The Changing Nature of the Natural Food Industry

William Sipper on the Changing Nature of the Natural Food Industry

What We Can Learn from UNFI, Whole Foods, and the Brokerage Landscape

The natural food industry is experiencing substantial growth while undergoing disruptive change across the supply-chain. The market for natural, organic, and specialty foods has seen an incremental increase over the past few years, as independent and chain retailers continue to respond to consumer demand. However, it’s not business as usual for natural food manufacturers, suppliers, and retailers.

Recent manoeuvres from distribution giants United Natural Foods Inc. (UNFI) and retail heavy-weights Whole Foods (recently purchased by e-commerce company Amazon) are indicative of a rapidly changing infrastructure – one in which cost-cutting and consolidation are the norms. Meanwhile, broker leverage continues to slide as manufacturers and retailers push for change.

Based on a market research report into the growth prospects for UNFI, here are four trends in the natural food industry that will shape the landscape of the future:

 

  1. Continued growth of the Organic and Speciality Foods market

What we can say for sure is that the market for organic and specialty foods is significant, and only getting larger. Retail sales of natural and organic food and beverage in the United States grew from $37.43 billion in 2016 to $40.05 billion in 2017. This is undoubtedly the result of consumers understanding the health and wellness benefits of organic and specialty foods, and aligning their consumption patterns to match. Demand for local, organic, and GMO-free items are all on the rise.

 

  1. Increased competition in the distribution market

A select few distributors played a leading role in getting natural food products from the warehouse to store shelves. United Natural Foods Inc. (UNFI) is one of them, and they are still the leading distributor of organic and specialty foods today. However, competition is stronger and more varied than ever. With increasing consumer demand comes more competition, both nationally and regionally.

On the national scale, traditional competitors like KeHe and Supervalu are going head-to-head with UNFI in the pursuit of offering the lowest cost for the most volume of goods.

On the regional scale, major distributors are up against a plethora of smaller distributors that are more responsive to consumer needs and able to innovate faster.

There is also the presence of Amazon Inc. to be grappled with, a new player in the food and beverage industry. The e-commerce giant recently purchased Whole Foods, who are UNFI’s most lucrative customer and have begun laying out plans to take some of the distribution markets away from UNFI.

What does competition mean in the distribution space?

No matter how involved Amazon gets in the distribution market, it will inevitably cause ripples throughout the industry. We can expect to see:

  • Increased diversification of the market, as distributors will tend to focus on a specific range of products.
  • Consolidation from the big distribution players in an attempt to manage regional competition. UNFI, KeHe, and Supervalu have all made numerous purchases in the past few years to strengthen their logistical base and product offerings.
  • Innovation in robotics and AI technology to save on labor costs.
  • Improved customer service. For instance, there is a growing demand amongst consumers for locally made products. Distributors need to jump on this opportunity before the manufacturer makes a separate deal with local retailers.

 

  1. Conventional grocers taking more market share

Conventional grocery stores have been slow to integrate into the natural food industry. Independent natural food stores and distributors were initially able to capture most of the market – but the days of independent retailer dominance are over.

By 2018, a lot of major grocers have begun investing in natural foods. Sprouts, Wegmans, Kroeger, and Walmart all have a massive stake in the market. Some chains – like The Kroger Corp., for instance – have a line of specialty products to sell in their stores.

Soon all the major grocery store chains will be selling a high volume of natural foods, either from their line or elsewhere. It remains to be seen if consumers respond approvingly to specialty foods manufactured by grocery chains like Walmart, a company known for selling nutrition-deficient foods at a low price. Even if natural foods do not become extremely popular at major grocery chains, it still represents a major market share shifting from independents to the ‘mainstream’ market.

For distributors, conventional supermarkets making their line of product means a shrinking market. A lot of the conventional stores entering the natural foods market are investing in self-distribution. Publix, Wegmans, Albertsons, and others all have the means to build a supply chain that works for them. This is also the model that Amazon is planning to develop with Whole Foods. It is not ideal for distributors, who are feeling the squeeze from many directions.

