The Internet phenomenon has been dramatic for many businesses and industries that, even today, are looking for a “new business model” that can make them economically viable.
The most affected industries have been those whose services and products are an easy prey of the business digital transformation. The travel industry and especially airplane booking, gaming, journalism, and in general, the entire audiovisual and media industry, face a disruptive change that leave many companies dying while unexpected competitors arise.
This change has being slower (but equally unavoidable) in all those products and services that require physical transportation of the good or service (in the latter case: a physical interaction).
The spearheads of this new trade “without stores” have been, until now, companies like E-Bay, Ali-Baba and outstandingly AMAZON.
Specifically, in our realm of the food industry it is recalled the failure of the company WebVan.com, in July 2000 (one of the largest bankruptcies of the dot-com era, with losses that accounted more than 800 million dollars), during the dotcom bubble in the USA.
It was not until recently when, after many modest attempts, in some markets such as the United Kingdom, success stories began to appear, mainly featuring modern distribution and new e-commerce platforms; as well as, regional initiatives with distribution and local delivery in the USA.
Will this time be the right time or rather we will see the same failures of 2000 again?
From fresh fruit and vegetable farming industry, until now, all this looked odd to us. We see from the distance how “all the story unravels” while everyone tell to us about the many opportunities we are losing by not selling our products in existing ecommerce platforms.
But here goes AMAZON (one of the investors of the fateful WebVan through the merger by acquisition with Homegrocer.com, which also failed) and rescues the idea, not so long ago, of food distribution, launching AMAZON FRESH. After replicating the concept in different US cities and exporting it to other countries, AMAZON, again, makes an unexpected move, invests in a pilot project of physical stores, AMAZON GO. The move shocks competitors and stirs some concerns: “The champion of ecommerce invests in physical stores.”
The next chapter of this story has been the multi-million dollar purchase of the Whole Foods Supermarket chain by AMAZON. So after its own stores pilot project (Amazon Go), AMAZON buys this traditional retailer with almost 500 stores and several distribution centers.
Traditional retailers invest on ecommerce technologies and the kings of online retailing invest in physical stores.
The race for the domination of the food trade has been unleashed with multiple investments and numerous strategies and the question is no longer which one existing retailing models will win: the traditional retailers or their online retailing counterparts. The future seems to be multi-channel.
You have to approach consumers using all possible available channels. And to provide a consistent and satisfying shopping experience you need a wide and deep assortment in the on-line food offer (larger than, for example, to that of consumer electronics).
On the other hand, the typical high logistic costs generated by heavy and perishable products, needs a minimum critical mass and the likely transport combination with other products of greater margin to reduce one logistical impact that probably only achievable in traditional retail distribution activities.
It is this way that we come to terms with the concept of “The Total Retailer”; the one that reaches consumers in every possible way (digital-physical blur). But to become a Total Retailer, both traditional retailers and online retailers face an investment horizon of unparalleled size in the recent history of global distribution.
In order to develop an ecommerce technology that could rival the one developed by AMAZON, a traditional retailer needs an investment equivalent to the one needed to deploy a global chain of “brick and mortar” stores. And vice versa, for an ecommerce retailer that already has a powerful online business, the challenge is to develop an efficient well-functioning network of stores globally that allows them to reach consumers anywhere, everywhere.
Therefore, in one case as in the other, the size to compete globally in food retailing has increased exponentially. The outcome will be more mergers and acquisitions, more new developments and investments in “brick and mortar” stores to reach, as fast as possible, the new critical size threshold needed to be able to compete globally. And let’s not forget that when technology defines a business, “The Winner Takes All”.