Promotional expenditure accounts for a sizeable 20% of costs in the grocery value chain[1]. Despite much hype, most of this spend remains untouched by digital technology, especially the widespread use of store-wide promotions funded by FMCG brands.

Consumer use of digital technology during the shopping trip has accelerated during the pandemic. Most of us are spending more time researching purchases in digital channels and many retailers are seeing triple-digit growth in online sales.

Five years ago, I left corporate life to start my own consulting firm. I have loved this way of working and have relished the opportunity to help some great clients master different aspects of their e-commerce operations. It has also allowed me to achieve a long-held ambition to write my first book, Retail’s Last Mile.

Aldi in Australia has launched a marketing campaign challenging its rivals’ “pointless” loyalty schemes. The memorable ad is winning lots of attention, although the campaign was selective, focusing on only the base earn element of programs such as flybuys, e.g. “receive one point for every dollar you spend”.

Amazon is trialing a new grocery store format (Amazon Go) in Seattle. Amazon Go’s technology has attracted huge interest. For example, sensors on the shelf detect when a product is picked up and add the item to a virtual shopping cart. However, the focus on technology misses the real reason this store format is so disruptive.

Amazon has received a lot of publicity for its latest home-delivery innovation in the US. Prime customers with compatible digital locks can now have packages delivered directly to the boot of their parked car. As with most things Amazon, the move has attracted positive and negative reviews.

Almost all consumer products are bought through an intermediary. We buy products from retailers who bought them from the original manufacturer. Right now, I’m sitting over a breakfast cereal which was manufactured by Kellogg’s but bought at the supermarket.

Over the last year, I have spoken to hundreds of retailers and brands seeking to understand the growth in online marketplaces. One of the implications, that few have yet fully appreciated, is that “direct-to-consumer” sales by manufacturers are about to take off. 

Let’s look at the difference between the traditional retail and direct-to-consumer models.

Many words have been written about the timing of Amazon’s Australian launch, with constant speculation and misinformation about the date. In coming years, the launch date will be nothing but a footnote. What really matters is how to respond to Amazon and, on this, there is much well-intentioned but unhelpful advice. Unhelpful because many commentators are now downplaying Amazon as “just another competitor” – when in fact the retail marketplace is about to be transformed. For those who will compete with Amazon, following that advice could be the modern-day equivalent of launching a cavalry charge towards soldiers armed with machine guns. 

My advice is to take a fundamental look at your online operating model. 

Browsing the in-flight entertainment on a recent trip, I came across a TED talk by Eduardo Briceno, “How to get better at the things you care about”. It highlighted a challenge I see facing leaders in retail and consumer goods.

In a recent global survey, 350 retail CEOs were asked to nominate their strategic and investment priorities. The top response was “digital transformation”. I believe most of these leaders have misread the real challenge they are facing.

If you work in retail, I'm willing to bet you're fed up of hearing about Amazon. I'm also willing to bet that some of what you think you know about Amazon may not be right.

Ryan Spahr is a Philadelphia entrepreneur making a healthy income selling groceries, electronics and office products on Amazon.  His company -  Supply Tiger - turns over USD $6 million a year.

The speculation is over. Amazon is coming. It has confirmed that it will launch physical retail operations in Australia with its “Amazon Marketplace” platform for third party sellers. The question now is: how should business leaders respond? I propose to answer this question in my newsletter over the coming months. I’ll be highlighting the opportunities and challenges Amazon represents for Australian businesses of all sizes, from large conglomerates to solo entrepreneurs, and offering some practical suggestions on how to move forward.

We hear the word disruption every day. Joseph Bower and Clayton Christensen introduced the term “disruptive innovation” in a landmark 1995 Harvard Business Review article. They defined disruptive innovation as a process by which a cheaper new product launches with an “attack from below” on a market, but then gradually overtakes the incumbent players.

The formidable effects of compound growth underpin many long-term shifts in business and society. Yet our brains often struggle to grasp the maths, even when we see it unfolding right in front of us.

Amazon’s recent move to trial convenience stores, on the back of its foray into bricks and mortar bookstores, has reignited the debate about the long-term prospects of instore vs. online retail channels. Has the threat to instore retail been overestimated? Will we see a move back to shopping instore?

Retail giant Walmart recently announced the $3 billion acquisition of Jet, an online grocery start-up in the US with less than $1 billion of gross sales. The move is Walmart’s latest attempt to keep up with Amazon, which it has belatedly recognised is a disruptive threat to its core grocery business. The high-risk play, one of several large e-commerce investments by Walmart, reflects its urgent need to seriously compete with Amazon after ignoring the threat from online grocery shopping for several years.

Amazon has put speed at the heart of its online retail offer. It recently launched Prime Now, a city-based local delivery service offering up to 25,000 lines in a two-hour delivery window. 

But how important is delivery speed to most customers and how does it affect the profitability of the retailers considering speedier delivery options?

As a school student my favourite subject was economics. One of my first lessons was about the basic models of microeconomics. They were attractive to me because they made the world seem understandable and predictable. Some critics, though, believe economic theory’s predictability is based on flawed assumptions about the way the world works.

Back in the early 1800s, before the Industrial Revolution and the advent of modern transport, most of western civilisation lived in small rural communities. Everyone knew each other’s personal information – not just names, birthdays, or hobbies – but also intimate information such as past relationships and even sexual orientation. However, the reality for most companies is that the personalisation journey is only just beginning.