There’s some speculation out there that Amazon bought Whole Foods in search of grocery supply chain improvement. It’s no secret the types of tools for managing supply chain depend greatly on a variety of factors, among them the nature of the products being moved. Therefore it’s plausible, despite seeming unlikely, that the internet powerhouse which helped write the book on successful supply chain management needs to learn a thing or two about how to get fresh food to consumers. After all, they wrote that book by shipping books and other non-perishables, not beefsteak tomatoes and gallons of milk.
The acquisition had barely hit the press before there was speculation on what this might mean for grocers moving forward. Market forces aside, Amazon’s move had a lot to do with logistics.
As Amazon pushes into the food and grocery space, having Whole Foods essentially gives the company several warehouses full of groceries it can easily push out to local buyers. Plus, the company still benefits from maintaining a retail presence in upscale neighborhoods where the median price point is higher.
The fact is that many tend to look at this era as post retail, but brick and mortar stores and big brands continue to maintain a presence. Further, Amazon has actually expanded into the brick and mortar space with its own bookstores, as well as the recent Whole Foods acquisition. Some of the logistics between the eCommerce and retail businesses are similar and offer similar benefits.
One of the big strengths in retail is the chance to connect with your customer. Much of a brand’s identity can be distilled down to how a customer interacts with it. Online businesses have to present a simplified storefront with easy access to all items, and everything categorized very meticulously. If that sounds like a retail storefront, that’s because the only missing element is the human presence.
Retail businesses have the added benefit of customer interaction. eCommerce businesses tend to only hear from dissatisfied customers, so the emphasis is on providing excellent return or exchange policies. In retail, knowledge is power. Educating consumers on purchasing decisions can lead to upsells and improved revenue.
Supply Chain Management
eCommerce businesses require concentrating a great deal of effort on managing the supply chain. Online retailers must remain particularly agile, able to move product to buyers within a few days’ time. Therefore, warehouse location and delivery times become a factor in addition to holding enough stock on hand to satisfy orders from a storefront that never closes.
Retail faces slightly different circumstances, with devastating consequences if a product is unfulfilled. eCommerce businesses can simply re-allocate product from one warehouse and offer a re-estimation of shipping to accommodate for the longer fulfillment. Retailers have to wait on those warehouses.
That’s a big disadvantage for brick and mortar stores unable to acquire stock upfront to keep. How does one accurately gauge consumer demand? Entire supply chain systems are set up to try and tackle this monumental task, with varying degrees of success.
Convenience and Fulfillment
While brick and mortar retailers have varying challenges with logistics, the truth is that customers still find the instant fulfillment very gratifying. Some are even willing to pay a premium for it, and retailers have begun to adapt to consumer demand by offering price matching programs. Essentially, a consumer can shop for something in store on a smartphone and purchase it for the lowest possible price from his or her chosen retailer.
That makes physical location, stock on hand, and a variety of factors related to marketing and display crucial to closing the deal. When consumers can touch or see something up close, it tends to impact them differently than a photograph hosted online.