Amazon’s recent purchase of Whole Foods, to the tune of $13.4 Billion, was a paradigm shift in the natural product retail segment for good reason. It is the first major technological disruption to impact this industry which has seen natural and organic foods top sales records for years as more and more consumers become more health-conscious and seek out these products.
Beyond the obvious implications of this acquisition, there is a far more subtle story emerging. Of course, there is trepidation that Amazon, having already crushed the book business and other markets, will now do the same to grocery. Ask anyone who was formerly employed at Border’s books if Amazon is capable of dramatically changing the landscape in irreversible ways, and you will hear a profound “yes” along with a sorrowful cry. After all there is a reason that in 2015, 33.2% of every dollar spent online was spent on Amazon.
However, there is more here than even Amazon’s dominance and desire to be the “everything store” portends. It is the nagging notion that natural product brands are now forced to simply play along in Jeff Bezos’ game. They must cater to the whims of Amazon, its commissions, its policies and its algorithm. In fact, many top natural products brands are already claiming defeat or, at a minimum, resigning themselves to the eventual turning over control of their destiny to the online behemoth.
But why should natural product brands willingly wade into the sea of sameness that is Amazon when they could give customers a reason to buy directly from them? In many cases, these brands already have exceptional brand ethos, a solid community of brand advocates, social media followers and unique selling propositions. They also tend to appeal to a high-end customer, many of whom enjoy purchasing from niche brands.
In short, they have all the makings of a great online store. So why should they curl their tail and run to Amazon who has few of the aforementioned? It is because they assume that one day, everyone will buy everything from Amazon. However, that is a flawed mentality. One look at ecommerce’s growth and you will see a different reality budding. Ecommerce represents 8% of total retail sales, and while it is true Amazon represents half of that number, ecommerce is in its infancy.
Ecommerce sales represented $369 billion in 2016 and is predicted to reach $684 billion in 2020. That is incredible growth by any standard. Moreover, ecommerce is growing because of the ever-increasing “on demand” society, the social media economy, mobile consumption as well as other factors. Of equal import, virtually every generation from Millennial to Baby Boomer is now purchasing online.
Of course, there is the obvious obstacle of the investment needed to create and execute an effective ecommerce strategy, but what better way to spend your money – developing a brand that customers seek out because they love your brand. The alternative is paying Amazon, who in turn is investing in their own private label brand, Amazon Basics, and now has Whole Food's private label, 365 brand, to play with which may eventually push you out of the market entirely.
Founders of natural product brands are innovators by nature. They started their businesses because they believed there was a better way. It is time for natural product brand executives to recall their roots and jump into the ecommerce pool, the water feels great.