The grocery retail industry underwent a seismic shift in 2017, due to increased shopping technologies and novel customer journeys. A majority of the leading brands in the space managed to strike deals with digital platforms, cementing this transition as a legitimate industry shift. By partnering with digital brands, the major players began to provide this blossoming value to their customers. It is unclear which brand completed the most successful deal, but the following five deals were all hugely impactful. To learn more, check out the following piece written for IGD Retail Analysis by Stewart Samuel. You can access the piece by clicking here, or by reading below:
This piece was originally published by CMSWire on December 18, 2017.
“From Amazon and Whole Foods Market through to Aldi and Instacart, we look at five deals which were made in the last year, and their impact on the sector.
1. Amazon and Whole Foods Market
If I had to rank the deals in terms of their impact, Amazon’s acquisition of Whole Foods Market, would be the clear leader. With the acquisition completed in August, Amazon started to drive change within the business almost immediately. This included lowering prices across key items, selling Whole Foods Market’s private brand ranges on Amazon.com, and making Amazon Prime the loyalty program at Whole Foods Market. While the deal also highlighted the importance of physical stores for the future of retail, in an increasingly digital world, it also saw many retailers accelerate their own grocery ecommerce plans.
Broader changes within the Whole Foods Market portfolio can be expected next year, and while we have seen some selling space allocated to Amazon devices, this is unlikely to be the direction that the retailer will take the stores. The focus will need to be on emphasising the retailer’s fresh and prepared foods strengths and use these as the platform for a national Amazon Fresh program.
2. Target and Shipt
Since the Amazon and Whole Foods Market deal was announced, we have seen an increasing number of retailers partner with companies such as Instacart and Shipt to enable them to offer same-day delivery. Partnering in this way enables them to scale up quickly, with relatively lower capital requirements. Target took this one step further in December, acquiring Shipt. This will enable it to offer same-day delivery services to its shoppers at around half of its stores by early 2018, and from almost all stores before next year’s holiday season. The acquisition enables Target to reduce delivery lead times from days to hours, accelerating its ability to offer same-day delivery across the entire US. The retailer will also optimise Shipt’s expertise as it strengthens its supply chain, including integration with Grand Junction, a transportation technology company it acquired earlier in the year.
Last mile, same-day delivery has become the new battleground in US ecommerce. The growth and development of programs such as Amazon Prime and Prime Now, along with third-party delivery services such as Instacart and Shipt, have been central to this. Target’s acquisition of Shipt sends a signal as to the strategic importance of the supply chain in a multichannel environment. Further deals are likely in this area in 2018.
3. Albertsons and Plated
Meal kits were hot news in 2017. While many retailers developed their own ranges to compete with the growing number of online specialists in this area, Albertsons went out and acquired Plated. This deal enabled the retailer to quickly enter this high growth area. Albertsons’ stores provide a platform to significantly expand the distribution of Plated’s ranges and better meet shoppers’ growing demand for convenient meal solutions. The retailer is currently focusing on integrating the service into its operations. Albertsons is aiming to transform the experience for its customers in this area by creating an multichannel meal kit service. This will include being able to purchase the products in-store, ordering online for store pickup or home delivery via Albertsons’ ecommerce service, or having a regular subscription to the service.
The ease and convenience of meal kits will ensure that they stay front of mind for retailers in 2018. However, we expected to see more private brand development in this area, which will start to challenge many of the specialist companies. This will include more tailored ranges, to better meet dietary and nutrition needs, and more flexibility around option combinations.
4. Walmart and Bonobos
Walmart’s acquisition of Bonobos, a leading ecommerce-focused menswear brand, was the last this year in a long line of deals which included ShoeBuy (now Shoes.com), Moosejaw and ModCloth. The addition of Bonobos is part of a broader ecommerce strategy to enhance the customer value proposition, including offering an expanded range while building expertise in key long-tail categories, including clothing and home. Walmart is also focusing on adding best-in-class owned, vertical consumer brands, which will continue to be sold on those brands’ properties, and on Jet.com over time. This will help Walmart to broaden out its customer appeal, particularly among younger and more affluent shopper groups.
While Walmart has made several acquisitions this year, we do expect to see more deals to be done in 2018. The retailer has a clear plan to win with ecommerce; optimising its unique assets is a key part of this. The retailer has started to focus more on its private brands in the ecommerce space; recently it launched Uniquely J on Jet.com. We have seen an uptick in private brand activity across the sector as retailers seek to build shopper loyalty and create new points of difference.
5. Aldi and Instacart
While Aldi’s test partnership with Instacart may not be on the same scale as the other deals that have shaped the sector this year, it is a clear sign of intent. The retailer is working with Instacart to offer delivery in as little as one hour in the Atlanta, Dallas and Los Angeles markets. Hard discount retailers are not typically active in the ecommerce channel, although Lidl is also testing a similar service in partnership with Shipt.
This initiative comes as Aldi embarks on a $5bn investment program in the US. In addition to investing $3.4bn to extend its network to 2,500 stores by the end of 2022, it is also investing $1.6bn in remodelling 1,300 stores by 2020. Partnering with Instacart will potentially help the retailer to reach new customer groups and gain share in the fast-evolving ecommerce channel, as it continues to make major strides within the sector.”
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