Fascinating to hear the latest speculation on Amazon's moves into the mainstream Grocery market. The alleged move to open up a chain of mid-sized more affordable grocery stores has sent a number of retail investors running for the hills.
But is the threat really that credible and the likelihood of disruption that material?
Unlike in the digital world, building a scale business with material market share requires the roll-out of physical assets and estate which are generally highly capital intensive to build and slow to scale. Even the most aggressive of players have taken decades to create large scale and efficient store portfolios so not something to take on lightly.
It's also interesting to see how the 'capability conundrum' might play out in reverse. One of the most recurring conversations we have with our clients is how they might close the digital capability gap. It seems Amazon maybe risks falling into the equivalent trap and assumes that what it takes to run a great grocery chain at scale is the same as what it takes to be a great digital business.
Of course the route may well be M&A driven which might enable Amazon to get a fast start but even so the ability to transform the performance of an existing player into something market beating requires rare skill and experience.
As ever media hyperbole surrounding Amazon may well have overstated the plans but it seems the impact almost certainly has been overstated too.
Grocer shares turn lower on Amazon supermarket report Supermarket shares turned lower on Friday, with investors relegating the stocks to the discount bin following a report that Amazon is planning to open dozens of grocery stores across the US. According to the WSJ, the ecommerce giant is stepping up its push into the food business. It plans to open its first grocery store in Los Angeles as soon as the end of this year and has signed leases on other locations that could be opened early next year. Amazon sent shockwaves through traditional brick and mortar food retailers in June 2017 when it struck a deal to acquire Whole Foods for $13.7bn. Since then the group has announced a series of price cuts on a variety of food items, sparking concerns of an all-out price war in the sector.