“The advantage that big retailers and grocers had against Amazon was their physical stores and the decades of experience building an in-store shopping experience,” said John Roswech, executive VP of brand solutions at Criteo. “With one $13.7 billion check from Amazon, that distinction is gone.”
Generating value from a brick-and-mortar footprint for ecommerce sales is something Wal-Mart has been pushing aggressively since it bought Jet.com last year. In April, Wal-Mart announced a new policy offering discounts to Jet.com shoppers who picked up items from a store, and the retailer clears that margin by saving on the cost of ecommerce fulfillment.
A Jet.com executive speaking on background to discuss internal strategy said that “one goal for the store pickup program is to marry the kinds of products typically bought online – like electronics, tools and furniture – with the high-volume grocery and packaged food sales that still happen primarily in stores.”
Private Labels And Brand Concerns
Private label product lines have become a backbone for grocers like Costco, Wal-Mart and Wegmans. Amazon has deployed its own burgeoning private label brands as true ecommerce category killers.
However, Amazon’s private labels haven’t yet extended to grocery or CPG products.
“Everyone’s writing about the impact the Whole Foods deal could have on the Target or Kroger types,” Roswech said, “but really what is the impact this has on brands, which are in a position to be disintermediated from that retail position that’s defined the past century or so for their products?”
For instance, Amazon has used its position as the shopper-consideration starting point to elevate its private labels on Amazon searches and shopper inquiries on Alexa. The ecommerce giant has pushed top CPG brands like Mondelez and General Mills to go direct-to-consumer via Amazon, instead of through retail chains, a move that could improve profit margins and potentially save costs on product design and in-store marketing.
With Whole Foods’ own private labels in the fold, cookies and cereal brands could risk the same dismal fate as, say, battery companies, which lost a key ecommerce foothold when Amazon debuted a rival product line.
And it isn’t just Amazon. Jet.com has been phasing out private label products owned by Costco since Wal-Mart took over. Friday’s deal could raise eyebrows among the many men’s apparel companies that compete with Bonobos and rely on Wal-Mart for distribution.