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Retailers enter untested waters

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Suddenly, without warning, mass retailing is experiencing a transformation without precedent — or, at the least, without precedent in this century.

Within the space of days, Amazon.com Inc. has purchased Whole Foods Market Inc., an alliance that brings together two of the most fascinating retailers currently vying for business in America, while Walmart has entered into an alliance with Google Inc. whose objective appears to be to simplify the delivery of merchandise to consumer homes.

Behind these two transactions are two retailers — Amazon and Walmart — that have already recast retailing in America, and two other companies — Whole Foods and Google — that have altered the transactional rules of doing business in America.

In the initial aftermath of these transactions, traditional retailing have felt the impact. Grocery stocks have declined, while conventional general merchandise retailers are already asking what these alliances mean for them. More to the point: The retailers asking these questions are not searching for advantages but rather wondering how they can minimize the negative impact.

Longer term, these new alliances are bringing into sharper focus the impact such retailers as Amazon, Whole Foods and Walmart have had on the business and, more importantly, how they can continue to disrupt the once-normal flow of transactions from the retailer to the consumer.

It has already become apparent that digital retailing has changed the game. Consumers have become comfortable buying merchandise online, even if it has not yet been determined what merchandise they are most comfortable with. More to the point, online upstart Amazon has forever changed the equation by becoming one of the factors behind a customer’s decision to buy.

True, Amazon has not yet become a profit-generating machine — but it doesn’t appear to matter much. The retailer continues to grow while expanding the range of options if offers consumers. Now, with the addition of Whole Foods, it is poised to offer a brick-and-mortar option, while bringing some of Whole Foods’ better-known brands online — at competitive prices.

At the same time, Amazon is now in a position to tinker with Whole Foods’ pricing, which has been widely criticized as being prohibitively high, and so discouraging shoppers from choosing that grocery format in favor of lower-price competitors that have not been successful in duplicating the Whole Foods appeal to quality and nutrition. The fact that that may now change — Amazon has already started that  to lower Whole Foods’ prices — is one factor behind the declining share price of some of grocery’s most important players.

Now we turn to Walmart. That retailer has apparently confronted one of the issues that have slowed its growth of late. Specifically, the retailer has resigned itself to the reality that it can no longer do everything by itself. Sometimes it must reach out for help — even if, in reaching out, it utilizes a company that many observers view as a competitor. That has apparently been the case in its just-announced partnership with Google to help speed product to consumer shelves. An obvious inducement to this move — obvious at least to some of those observers who view Amazon as a competitor — is to attempt to blunt that retailer’s effectiveness as a digital alternative to Walmart.

Dismissing that conjecture for a moment, there is still no denying that an alliance between Walmart and Google has the potential to sharpen Walmart’s ability to improve its distribution, an area in which it has not, to date, out-shown its competition.

Thus far, all this is surmise. But taken at face value, it points out that America’s leading retailers are not above treading into new, untested waters. Put another way, because they lack the internal capacity to take the next step is no longer a guarantee that they won’t step outside the conventional limits in which they have previously operated to search for another way to approach an issue — and circumvent a roadblock.

Unless the traditional retailing community can summon an equally ambitious program, the road ahead for them could be a rocky one.


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