By Andrew Elliot
It has long been said retail is theatre. And just as theatre requires the willing suspension of disbelief, so does shopping. We believe we might find something new. We believe a new product might somehow change our lives. The truth is far more banal.
When shopping for the everyday necessities of life, people are creatures of habit. And not just some of the time. Almost all the time. Some industry research has even pegged our shopping habits as consistently boring. Nearly 90% of purchases are the same each and every month. No wonder Amazon’s end game is the creation of a seamless, instant-gratification model of distribution.
If habit already trumps novelty and excitement, Amazon’s expansion of its grocery delivery service, Amazon Fresh will encroach even further into this small space for spurring behavior change. If Amazon can habituate people to repeat purchases through scheduled deliveries, where does that leave retailers or upstart, category-busting brands? Granted, Amazon Fresh is in only three West Coast cities today; but San Francisco, Seattle and Los Angeles could well be Indianapolis, Pittsburg and Duluth tomorrow.
Our coming drone overlords want to further automate what’s been a mostly fragmented, human-led process for the distribution of everyday goods into our habitual, boring and predictable lives. Of course, I’m being just a wee bit hyperbolic, but only to raise a question: Are consumer package goods companies consciously deciding to align with the logistic powerhouse of the future instead of the distribution giants (brick-and-mortar retailers) of the 20th century?
It’s not so far-fetched. Early signs indicate that’s where we are headed. Despite commanding only 6% of total retail sales at the end of 2012, CPG companies like P&G, Georgia Pacific and Seventh Generation have given Amazon every advantage it needs to cement and automate consumer purchases on a weekly or monthly basis. By inviting the online behemoth into its warehouses, as recently reported, consumer package goods are basically saying to retailers, Sure, you helped me build a billion-dollar brand, but now we are going to help your biggest competitor!
Are CPG companies giving up too much by aligning with Amazon? More importantly, what does this mean for retailers stuck in the middle? In 2014, I think there are three shifts worth watching.
The duality of consumer v. shopper will be dismantled.
The consumer is where you focus to build a brand; the shopper is where you focus to close the sale. Maybe that’s the way it has worked for decades, but not in the future. Those once clear strategic lines are increasingly muddled by the disruptive role mobile plays along the path to purchase. This demands a radically different go-to-market strategy for brands. The psychology around consumption is changing. The path to purchase is no longer linear. The old strategy talk of clear delineations among so-called pre-shop/shop/post-shop phases, no longer apply. Now people live and people shop. All the time. That means “consumer” behavior is being replaced by shopper behavior. This changes the temporality of the so-called “moment of truth.” It’s not just in the store anymore.
The wildcard of Millennial preferences will keep everyone guessing.
For retailers, the enemy is Amazon. For CPG companies the foe is private-label. Or is it? After all, somewhere between these pitched battles is another threat: Millennial apathy toward big, multinational brands. They don’t want them. They want local, small-batch and environmentally responsible. Yet where is the best place to find these brands? If the next generation wants the new, the local and the ethically sourced, why are CPG brands working with Amazon to build a system that caters to the established, the tried-and-true, the blockbuster brand only? For the last century, CPG companies, from P&G to Kimberly-Clark and Unilever, transformed everyday life. They brought innovations to the laundry room and the bathroom alike. Can they still introduce the new without retailers? More importantly, it’s worth asking who is better suited to help CPG companies appease the counterculture tendencies of Millennials – retailers or Amazon?
Retail isn’t theatre anymore, but it could be again.
The biggest threat to retail stores is, of course, Amazon, but also shoppers figuring out how predictable they are. If all those automated purchases budgeted with Smartphone apps handle all the necessities, what happens to the extra money left over? What promised novelty and newness will drive consumers back to stores again? The onus is now on retailers to transform what’s become a predictable warehouse environment into something far more interesting after an era of warehouse-style aesthetics.
Despite the Amazon threat, real opportunity remains for retailers and CPG brands alike. Amazon’s aggressive push into every corner of consumption and consumer culture isn’t inevitable. CPG brands need to consider whether they are ceding too much of the already limited margin they have for changing consumer behavior.