For consumers, the emergence of natural food products in conventional grocery stores should be welcomed. Why? Because the prices are lower for similar products, even if the selection is limited. Many experts project that leading grocery chains will subsume most of the natural foods market within a few years. Small independents will be forced to innovate by finding, sourcing, and selling new products to a dedicated base of health-conscious customers.

William Sippper on the effect of health conscious consumers
William Sippper on the effect of health conscious consumers
  1. Full-Service model in place of the wholesale model

Distribution companies usually fall into two operational models when dealing with retailers: full-service or wholesale. Each has benefits and drawbacks, depending on the size and needs of the retailer.

 

The full-service model includes:

  • Higher cost
  • Services in addition to delivery of products. Services could include sales strategies, inventory planning, and anything related to the management of products ordered from the distribution company. The focus is on increasing volume for the retailer, in which case both parties are profiting.
  • An on-site sales rep who has a salary from the distributor plus commission for every additional product they sell to the retailer

 

In contrast, the wholesale model includes:

 

  • Lower cost because no additional services are offered
  • Designing promotional programs to help move specific product in bulk. The focus is on moving a massive volume of product, not assisting the retailer to make sales.
  • High-profit margins for particular products based on the volume of goods shipped out of the warehouse
  • Lower operational cost for the distributor

 

Major distribution companies like UNFI and KeHe have doubled down on the wholesale model to maximize revenue. The intention was likely to save on expenses to ensure strong revenue numbers – but at what cost? Some retailers surely like the fact that they can pay less for distribution service, though the pendulum is swinging in favor of a full-service offering.

 

Spotlight on UNFI and Whole Foods

To get a clearer picture of where the industry is going, it will help to shine the spotlight on two key industry players. UNFI and Whole Foods are indicative of the strength of the natural food industry today. Both companies are hugely successful and have collaborated to bring natural food products into popular consciousness. Based on the four trends mentioned above, here is a rundown of the prospects for UNFI and Whole Foods.

 

United National Foods Inc.

Shrinking margins, limited opportunities. Operating costs for UNFI are high. The company has hundreds of distribution centers across the country and warehousing costs are only going up. For example, new truck driver regulations have meant a delay in delivery times across the board. Rather than soak up these expenses as part of their operating costs, UNFI tends to lump additional service fees into the price for retailers. Decisions like this one will only induce retailers to look elsewhere for a more full-service oriented experience which may cost more but come with added benefits.

 

To increase profit margins, UNFI should look to:

  • Re-negotiate generous volume discounts for customers who no longer warrant the discount based on ordering history.
  • Pursue new clients more aggressively, both big and small.
  • Shift to a full-service approach

Purchase of Whole Foods by Amazon likely to shrink margins even further. Nearly every industry commentator agrees that Amazon will sever ties between UNFI and Whole Foods when the distribution contract is up in 2025.

UNFI currently gets about 1/3rd of its business from Whole Foods, albeit it at a discounted price (8-12% margins). While it’s unlikely that Amazon will cut UNFI entirely out of the supply chain, they will certainly take a considerable portion of the business away.

Expansion into Fresh Foods to stay on top of market trends. The boardroom at UNFI has made an initial decision: expansion into the fresh produce market. On paper, this looks like a wise decision for two reasons. First, it matches consumer preferences. Second, none of the big chains (including Whole Foods) can distribute fresh produce on a massive scale.

To succeed in this new market, UNFI will have to overcome the following challenges:

  • Upgrade warehouse facilities with fridges and freezers.
  • Nurturing regional relationships with growers and retailers.
  • Change the sales model from wholesale to full-service.
  • Focus on smaller accounts.

Most importantly, the distribution giants need to move away from the practice of “bidding out.” They have already come under criticism from retailers for buying the cheapest produce available and selling it at an inflated price. This approach ignores all the dynamic costs involved in growing and asks the grower to swallow as much of those costs as possible. Why can they get away with this? Because competition in the fresh produce market is weak.

