Disruption — of industries, delivery channels and long-entrenched ways of doing business — has become such a familiar buzzword on the digital landscape these days that using it barely raises eyebrows anymore, much less makes any jaws drop.
But last week’s $13.7 billion offer by Seattle-based Amazon to purchase Austin-based Whole Foods Market, just may be the disruptive acquisition that finally takes everyone’s breath away.
Using Analytics to Unlock Business Value
The all-cash offer is not only Amazon's largest to date, but proposes to turn the ubiquitous online marketplace into a powerful brick-and-mortar presence with a network of over 460 stores. Overnight.
Yet, while Amazon’s purchase undeniably represents an unprecedented technological investment in the retail grocery industry, the acquisition is also a watershed moment for another reason: it represents the coming-of-age of analytics as a true catalyst for business value.
Razor-Thin Margins and Declining Sales
By way of background, the grocery industry has traditionally operated on razor-thin profit margins. This means that goods must be sold at a very high volume for any grocery chain to be profitable.
Whole Foods Market has historically maintained a margin advantage over other grocery chains due to its focus on offering higher-margin organic foods. In recent years, however, competitors have also begun to offer organic foods, drawing price-sensitive customers away from Whole Foods.
As a result, in February 2017, Whole Foods reported its sixth quarter of declining sales, noting that it planned to close a few stores and lower its financial projections for 2017.
Forays Into Real-World Retailing
So what growth can Amazon expect to see in a company experiencing a sales slump in a low-margin, highly competitive industry? Part of the optimism lies in Amazon’s other recent forays into real-world retailing.
For example, Amazon has already launched brick-and-mortar bookstores in Chicago, New York and San Diego. And Amazon has been working to make its services more tangible for consumers via Amazon Dash, a series of branded buttons for reordering goods.
Building on Existing Infrastructure
Viewed in that strategic context, Whole Foods offers Amazon an established infrastructure that can provide synergistic channels for Amazon tech and services, while lowering financial risk. To highlight two obvious examples, imagine Amazon bookstores located in Whole Foods stores and expanding Amazon Dash to include Whole Foods products.
Another advantage for Amazon lies in providing additional ways to demonstrate the real-world value of its business intelligence and cloud solutions. Amazon currently has a number of analytic solutions, but they are meant for orchestrating data between cloud services.
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Matching Competitors’ Analytics
With Whole Foods as a subsidiary, those cloud operations now have greater potential to demonstrate their value to business decision-making. That value can provide a crucial advantage for a retailer in an industry where growth typically comes only from acquisition and consolidation.
The ultimate play: a retailer that has previously been limited by low margins can suddenly determine where to focus on growing customer experience to better retain customers. Amazon’s acquisition positions Whole Foods to be that retailer, ready to take on analytics-efficient competitors like Walmart and Target.
Unlocking Value Through Analytics
An entire predictive analytics model can be built to adjust business intelligence and machine learning development towards activities that support customer personalization.
That effort spotlights analytics, which Amazon has always put front row center as a key driver of its growth. Based on the current trend toward seeking insights from combining data, Amazon is ideally poised to unlock long-term value for Whole Foods through its cutting-edge analytics.
Disruptive Growth Potential
It’s also worth remembering that from a marketing standpoint, sales growth through store expansion only takes a company like Whole Foods so far. To identify additional growth potential that may be hidden, companies must have the tools to analyze existing sales activity and determine how best to offer additional products to customers while managing costs.
This alters the role of analytics from simply determining which channel represents the best ROI to giving a company such as Whole Foods the tools to up its game in measuring customers’ brand awareness and purchase journeys across multiple channels.
Amazon’s roadmap to business growth has always involved the savvy application of analytics. Now, the possibilities for using those same tools on behalf of Whole Foods seem not only boundless but truly disruptive as well.
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