Four Ways Food and Beverage Companies can Outmaneuver Amazon
Posted by John Bek, Segment Leader, NetSuite Food and Beverage
As Amazon continues to pursue major market share across numerous industries, electronics retailers, pharmacies, consumable manufacturers, department stores, food delivery companies and grocery stores stand among those sectors most impacted by the ecommerce giantâ€™s expansion.
The fourth-largest company in the world by market cap, Amazon is a contender on both the B2C and B2B frontsâ€”a reality that at some point will likely impact the food and beverage service industry. Take restaurants, for example. Unlike institutional customers (i.e., hospitals, schools, military bases, etc.), which usually buy on contract, restaurants would be a fairly easy chunk of business for Amazon to bite off in the future.
In fact, for the thousands of independent eateries and smaller restaurant chains that arenâ€™t buying from any one supplier, Amazonâ€™s offer of an easier, more streamlined way to shop for food and beverages would be a no-brainer. After all, these buyers are consumers themselves, and theyâ€™re used to shopping like that anyway.
Hereâ€™s the disruptive part: even if customers know that theyâ€™re not getting the best possible price, the reason they stick around is because they know the experience will be convenient and easyâ€”and that delivery will be quick. Theyâ€™ll put a few items in their shopping carts and, at some point, hit the â€œbuy nowâ€� button, knowing that their goods will arrive in the next day or two, guaranteed. Itâ€™s this â€œonce Iâ€™m in, Iâ€™m inâ€� mentality that keeps Amazon moving steadily into new industries. In other words, a buyer for a local restaurant isnâ€™t just a buyer for that establishment; he or she may also be an Amazon Prime member who would like to extend the B2C experience into the restaurantâ€™s procurement strategy. It’s the evolution of consumer expectations making the leap into B2B procurement that food and beverage distributors should keep in mind.
Stepping Up to the Plate Now
So, what can food and beverage distributors be doing now to ward off any potential threats from Amazon? For starters, one of the best strategies will be to offer support that rivals Amazonâ€™s own offering. For example, Amazonâ€™s secret sauce lies not only in its ecommerce shopping cart, but also in the logic behind that cart in terms of creating the right flow, process and product at the right time. Making that happen requires both ecommerce and a complete logistics infrastructure. Amazon has infrastructure in place that allows it to store the sellersâ€™ products (i.e., Fulfillment by Amazon or â€œFBAâ€�) and fulfill orders very rapidly and efficiently.
Here are four more important steps that all food and beverage companies should be taking now:
- Donâ€™t wait until the inevitable happens. Five years ago, Walgreens probably would have laughed off the fact that the worldâ€™s largest online book seller could invade its turf, but thatâ€™s exactly what happened when Amazon bought PillPack last year. The best strategy is to prepare now by updating or replacing any antiquated systems, developing good ecommerce strategies and shoring up valued customer relationships that may need attention.
- Integrate automation into your operations. If thereâ€™s one thing that Amazon is great at, itâ€™s getting orders out the distribution center (DC) door and out to its customers quickly. Credit some of the companyâ€™s automation investments (i.e., its purchase of robotics maker Kiva Systems in 2012), with helping to propel that speedy-delivery mission. An industry that was historically rooted in one sales representative matched up with one restaurant owner, the food and beverage sector could benefit greatly from a more automated, streamlined approach made possible by an enterprise resource planning (ERP) platform combined with a customer relationship management (CRM) solution and other tools that enable high levels of automation.
- Take an introspective look at your operations. Look inward at your companyâ€™s processes; evaluate them for potential inefficiencies, rigidity and errors; and find the gaps that need to be filled. Recognize that youâ€™re dealing with a business landscape thatâ€™s evolving, and that even your best customer relationships may not withstand the powerful draw of a competitor like Amazon. Using advanced technologies and automation, you start to position your company for successâ€”should the threat become a reality.
- Utilize a robust, omnichannel technology platform.Â Thanks to the overall shift to ecommerce selling (versus face-to-face sales), food and beverage companies should be using ERP, CRM and other tools that allow them to sell online, via mobile device, face-to-face or using the phoneâ€”whatever the customer prefers. NetSuite, for example, helps companies create an Amazon-like omnichannel experience thatâ€™s vastly different than what most food and beverage companies have used historically.
Right now, food and beverage distributors arenâ€™t seeing much competition from Amazon. The idea has reared its head from time to timeâ€”a 2017 report from JPMorgan claimed that at the time Amazon wanted to â€œdive into food service distribution, potentially shaking up an industry now dominated by three large playersâ€�â€”but has yet to transpire. Spurred on by the Whole Foods acquisition, which took place around the same time, consultants like Caryn Hecht were predicting a similar fate for wholesale food distribution.
â€œAmazon will continue to leverage increased buying power and lower volume cost, provide a greater product selection, and now have the infrastructure for faster delivery completely by-passing wholesalers,â€� Hecht wrote in How Amazon Acquisition Impacts Wholesale Distribution.
â€œThe faster to market advantage of traditional wholesale distribution will be threatened by this new model,â€� Hecht added. â€œTo remain relevant in the new frontier of retail, wholesale distributors must be ready to differentiate their offerings and services through a deep understanding of their industry and customers.â€�
Learn more about NetSuiteâ€™s software for food and beverage distributors.