William Sipper on the effect of Whole Foods potential to push down costs
William Sipper on the effect of Whole Foods potential to push down costs

Whole Foods

Whole Foods is a major retailer in the natural food/specialty foods industry. Formed in 1980, it has grown to become the most extensive network of supermarkets in the United States, specializing in natural and organic foods. There is arguably no more influential company and brand responsible for leading the organic and specialty foods movement across the United States. Success came incrementally for the Austin-based company, who gradually expanded their reach to include 473 stores in 2018. However, perhaps due to aggressive growth initiatives, the past few years have seen declining sales and an unclear future.

The future of Whole Foods was made abundantly more clear in August of 2017 when it was sold to e-commerce giants Amazon. What will the sale mean for the natural food industry as a whole?

 

  1. Cut costs by re-negotiating or terminating existing distribution deals. Whole Foods has a distribution contract with UNFI signed until 2025. If Amazon has not re-negotiated the distribution terms by this point, they are bound to terminate the contract and sign-on for far less volume.
  2. Potentially buying out existing distributors (including UNFI). There is a possibility that Amazon will simply consolidate the existing distribution market, rather than expand their existing networks. The likelihood of this happening depends on the ability of UNFI and others to adapt.
  3. Building their distribution networks to meet the demand of Whole Foods supermarkets across the country. A third alternative is that Amazon simply builds out their existing distribution network to match the needs of each retail hub.

On a more general level, the presence of Amazon is indicative of where the natural foods retail market is going. Relying on technological innovation to disrupt existing relationships is helpful because it is bound to bring prices down. UNFI and others have had to pack extra costs into the supply chain to ensure they make a profit. These added costs are lumped onto the manufacturer or the retailer, and artificially inflate the cost of goods.

If Amazon and Whole Foods can bring costs down by removing arbitrary service costs, then the market will expand. The natural food industry is, after all, a consumer based industry. Amazon sees an opportunity to swallow some expenses, build out their distribution networks to include food and beverages, and ultimately, make natural foods affordable to mainstream markets.

William Sipper on Diminishing Broker Power
William Sipper on Diminishing Broker Power

 

The Broker Situation: What Has Changed?

Given the undulating landscape of the natural food industry, brokers are faced with plenty of material and existential challenges. What will their role be in 10 years once Amazon has settled into the market? Here are four ways in which the broker situation has changed in recent years:

 

  1. Broker leverage power has diminished because of fierce competition. The consolidation trend has opened a window in the retailer market for small distributors to carve out a niche market suited to the needs of equally small independent retailers. It is common knowledge in the industry that many retailers are unhappy with Haddon House since it was purchased by UNFI. Small distributors should be aggressive in attempts to win some of these accounts and pair them with manufacturers.

 

  1. Finding new products for the market is more important than ever. Brokers have always had to scan the underground and discover new products suitable for market. For brokers facing many roadblocks in the packaged natural and specialty foods market, the growing demand for fresh produce and local, GMO-free products are can’t-miss opportunities.

 

  1. Less variety in product offerings. In order to cut overhead costs, brokers will offer less variety in product selection for retailers.

 

  1. No more forward ordering deals. Manufacturers are putting the squeeze on distributors profit margins by pushing back against forward-ordering deals. Up until recently, manufacturers would sell bulk products at a considerable discount to distributors, who would then sell the products at the full value to retailers.

 

Manufacturers do not sell bulk product three or four months in advance at a promotional rate anymore because they lose out on revenue. As a result, distributors need to make their profits elsewhere: in cutting labor costs, buying cheaper fuel, or other means. This has been their approach for the past few decades, but they have run out of options. Perhaps the emergence of an e-commerce disruptor like Amazon will force distributors to shrink and specialize.

Conclusion

These are some of the major trends and developments taking place in the natural food industry today. As the consumer market for natural and specialty foods continues to grow, conventional chain grocers and an e-commerce giant have decided to get involved. It remains to be seen whether consolidation and cost-cutting strategies trim margins enough to keep existing distribution companies like UNFI profitable.

