Published on: October 31, 2018
Content Guy's Note: The goal of "The Innovation Conversation" is to explore some facet of the fast-changing, technology-driven retail landscape and how it affects businesses and consumers. It is, we think, fertile territory ... and one that Tom Furphy - a former Amazon executive, the originator of Amazon Fresh, and currently CEO and Managing Director of Consumer Equity Partners (CEP), a venture capital and venture development firm in Seattle, WA, that works with many top retailers and manufacturers - is uniquely positioned to address.
This week, we focus on how technology is providing lot of tricks and treats for retailers an suppliers, but very little reassurance about future survival.
And now, the Conversation continues…
KC: Happy Halloween. Good day for us to talk about the tricks or treats awaiting businesses in the coming days/weeks/months/years if they don’t start to innovate for a dramatically changing consumer. Take, for example, Michael Sansolo’s column last week about the Washington Post food writer who doesn’t cook because she hates food shopping. Now, she’s lucky because she’s in a job where she gets paid to eat out, which most of us cannot do. But I think she’s a lot more like other consumers than most retailers would want to admit, and she’s just responding to a food shopping experience that really hasn’t changed as much as other segments have in recent days.
Tom Furphy: I really enjoyed Michael’s piece on the article. The author is certainly an edge case in her career and extreme disdain for food shopping. But, like Michael, I do think her general sentiments are reflective of many consumers, millennials and beyond. The comments to the article certainly support that. Many consumers dislike shopping for groceries in a traditional store.
Across our lives technology and new business models have made life much easier and (in many cases) more fulfilling. Think of services like Airbnb, Netflix, Amazon Prime and Uber. These companies have blown up prior paradigms with technology and new models that have changed our expectations of service. The consumer is in a much different place now than they were five or ten years ago, with more control and choice. They expect models to change and they embrace models that do actually change. In fact, many younger consumers can’t remember a world without these models.
Requiring someone to give up an hour or more to take a home inventory, make a list, go to the store, shop, wait in line to pay at the front end, then lug the products home is a pretty tall ask in today’s world. Shoppers have every right to challenge that and take their dollars to models that better serve their needs.
KC: It really is extraordinary that entire other categories have gone through major transformations while too many supermarket retailers have kept telling themselves that they’re immune from the retail realities that have affected other channels. Gillette can get nicked by Dollar Shave Club and Harry’s … traditional bed companies are caught asleep while companies like Casper and Tuft & Needle turn into their worse nightmare … shoe retailers get kicked by Zappos … and so on and so on. (Did I forget to mention a little company called Amazon?) I’m just not sure how they justify a slow, cautious approach to change at a time when such tactics only leave you farther and farther behind more aggressive competition.
TF: Love the witty humor. Perhaps traditional retailers should fear the stored up aggression of Amazon.
Change is hard. And I realize we risk oversimplifying when we advocate for change in our conversations. But the stark reality is that the Grocery industry, and this applies to CPG and grocery products in other retail segments, is massively behind where it should be. Remember, the innovations that you’re seeing in the market from Amazon were started years ago inside the company. These innovations are difficult and require true, long-term commitment. They will continue to be relentless with store format innovation, which will also encompass their Whole Foods and other grocery operations. It’s on!
Think about it. If you were to close your eyes in the middle of a grocery store 20 years ago and open them today, for the most part you would not notice significant changes. Except for a few little tweaks here and there, some upgrades in the perimeter and the elimination of photo processing and video departments, the stores are fundamentally unchanged. That is dangerous.
KC: In the food industry, I have to wonder if it is just a matter of time before CPG companies get fed up with the glacier-like attitudes that are standing between them and shoppers, and start to get even more aggressive about disintermediate traditional retailers. They may not be able to get around the top-20 players, say, but it strikes me that there are a lot of retailers out there (think every retailer that could be susceptible to competition from the likes of Aldi or Dollar General) that are not unique or innovative enough to survive the fast-approaching storm.
TF: You’re right. The top retail players still have the clout of market share on their side. But that clout is weakening by the month. Brands are generally not content to sit on the sidelines and let the retailers call the shots. They are treading forward with new initiatives and routes to market, albeit carefully for fear of large retailer backlash.
In our businesses, we’re seeing it first-hand in spades. Manufacturers are being disrupted by new business models. They see Amazon as a partner that provides great volume and gets them more directly to the consumer. But is also a partner that is intensely competing via private label. That leaves them the options of direct-to-consumer, leveraging new capabilities, deeper retailer partnerships or some combination of the above. I can’t say too much here, but we’re seeing manufacturers pushing through directly to the customer in very creative ways. Some involving retailers and some not. Regardless, they are not waiting for the retailers to collaborate.
The Conversation will continue…
- KC's View: