The early morning hours of June 16 started like any ordinary Friday. Then came Amazon’s shot heard round the world, its boldest move yet in the retail revolution as the online giant announced its acquisition of Whole Foods Market. Journalists, retail analysts and PR teams shifted into hyper-drive to analyze the news before they’d even had a chance to finish their morning coffee.
The Whole Foods deal, however, was just one of a series of events, all in a 48-hour period, that will change retail forever. Here’s a quick recap:
On June 15, German discount grocer Lidl opened its first U.S. stores, as Lidl’s U.S. CEO told Supermarket News that Lidl intended “to beat the best prices in the market.” U.S. grocers, already under assault from Walmart, Amazon Fresh, Aldi, Kroger and a horde of other competitors, are feeling renewed pressure from Lidl’s appealing store design, innovative merchandising, high product quality and ultra-low prices (12 to 30 percent lower than competitors’ published promotions, according to Supermarket News.)
In any ordinary week, Lidl’s U.S. arrival would have been the week’s top retail story. Amazon’s acquisition of Whole Foods, however, was the biggest jolt to retail and grocery in several years – even more significant that Walmart’s acquisition of Jet.com last year. At the end of the day, other grocery stocks plummeted as the financial markets grasped the strategic significance of the Amazon-Whole Foods deal.
That acquisition almost drowned out another key event on Retail’s Freaky Friday – Walmart’s $310 million acquisition of trendy menswear retailer Bonobos. Walmart has been on a major spending spree on digital brands as it squares off against Amazon, and its latest purchase follows on the heels of its acquisitions of innovative retail startups Jet.com, Moosejaw, Hayneedle.com, Modcloth and Shoebuy.
Taken together, these events mark a watershed moment in retail, particularly in the grocery and apparel segments. And while most of the retail media coverage this year has focused on the so-called “retail apocalypse” marked by thousands of store closings, the real story in retail is far more complex and exciting. The retail industry is undergoing an intense time of transformation and reinvention, and the news from Lidl, Amazon and Walmart underscores the fast-paced disruption of established retail models.
Is retail becoming simply Amazon, Walmart and everyone else? I don’t think so – for one thing, disruptors such as Warby Parker, Pirch, Paul Evans, Outdoor Voices, TOMS, Shinola, Lidl and hundreds more are enjoying solid growth and can quickly build a passionate, loyal fan base. Fashion incubators are springing up from New York to San Francisco and beyond. Yes, some of these companies will get acquired by a Walmart or Amazon – but many more will grow into strong, mature companies that will keep an innovative, entrepreneurial spirit.
It’s no accident that so much technology innovation today is focused on the retail industry. According to IHL Group’s research, Amazon spent more than $15.1 billion on innovation in 2016, more than the top 20 U.S. retailers combined. IHL calls this the TIGIR (Technology Innovation Gap in Retail) and says retailers must dramatically increase their technology spending to compete. The industry is making strides. Zappos, Walmart, Neiman-Marcus, Lowes and many other retailers have their own innovation labs, Kwolia’s Retail Innovation Lounge was a hit at SXSW and Shop.org, and technology accelerators such as REVTECH are nurturing early stage tech startups in retail, grocery and restaurants (Ketner Group is a proud sponsor of both).
It’s an exciting, disruptive time in retail. Our team at Ketner Group is fortunate to work with many of the technology companies that are enabling retailers to compete against the Amazon-Walmart juggernaut, giving retailers, grocers and other businesses the technologies they need to drive sales, profits and customer engagement. As the events of June 15 and 16 demonstrated, retail is changing forever – but the story is far from over. Stay tuned; it’s going to be a wild ride.
Austin