F&B Industry Branding

How Branding is Evolving In F&B post by Bill Sipper

How Branding is Evolving in the Food and Beverage Industry

In today’s food and beverage industry, consumers want brands to be authentic. Branding is evolving in this industry.  They are quick to pick up when they aren’t authentic and to tell others on social media.

Brands have to keep customers fully informed about the products they buy. They also need to be smart and strategic to grab market share in a very competitive market.

Brands must first identify their target audience and then create value for them. Once they’ve attracted customers, they have to build trust to turn them into brand advocates. If consumers are happy, they are more likely to continue to buy products and recommend them to others.

Branding and Social Media Interaction

Brands need to listen to what their customers say, and today this is much easier because they can interact with them on social media. Brands are receiving feedback from customers and understanding more about them helps them to cater to their needs.

Social media offers brands opportunities to create emotional connections with their customers and explain more about what their products offer them. In turn, consumers are better informed than ever before.

They have strong opinions about the quality of ingredients, nutritional value, and health. If brands provide this information to those who are interested, they create an opportunity to build loyalty.

More than ever before, people want the brands they choose to reflect who they are as people. Food packaging is one area where this is seen.  The designs must reflect environmental and social responsibility and make people feel they are making the best choices for their health and their identities as a whole.

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Would love to read and comments too.

 

Food and Beverage Company Faults

Food and Beverage Company Should Make Use of SM post by William Sipper

A Food and Beverage Company that doesn’t make Good Use of Social Media is Shooting itself in the Foot

The intense competition that exists in the food and beverage industry can make it difficult for smaller brands to gain the attention of consumers. Using social media marketing effectively can make a difference. People tend to try out new foods and beverages based on personal opinions, recommendations, and reviews. This shows how important it is for brands to interact with consumers on social media.

Influencers

Just one post by an influential food blogger about a specific product can generate countless impressions with high conversion rates. A social media presence gives brands the opportunity to connect with such influencers.

Brand personality

The personality of a brand is becoming more and more crucial when it comes to marketing.  Relating to consumers on social media helps to build that personality and create loyal followers. Companies are seeking out creative ways to relate to their customers and get feedback their feedback.

Social media interactions

Millennials love sharing dining experiences and will post about interesting beverages they have tasted. They want multi-sensory experiences and food and drink play a big part in this. Well-presented or well-packaged food is likely to be shared on Instagram or Facebook. Social media interactions provide a way for brands to be recognized and to create a loyal customer base without having to resort to more direct forms of advertising.

Companies that do not use social media to their benefit are definitely shooting themselves in the foot. A strong social media presence is no longer an option for food and beverage brands –it’s an absolute necessity.

Mobile Apps Influencing F&B Industry

Mobile Apps Impact by William Sipper

How mobile apps are influencing the food and beverage industry

We live in the age of mobile phones, and the majority of smartphone owners use their phones to engage in multiple activities. The impact of mobile apps on the food and beverage industry is continuing to create change.

Consumers love to share culinary experiences and give recommendations on social networks with photos as evidence. This takes customer influence to the next level. Restaurants are also using mobile apps to help streamline customer service.

On-demand food delivery apps

These apps are extremely popular with consumers who are very busy or prefer not to cook. Fewer customers may be attracted to a physical location, but the ease of online ordering usually makes up the difference in more orders. Discounts for new customers and specials can attract more customers.

This change is difficult for less tech-savvy restaurant owners not listed on apps but listing a restaurant, or even placing adverts on these apps can significantly increase traffic to an establishment and they need to explore this to remain competitive.

Reservation apps

These apps make it easier to find reservations at restaurants where you want to eat. OpenTable is one of these apps. One of the problems of such apps is no-shows at restaurants after bookings have been made. This means restaurant owners miss out and it reflects on the app too. Apps and restaurants both need to continue to explore and improve these new ways of doing business.  In turn, customers who use them need to play the game too.

