This is a Short Note.
TechCrunch reports that Amazon’s Whole Foods is lowering prices on products, matching Walmart prices. Whole Foods is a premium grocery chain which was acquired by Amazon few weeks ago. Walmart is the world’s largest retailer, known for its low prices. Interestingly, Amazon wants to attack that same competitive weapon Walmart brings to the sector: low prices.
Amazon had announced Whole Foods price cuts on things like bananas, organic avocados, organic large brown eggs, organic responsibly farmed salmon and tilapia, organic baby kale and baby lettuce, animal-welfare-rated 85 percent lean ground beef, creamy and crunchy almond butter, organic Gala and Fuji apples, organic rotisserie chicken, 365 Everyday Value organic butter and other items. As it turned out, it had already begun discounting other grocery staples today, including milk and cheese.
That is very surprising because everyone had expected the competition to be defined on Amazon’s use of technology and logistics, as the global leader in the ecommerce sector, to challenge Walmart on grocery. If you are Walmart, you should be concerned. It is possible no one in Walmart saw the price reduction coming. Amazon may be ready to lose some money and take market share from Walmart.
What Amazon is doing is called flanking maneuver in military. Amazon is going on offense concentrating its competitive power and taking it to Walmart. What Walmart will need to do now is to respond. When you are responding, it means you could be outflanked, because the other person is defining the basis of the competition, in cases where the forces are evenly matched.
In military tactics, a flanking maneuver, or flanking manoeuvre is a movement of an armed force around a flank to achieve an advantageous position over an enemy. Flanking is useful because a force’s offensive power is concentrated in its front.
Amazon had already pushed Walmart to sign a deal with Google in order to defend the technology aspect of the competition. Google will provide the voice assistance technology to simplify ordering on Walmart as well as streamline the ecommerce business with Google Express. But with the reduction of prices, Amazon had flanked Walmart at a level it might not have prepared for.
This week, Google and Walmart teamed up to deepen Walmart business; Google will provide a key part of the technology through its voice activated system and the Google Express.
The Lessons Here
Until you can change the basis of a competition, you can never be a category-king in your sector. And until you can innovate to flank maneuver your competitors, becoming unpredictable, you cannot be king for long. That capacity to present different views to your competitor offers both scalable and strategic advantages. New England Patriots, an American football pro team, is known for showing opponents different offensive views that make them to give up on a play even before it begins.
Amazon will be extremely tough for Walmart to deal with because Amazon is mutative in its strategic moves and Walmart will struggle to catch up and adapt. With Amazon’s decision to even lose some margins to compete with Walmart, watch out for endless battles that will end up damaging Walmart. Fortune explained it best on a newsletter thus:
Now its feels like Whole Foods’ history of struggling and failing is being erased, with breathless depictions of the much-needed price cutting that took effect on Monday. “Amazon Doesn’t Need to Make Money on Groceries,” the [Wall Street] Journal wrote. “Amazon slashes prices at Whole Foods to kill off Walmart and Kroger,” tech news site the Next Web offered. …
Less some brilliant, Amazon-only retailing strategy, the move is a staple of the grocery business. Suburban supermarkets practically invented the loss leader as a tactic to bring in more shoppers who would then fill their carts mostly with full priced items. It’s a smart strategy that still works–and exactly the kind of “conventional grocery-store pricing and other supermarket tactics” that [John] Mackey [Whole Foods co-Founder] failed to appreciate.
But for all, the good news is that American grocery buyers will win big, because price will drop, even as value improves.