Amazon aiming for Target? More disruption coming in grocery retail
Monday, January 08, 2018
Leave it to Amazon to make waves right as we step into 2018 — even when they are not the direct source of the news. Tech analyst Gene Munster predicts that Amazon will buy Target this year. The prediction immediately led Target's flagging shares to rise.
Munster is an influential tech analyst known for this deep knowledge of the industry. According to him, Target's large store count makes it an ideal offline partner for Amazon.
Amazon has already disrupted the grocery business, first with its online delivery system and then with its $13.7 billion acquisition of Whole Foods in 2017. The retail giant opened e-commerce for all, and now it has paved the way for the offline-online combo.
Amazon's strategies include more physical store acquisitions in near future, which resonates well with Munster's prediction. More importantly, their shared demographic focus — moms — makes the two brands a natural extension of each other.
Both brands declined to comment on the story, but the news had its effect on their shares. Amazon's aggressive focus on the family market makes this prediction believable. If it does acquire Target, Amazon's store count would immediately rise to roughly 2,300 stores. This will give it a major boost in competing with Walmart's 12,000-plus store footprint.
A month ago, however, Business Insider reported that Target is all set to fix the weakest link in its business, the grocery section. The chain announced its decision to buy Shipt, the grocery delivery startup, for $550 million.
Since the online grocery market is poised for robust and exponential growth, Target's decision seems practical. The market is expected to reach more than $100 billion by 2025, which will be roughly 20 percent of all grocery sales. The deal will help Target compete with rivals like Walmart by featuring options like same-day delivery of groceries.
Today, the size of Target's grocery business is about 15 percent of Walmart's. The acquisition would expand its online channel, improve sales and offer significant competition for its rivals.
Many analysts have derided the chain for its uninspiring grocery selection in the past. Now they feel there may be some hope for the brand after all. But with speculations floating about Amazon acquiring Target, who knows what lies ahead in the grocery wars.
According to The Associated Press, consumers are expecting increased convenience when it comes to grocery shopping in 2018. Same-day delivery, two-day delivery, curbside pickup and other varied options will make online grocery shopping easier and more enjoyable. Other dominant trends include mobile payment at checkout and ready product information via mobile as shoppers browse through the aisles.
Amazon's "customer first" mentality has rubbed off on all retailers, and we will see more evidence of the same this year. Innovation, convenience and pricing will be the game changers. We will also see an increase in meal kits, in-stores bars and cafes — all geared toward the busy, modern-day shopper.
Whether it acquires Target or not, Amazon has hinted that it's ready to dominate the fresh grocery business. 2018 will see a synergistic blend of AmazonFresh and Prime Now, its two major services. The grocery business and the robust delivery system will offer shoppers with easier options.
Prime Now grocery orders are already up, more than other more traditional e-commerce offerings. Whole Foods' grocery footprint across states and Prime Now's robust delivery logistics will create an unbeatable combination.
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