BonApp is a popular app used in China. It lists all the restaurants in the largest Chinese cities and can also be used in Singapore, Bangkok, Taipei, and Tokyo. It is simple to use, and restaurants are classified by cuisine style, price, location proximity, customer rating and the possibility of delivery.

Users can use photos of meals with their comments. Users are even linked to maps to find out how to get to the restaurant and can book a table via the app. On the homepage, a Top 10 of best restaurants in various categories appears on a daily basis.

Review apps

Review apps, such as Yelp, have served to increase attention on customer service. They have also forced restaurant owners to be aware of more than just the need to serve good food. They have to embrace new technologies to remain competitive.

One way they can use social media to their advantage is by using it to create a buzz and amplify audiences for special events such as a special Valentine’s day menu or a St Patrick’s Day Celebration.

Discount apps

An app like DealNews works with restaurants to bring in new customers by offering special deals. Apps like this have influenced how restaurants price menus because they have to take into account that customers may use coupons or discounts.

Individual restaurant app

These can be gamechanger but are usually only used by big companies. Starbucks, for example, gives users the opportunity to order and pay for drinks from their app. Members earn loyalty points by making purchases with the app.

The food and beverage industry is changing rapidly, partly due to the widespread use of mobile apps to streamline processes.

Please connect with me on my LinkedIn or review my press releases and articles published on my crunchbase profile.

Electric Cars Could Have An Impact On Beverages

Electric Cars and Convenience Stores post by William Sipper

Will beverage sales drop as more electric cars take to the road?

When electric cars hit the road and drivers don’t have to fill up tanks at gas stations, could impulse purchases at convenience stores drop? Morgan Stanley analysts have concluded that this could take place.

Convenience stores could take a hit

In a report published recently, they noted that only a small fraction of vehicles on the road are electronic, but this could change in the future. Electric vehicles could account for 94% of car sales by 2040.

The analysts believe that convenience stores and beverage companies could suffer losses as a result.  Particularly companies like Monster Beverages, as 63% of its sales in the U.S. are made in convenience stores. The analysts did not see alcoholic drinks or tobacco products taking the same hit because beverages are often bought impulsively, and people drink them on the spot.

The Convenience store industry is more concerned about other factors

Those in the convenience store industry are more concerned about their competitors such as other retailers and online stores than about the effect of electric vehicles. They see this threat as being decades away.

Electric cars will not present a challenge unless they are adopted en masse. They are more concerned about the fact that everyone is selling convenience today.  With online outlets offering food delivery and grocery services and even hardware stores and clothing shops are selling beverages at checkout counters. New laws that impose taxes on sugary beverages are another current concern that pre-empts any worries about electric cars.

Current sales of electric vehicles

Sales of electric vehicles in 2017 reached nearly 200,000. This was a significant increase in sales in 2016 and happened despite the fact that new car sales overall were down. Still, to stay in context, over 17 million new cars were sold in 2017.

This may fuel the belief that widespread adoption of electric vehicles is still far in the future.  In turn, changes in consumer behavior and technological advances always tend to happen faster than we anticipate.

Ways convenience stores could respond

Fuel appears to account for less than half of the profit for gas stations.  Much of their money is made from drinks and other items bought inside the store.

People usually make plenty of ‘pit stops’ at gas stations on long journeys, and they don’t just buy gas. Humans need to rest and refuel their bodies, and this need will not go away. Just because electric vehicle owners could charge their cars at home doesn’t mean they wouldn’t want places to stop on a journey.

One way in which convenience stores could respond to the wide adoption of electric cars would be to install the types of charging stations people would enjoy. Those who currently spend money on gas could pay for a super-charge, a safety inspection, a beverage and a bite to eat. Charging stations could also be popular with those who may not have charging ability where they live.

Selling merchandise during the electric car era is not likely to be a problem to those who are tuned in to providing convenience.

