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Home » Can Grocers Survive the Amazon and Wal-Mart Squeeze Play?

Can Grocers Survive the Amazon and Wal-Mart Squeeze Play?

July 12, 2017
MultiChannel Merchant

The growth of Wal-Mart in grocery occurred as the company experimented with hypermarkets drawing from the European experience before landing on the supercenter model in the late 1980s. The higher shopper frequency for food that feeds scale for the combined store, their advanced hard goods merchandising technology adapted for grocery and their leading supply chain platform created competitive advantage in grocery, an industry lagging far behind other retail categories in terms of web and technology investment.

The complex nature of food retail (frozen, refrigerated, perishable fresh, bulk) put grocery at the bottom of the digital cart as a priority market. But along comes Amazon in urban markets where Wal-Mart isn’t, bringing its digital leadership in much the same way as Wal-Mart: Frequency, technology and supply chain. Wal-Mart saw the future and blinked, buying Jet.com in the hope of succeeding in e-commerce after repeated digital disappointments.

While Amazon’s tender for Whole Foods is indeed a pitched battle with Wal-Mart, the digital and physical squeeze play will grab share primarily from the rest of the grocery landscape, if history is a guide. We have a model in the consolidation of the DIY industry, where Home Depot and Lowes have split the North American market, leaving specialty and smaller format players battling for the remaining market share.

Creating a Survivable Future

Grocers need to take a hard look at their strategies and assets. Most have been content to play the local game, believing the traditional convenience of local stores would offset the buzz of urban and other digital food concepts. They also trusted that the complexity of the food supply chain would not succumb to digital advantage and that customers would remain loyal (after all, they all have our loyalty card, right?).

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