With Amazon’s recent purchase of Whole Foods, the CPG community has been put into a tailspin trying to figure out what Amazon’s long-term game plan may be. One point that has been easily overlooked in the flurry of excitement is the acquisition of Whole Foods’ private label brand, 365. In the new Amazon age 365, and other private label brands, stand to gain a significant competitive advantage over national brands as more and more retailers adopt an omnichannel strategy that seamlessly merges the on-line and off-line shopping experience.
Omnichannel is a term that has been adopted by the retail world to define a strategy which integrates on-line e-commerce with brick-and-mortar commerce. The objective of this strategy is to deliver greater convenience to the consumer, seamlessly connecting the two places where they engage directly with a retail brand. Technology has been leveraged to reduce the friction of transactions and provide a better experience for the consumer. As technology continues to evolve, omnichannel will likely be a cost of entry for all of retail.
Private Label Advantage
Private label brands today have the advantage of price and perhaps the advantage of shelf position or visibility in-store. With the rise of the omnichannel strategy, private label brands may now have the advantage of consumer experience. All brands sold on a shelf in a retail establishment play on the same level playing field of the consumer transaction. Let’s be honest, there is not much more a brand can do to create a new transactional experience when dealing with traditional retail.
E-commerce has created an opportunity for retail brands to create a new transactional experience. Application of an omnichannel strategy further enhances the opportunity by linking the consumers’ on-and off-line experiences. However, to date, the convenience afforded by an omnichannel approach is universal, and not differentiated. Private label brands present the opportunity for retailers to brand the omnichannel technology that to date has been more or less invisible to the consumer. Private label brands can become the face of the omnichannel strategy.
Branded Omnichannel Experience
We believe that retail brands that embrace the idea of a branded omnichannel strategy will emerge as leaders in the future as the technology playing field is leveled. The simplest and most direct route to a branded omnichannel strategy is through private label brands. Private label brands can create the experiential bridge between on-line and brick-and-mortar. Evidence of this potential could be part of what Amazon found appealing in the Whole Foods acquisition. Amazon has the potential to create the ultimate in convenience, price, quality and experience through 365 as a vehicle for the Amazon/Whole Foods omnichannel experience.
Imagine going on Amazon Fresh for your groceries and having 365 pop up first when you search for orange juice. Technology creates an advantage for 365 as you shop, and delivers added convenience when you chose to pick up in-store or have it delivered. The result is that 365 is given the advantage of association with the convenience delivered by an omnichannel approach.
While many brands are reluctant to truly embrace e-commerce, it is mostly here to stay. The game is changing on many fronts, but the change that is happening could be good news for private label brands. However, it is certainly bad news for the national food brands that struggle to compete on price, are reluctant to embrace e-commerce because people “don’t buy food online…”