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Drink Consumption in Philadelphia Drops

Drink Consumption in Philadelphia post by Bill Sipper

Sugary Drink Consumption in Philadelphia Drops

A Drexel University study has found that the tax of 1.5 cents per ounce on soda and sweetened beverages in Philadelphia has meant that residents are about 40% less likely to drink soda every day. The researchers surveyed 900 Philadelphia residents before and after the tax took effect.

They also compared responses with those from residents in places near Philadelphia without such a tax. The findings of the study were published in the American Journal of Preventative Medicine.

A co-author of the study, Amy Auchincloss, said the tax was in the interest of public health. She believes that sugary drinks have been under-priced in comparison with healthy beverages.  This tax has helped to level the playing field.

The study only reflected drinking patterns for two months after the tax took effect. Whether consumption of sugary drinks will continue to remain lower is yet to be seen. When Mexico imposed such a tax, soda consumption declined for at least two years.

Effects of the tax

The health costs of drinking sugary drinks are undeniable.  Weight gain, heart disease, higher risks of developing type 11 diabetes, tooth decay and other ills.

Whether a tax can change human behavior is questionable. Despite the fact that unhealthy drinks have become less competitive, 30% of Philadelphians continue to drink one sugary beverage a day.

The surveys for the study also showed that consumption of sugary fruit drinks like Koolaid did not go down, even though they are also taxed. Auchincloss believes that this could be due to the false perception of these drinks.  The thought is that these drinks are healthy, even though they contain very little fruit and about the same amount of added sugar as soda.

Reduced Projected Revenue

Philadelphia was the first major city to impose such a tax, and the revenue was to be used for public projects such as libraries, schools, recreation centers, and parks.  Projected revenues have not been as expected.  No one was surprised when Mayor Jim Kenney’s budget proposal reduced projected revenues from the tax by about 15%.

After Philadelphia passed its 1.5 cent-per-ounce tax on the supply of sweetened beverages in January 2017.  Other jurisdictions like Seattle, San Francisco, and Cook County did the same.

The Cook County tax was quickly repealed.  Also, none of the others have worked out as expected. It has been found that consumers shift to other beverages or buy the higher-priced items in other jurisdictions.

One of the main reasons the beverage tax passed was it was tied to popular programs. These programs are now facing serious shortfalls.

Some pending legal challenges from retailers and the American Beverage Association as to the legality of the tax, add further uncertainty. One thing seems sure – beverage taxes are not a reliable way to fund public programs.

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Philly’s Soda Tax Falls Flat

Philly's soda tax post by William Sipper

Other cities are watching as Philly’s soda tax falls flat

All eyes are on Philadelphia as the results of 1.5 cents per ounce excise tax being imposed on beverages sweetened with sugar start becoming apparent. Philly’s soda tax was the first tax of this nature to be introduced in a major city.

The idea was to use the revenue to fund prekindergarten programs, libraries, parks, recreation centers and community schools. This seemed like a very good reason for imposing such a tax to some Philadelphians. However, it appears that the fears of many of those in the beverage industry are coming to pass.

Driving Far For Soda

Firstly, the revenues collected since the tax was introduced in January 2017 have fallen short of what was expected. City officials are quick to point out that there may be many reasons for this such as retailers stocking up on products before it came into existence and the fact that figures relate only to the first half of the year when soda sales are seasonal.

A study by market research firm, Catalina, who analyzed millions of transactions at grocery and drug stores, showed that customers were driving outside of the city to buy their sugary drinks. The study showed that sales of fizzy soft drinks fell inside the city limits and increased outside of it. A city spokesman reacted to this by saying that it was expected that this would happen initially.

Employee Lay Offs

Stories have also been coming out about the harm being caused by the tax to those in the beverage industry. Manufacturers like PepsiCo and Canada Dry are blaming the tax for big falls in sales and they have had to lay off employees. Retailers have also felt the pinch, and have had to lay off staff.

Cook County followed Philadelphia’s example and introduced an excise tax on sugary beverages in August. In turn, barely two months after it came into effect, public outcry has caused commissioners to revise their views. There are enough commissioners that are now are backing its repeal and it is likely to fall away in December.

