer is going to be scrutinized.

With this in mind, a data-centered approach to collaboration between manufacturers and retailers has become essential to optimize in-store performance around a common version of the truth and mutually beneficial results.

Typically, retailers have their data including POS, loyalty card, inventory, etc. and manufacturers have their shipment, spending, and any DSD or purchased syndicated data, in addition to rich consumer insights in many cases. Rarely are insights from this data shared between manufacturer or retailer in a collaborative setting Worse yet, it is equally as rare that this data is organized in a way that makes it useful in decision making.

Part of the reason for this is that both manufacturer and retailer have held to their “this is just how we do business” approaches leaving joint-business planning as a topic that is hypothesized about at CPG conferences.

amazon_logo_RGB.jpgHowever, the CPG business is changing rapidly and so must those that want to be in it.

“Food manufacturers and producers need to gear up for two key possibilities: Amazon nudging itself into shoppers' carts with food of its own making. It already has its own brand of many items such as batteries and pet food and Whole Foods sells its 365 Everyday Value brand. The other major threat: Amazon engaging in margin-busting negotiations,” states Meyer in another USA Today article “Get ready. Amazon-Whole Foods deal will change how you buy food forever”.

For manufacturers, this means having the tools on hand and the commitment to institute category and portfolio and category optimization, in addition to the trade promotion optimization capabilities companies should already be using. The analytical insight and predictive picture that these data-driven approaches can draw for organizations, refocuses strategy development and decision making on revenue generation and profitability rather than the “wait and see” practice of the past.

"The CPG business is changing rapidly and so must those that want to be in it."

Similarly, retailers need to have in place the analytical tools to optimize categories within their store driving results and avoid sweeping reactionary changes. There is no stronger approach that for retailers and manufacturers to work together through shared intelligence to combat instability and promote future growth.

What is the best approach for the current atmosphere? The alarm bells going off with retailers and manufacturers in response to Amazon’s latest muscle flex are based on the speculation of what could happen. When companies respond with fact-based decisions, they do so with a calculated understanding of what will happen. This allows them to remain agile enough to make educated pivots when necessary without exposing themselves to unnecessary risk.

The CPG sector has been through many revolutionary changes in its go to market philosophy over its rich history. Like any revolution some come out stronger and some cease to exist any longer. This revolutionary change could be the most volatile in CPG history. Is your organization prepared to come out of it stronger?

 What to Read Next: What CPG Companies Can Learn from Netflix About How to Use Analytics


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