Page 10 - April 2017 Newsletter

INDUSTRY UPDATES Contributed by: Jesse Peltier Representatives for these companies sion at Amazon, where an obsession with INDUSTRY UPDATES
either declined to comment or failed to customer value dominates its strategy.
Amazon and Walmart are in drill you down on price.” respond to requests for comment. But now, Amazon is selling individual
an all-out price war that is Executives inside these companies would items at Costco prices while not getting The Minneapolis retailer will open the for Target on the grocery side.
the same wholesale price that Costco
terrifying America’s biggest But this time around, Walmart’s renewed only speak on a condition of anonymity enjoys. In short, it’s going to be really first of its “reimagined” stores in a Hous- “Publix’s customer is a lot of what
focus on its “Everyday Low Price” prom-
ton suburb later this year. The new stores
Target is trying to go after — one
brands ise coincides with Amazon’s increased because negotiations with retailers are hard for Amazon to turn a profit on those have two separate entrances. One area who wants a slightly premium
Grocery suppliers are feeling goods. of the store features “displays of exclusive offering and a better atmosphere,”
the squeeze — big-time. brands and inspiring seasonal moments,” Greider said.
When Walmart sees this, it freaks out on as Target puts it, for leisurely shoppers.
the supplier, industry executives say. And The other is an area for picking up online The grocery side of the new Target
Last month, Walmart gathered it doesn’t matter to Walmart that Amazon orders and grabbing groceries. stores will feature a beer and wine
some of America’s biggest house- may not be getting the same wholesale shop and a “robust assortment of
hold brands near its Arkansas price that retailers like Costco or other Target will roll out the new store designs fresh produce as well as quick grab-
headquarters for a tough talk. For membership clubs receive. in 500 stores in 2018 and 2019. With its and-go options and meal solutions,”
years, Walmart had dominated the
retail landscape on the back of its In other words, even if Amazon isn’t
“Everyday Low Price” guarantee. But profiting from its extremely low prices,
now, Walmart was too often getting Walmart is still demanding the same
beaten on price. bulk-rate discount applied to individual
items.
So company executives were there,
in part, to reset expectations with “Walmart has had it explained to them
Walmart’s suppliers — the consumer by myself and others,” said one industry
brands whose chips, sodas and dia- insider who asked for anonymity talking
pers line the shelves of its Supercen- about private discussions. “My conclu-
ters and its website. sion has been that they beat all suppliers
aggressiveness in its own pricing of up regardless because they need it to be
Walmart wants to have the lowest the packaged goods that are found on confidential. a problem at the senior levels of these
price on 80 percent of its sales, supermarket shelves and are core to companies.”
according to a presentation the com- Walmart’s success, industry executives An Amazon spokesperson said in an
pany made at the summit. and consultants say. email: “At Amazon we protect low prices In some instances, Amazon is willing
for our customers, every single day — to lose money for some period of time
To accomplish that, the brands that The result in recent months has been a nothing has changed in terms of our on a product it feels it has to have. Jeff
sell their goods through Walmart high-stakes race to the bottom between focus or how we operate.” Bezos’s company knows, after all, that it
would have to cut their wholesale Walmart and Amazon that seems great has to continue to increase its selection
prices or make other cost adjust- for shoppers, but has consumer pack- Walmart did not provide a comment. in non-perishable grocery goods if it is
ments to shave at least 15 percent aged goods brands feeling the pressure. going to really challenge Walmart in the two-sided stores, Target is looking to cap- according to the retailer.
off. In some cases, vendors say they The pricing crackdown also comes in the Amazon algorithm $800 billion category. ture customers on both ends of the retail
would lose money on each sale if wake of Walmart’s $3 billion acquisition spectrum, from those who want conve- Grab-and-go options and pre-
they met Walmart’s demands. of Jet.com and its CEO Marc Lore. Lore One piece of the battle, executives say, Follow this link to finish this story amaz- nience to those seeking an experience. pared foods are a hot category for
now runs Walmart.com and has said is an Amazon algorithm that works to ing story... grocers, and more are emphasizing
Brands that agree to play ball with one of his mandates is to create new match or beat prices from other websites https://www.recode. The true test of the new design could fresh and convenience foods in
Walmart could expect better distri- ways for the retailer to beat everyone and stores. Former Amazon employees net/2017/3/30/14831602/amazon- come in Florida, where Target has their stores.
bution and more strategic help from else on price, including Amazon. say it finds the lowest price per unit or walmart-cpg-grocery-price-war struggled to compete with Publix Super
the giant retailer. And to those that per ounce for a given product — even if Markets Inc. and Wal-Mart Stores Inc. Publix’s new store in downtown St.
didn’t? Walmart said it would limit The pricing pressure has ignited in- it’s in a huge bulk-size pack at Costco — Target’s new dual-concept (NYSE: WMT) for grocery market share, Petersburg puts the deli, produce
their distribution and create its own tense wargaming inside the largest CPG and applies it across the same type of said Justin Greider, vice president with and meat departments front and
branded products to directly chal- companies, according to people familiar good on Amazon, even when the pack stores could set it apart JLL Inc. in Orlando. Greider specializes in center; Sprouts Farmers Market Inc.
lenge its own suppliers. with discussions at Procter & Gamble, size is much smaller. from Publix, Walmart, retail real estate. (NASDAQ: SFM), which just opened
Unilever, PepsiCo, Mondelez and Kim- HomeGoods and Amazon its first Florida store in Tampa, also
“Once every three or four years, berly-Clark. There is no one-size-fits-all So let’s imagine Costco is selling a pack When the SuperTarget concept debuted, has a large prepared foods selec-
Walmart tells you to take the money solution. of 10 bags of Doritos for $10 — or $1 Target Corp. (NYSE: TGT) has unveiled it was predicted to be a threat to grocers, tion.
you’re spending on [marketing] ini- per bag. Amazon’s algorithm notes that its new approach to brick-and-mortar Greider said, as Walmart Supercenters
tiatives and invest it in lower prices,” “It’s dominating the conversation every one bag is $1 at Costco and, in turn, retail — one that appeals to both time- proved to be. Want to finish reading?
said Jason Goldberg, the head of the week,” said an executive at one of these lowers the price on Amazon of a single crunched shoppers and those who come http://www.bizjournals.com/tam-
commerce practice at SapientRa- companies. bag of Doritos to $1. in to wander the aisles, leaving with That hasn’t been the case in Florida, pabay/news/2017/03/23/targets-
zorfish, a digital agency that works everything from throw pillows to cotton where Publix is the dominant grocer — new-dual-concept-stores-could-
with large brands and retailers. “They That is a great deal for customers — balls in their baskets. and an especially menacing competitor set-it-apart.html
sweep all the chips off the table and something that is likely driving the deci-
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