Philly’s Soda Tax Remains Firm

However, city officials of Philly remain firm in support of the tax, despite the shortfall in revenue collection and apparent harm to manufacturers and retailers. Opponents of the tax will be keeping a close watch over the next while to see how it the battle plays out. If many other cities levy such a tax, it could have serious economic consequences.

Generation Z Most Connected Generation Ever

Generation Z Connected post by William Sipper

Generation Z – Marketing to The Most Connected Generation Ever

Generation Z, or Gen Zers, are born after 1995, and they grew up with internet access and mobile technology. This makes them harder to market to than other generations in that they have developed very selective filters. They have a very short attention span! But it also offers marketers plenty of new and interesting opportunities.

Gen Zers are called digital natives – they are used to using five different digital devices. In turn, if you want to market to them, you need to have a strategy.  This strategy should utilize these devices and unified across all platforms.

Entrepreneurs From The Start

They are often entrepreneurial because they start building up their online presence from a young age. If they find they have attracted an audience, they are likely to want to leverage it to create their own income.

As such they are not just consumers and they cannot be treated as such. Companies need to think about ways to collaborate with them rather than simply marketing to them.

An example of this is the collaboration of Wat-Ahh! With Ariana Grande. She is a Gen Zer who is living out her dreams and wants to have an influence on other young people.

Ariana Becomes A Face to a Product

Ariana was signed up as a spokesperson but also as an equity partner. She was happy to do so because she could put her heart behind the product.  She loves drinking water, enjoys a healthy lifestyle and would like to get other young people to do so too. Humanizing your brand by giving it a face is important to Gen Zers.

Thoughtful Marketing Pays

Gen Zers want to make a difference in the world and are prepared to work with brands in order to facilitate such change. They are also more open-minded and inclusive than previous generations.  This being a point that marketers need to remember as they are likely to respond to inclusive, thoughtful marketing.

Engaging with Gen Zers on social platforms is very important. If you can establish a conversation with them that’s beneficial to you and them, they will listen. If you can initiate a two-way conversation online, and address trends and issues that interest them, you will be more successful than if you continue to use more traditional marketing methods.

Amazon’s Strategy Changed the Marketplace

Amazon's Strategy and Your Brand post by William Sipper

Strategy And Your Brand

Amazon has been a game changer in the digital marketplace where it has redefined the customer experience. Traditional brands are fighting to stay relevant as they compete with new, digitally experienced companies.Your brand needs to understand Amazon’s strategy.

Prime, Amazon’s membership program, is helping to accelerate its forward momentum.  Over 40 million people in the US have a Prime membership. Customers want to know ‘Do you have what I want and how quickly can you get it to me?’ Amazon has been working hard giving a positive answer to these questions.

They want users to keep renewing their membership and buying more products. The more products they purchase, the more data Amazon can use to establish what they want to buy next.

Understand Its Use

Alexa, Amazon’s virtual assistant, has created an on-demand, personalized experience for users. They can simply give Alexa a voice command, such as for toothpaste to be reordered, and it happens.

Your brand, no matter how big or small, can’t afford to ignore the extraordinary growth of Amazon. You can learn from them to understand more about how customers are using the platform.  Work at creating a more customer-centric experience for your own customers.

You need to know more than just what they are buying.  In turn, you also need to be aware of the other ways in which they are using the platform, such as using Alexa or Prime Video. You should also be familiar with Amazon’s different selling models to find out what may work for your products.

Connecting with Customers

Amazon has accumulated large amounts of data that can be used to gauge more about customer behavior.  Amazon Marketing Services (AMS) and Amazon Retail Analytics (ARA) offer enlightening reports.

Some brands are using third-party apps and other skills to find new methods of connecting with customers. Companies like Uber and Domino’s are enhancing their existing services this way.

Technology can be game changing.  It shouldn’t be used just for the sake of using it. Should be used where it can make an improvement to the customer experience.

All brands need to think about making whatever changes are necessary to their marketing strategies in order to thrive in a world that is digitally driven.