E-commerce expert calms retailers’ fear of Amazon driving away their Oreo and Cheerios customers
He said retailers are better at fulfillment of impulse purchasing and data sharing than Amazon.
Amazon has recently invited some of the largest confectionery and snack brands in the US, including General Mills and Mondelēz, to its Seattle headquarters in May, according to a release.
The e-commerce giant’s spokesperson, Kelly Cheeseman, told ConfectioneryNews the meeting is about encouraging those CPG brands to innovate with Amazon across the supply chain to benefit customers.
“We’ll discuss topics like packing reduction, which has a broad range of benefits from faster delivery to customer delight to reduced waste,” she added.
However, a group of retail industry leaders unanimously voiced their concerns on LinkedIn, suggesting Amazon’s move may make matters worse for retailers as more of their customers will likely be migrating to online shopping.
The founder of GrocerKey (an e-commerce grocery technology and operations company), Jeremy Neren, commented, “[it is an] opportunity for CPG brands perhaps, [but it is an] issue for wholesalers and retailers.”
Former director of consumer transaction technology firm NCR, Bill Miller, also had a similar perspective. He commented on LinkedIn, “The pace of disruption continues to accelerate… CPGs will go DTC (direct-to-consumer) more and more as well… stores must find their unique niche and fit in the future model.”
Walker, who has been working as an e-commerce consultant for retailers for over a decade, said: “traditionally, physical stores have so many different store formats, whether they are big stores or convenient stores. The ability to meet consumers’ impulse needs is really easy.”
“When you are in the mood for a single-serve chocolate bar or a single pack of crisps, you are within miles if not yards of heading to a convenience store to have that for you… Naturally, that’s the space an internet retailer can’t necessarily address.”
However, what is smart about Amazon is that it will have more engagements with those CPG brands in terms of “developing new products and creating exciting brand space online” – an area where traditional retail has a strong foothold, he said.
Walker pointed out there is also a “reward nature” for impulse purchase, according to his previous experience working at Tesco’s packaged foods division.
“It’s a treat for something going well, or for something difficult at the same time [for a shopper]. Because of that, it’s not always pre-planned. That’s the area where retailers like Tesco and Wal-Mart naturally gain their profits.”
Creating ‘theatre’ around seasonal events
In addition to grasping consumers’ impulse buying behavior, retailers also surpassed Amazon in promoting seasonal sales, Walker said.
“In the UK, I don’t necessarily see a standout leader [among retailers] in confectionery gifting.”
“There’s a great opportunity to have an enhanced experience with gifting [in retail], whether it’s printed packaging that goes ‘congratulations’ or ‘Happy Birthday,’ then you got the job.”
“It works very well for small gifts such as multipacks of chocolates,” he added.
“The opportunity to present those gifting solutions is something well within the grasp of traditional brick-and-mortar retailers, because they’re very used to talking on the seasonal platform… When you come to Tesco, you know the season because the trading space is very distinct: there’s a lot of Easter confectionery products out there.”
By comparison, Amazon is not strong enough to create such “theatre” around the major seasonal events, Walker said.
Limited data from Amazon
The other advantage that retailers have over Amazon is data sharing, Walker added.
“Retailers have a long history of working with market research firms who share sales and performance data… and they are able to commercialize the data.”
The data from Nielsen, IRI and Kantar tell retailers how each of their categories is performing against the market, as well as showing how a seasonal promotional activity is doing, Walker said.
However, to gain any customer data from Amazon, a retailer has to be an investor in its media services and operations, he explained, and the data it could provide is a much smaller amount than those from the market research companies.
What about Amazon’s own c-store?
In late 2016, Amazon announced the launch of “Amazon Go,” the first retail store that does not involve cashiers and checkout lines, and, instead, it features a tracking system to determine what a customer has bought.
The opening of the first Amazon Go store, which was supposed to take place last month, was delayed due to unknown reasons, CNBC recently reported.
However, the mounting efforts made by Amazon to ship products directly to consumers has raised some eyebrows within the retail industry as many question why the e-commerce giant decided to open its own convenience stores.
“I think from a brand perspective, Kellogg’s or Oreo’s, they have to think about mixed channels they are operating in. They have to think where their products are ultimately reached by consumers,” Walker said.
In terms of Amazon Go, Walker believed there has to be a necessity why CPG brands sell their products in this channel.
“How they [CPG companies] are going to do that is open to debate and discussion,” he said. “It might cause conflicts with other outlets like Wal-Mart, but those brands need to do what’s best for their customers.”