Comment: What procurement should expect from the Amazon-Whole Foods deal?
When Amazon announced its purchase of Whole Foods last month, grocers and retailers immediately began to wonder about the impact the integration would have on their industries.
Amazon has been considered a threat to traditional retail for a long time now, and its new physical presence adds to the competitive dynamic -- not only will the acquisition cause a major shift in how brick-and-mortar grocery stores operate, but it is also bound to impact the way grocery and retail procurement teams and supply chains function.
Anticipated changes: What’s in store for retail?
Although it is still too early to definitively say what this major acquisition will hold, retailers should keep an eye on the following changes, and be prepared to tackle them with well-thought-out supply chain strategies.
Transformation of delivery networks
With new access to a multitude of physical stores and distribution centres -- equipped with refrigerators and freezers specifically designed to keep perishable food fresh -- Amazon will likely bolster existing grocery delivery and pick-up services. Amazon Fresh currently allows customers to order groceries online and either pick them up at an Amazon location or have the order delivered directly to their door, but consumer concern of Amazon’s ability to deliver perishables was one reason the service didn’t take off as quickly as expected.
In addition, Amazon recently filed for a trademark for a service described as, “We do the prep. You be the chef,” which indicates Amazon may begin competing with prepared meal kit providers like Blue Apron. As these types of services become more widely available and gain popularity among consumers, other retailers are likely to follow suit and offer similar online ordering systems to keep up with demand.
Consumer expectations to receive orders almost immediately are also likely to increase, requiring retailers to develop new methods for delivering high-quality products in little time. For Amazon, the increased distribution centres will help make this a reality, in addition to its previous investments in drone technology, plane leasing and ocean freight booking. Other grocery retailers will need to follow suit and invest in streamlining distribution if they want to compete.
Lower prices for retailers and end customers
Whole Foods has thrived as a high-end grocery retailer, capitalising early on the market for organic, natural food options. On the other hand, it also has gained a “whole paycheck” reputation due to its high prices. This can be attributed to the fact it sources from smaller, locally owned stores, and carries more options per product line. It’s a costly business model that requires passing on additional cost to consumers to remain profitable.
Many grocery stores have caught up to the Whole Foods appeal by offering more affordable, natural product lines. Stop and Shop’s Nature’s Promise, for example, directly competes with 365 by Whole Foods. However, with the Amazon deal, there’s new concern for retailers: with Amazon’s ownership comes access to relationships with larger suppliers, more purchasing power and superior inventory technologies and distribution tactics. The result: Whole Foods may be able to pass along additional savings to the consumer through backend operational efficiencies – positioning their products as a brand of choice for both quality and price. To stay competitive, other retailers will need to source more effectively and strategically to cut costs.
Additional investment in procurement technology
Amazon has already proved to be a pioneer in the retail technology space with Amazon Prime and most recently, with grocery services like Amazon Go and AmazonFresh. With the added pressure this acquisition will put on retailers to stay competitive, they will need to follow Amazon’s lead and invest in procurement and digital technologies that not only streamline their processes, but improve the shopping experience for consumers.
It is possible we will see a spike in grocery stores offering AI-enabled online ordering and household item replenishment, with the simple push of a button. This type of technology will benefit supply chain and procurement teams, making their lives easier with more automation and driving the industry towards greater innovation and digitization.
Additional investments in the continued transformation of inventory and supply chain management are also likely. For example, the use of IoT enabled tracking and logistics, including smart containers and drone technology will improve inventory control and increase supply chain efficiency across the industry.
We can’t say for sure what the Amazon-Whole Foods deal means for procurement and supply chain teams until the deal is goes through, and ultimately, changes start to roll out, but the acquisition is bound to spark more innovation and evolution from grocers and procurement teams fighting to stay competitive and relevant.
SAP Ariba to digitise procurement for Expo 2020 suppliers
The global trade event, this year hosted in Dubai, was rescheduled from last year and will now take place between 1 October 2021 and 31 March 2022.
As the event’s Innovative Enterprise Software Partner, SAP Ariba solutions will fully digitise and automate the procure-to-pay lifecycle, providing a streamlined experience for thousands of market leading, global suppliers and strengthening the global supply chain with enhanced transparency and efficiency. The cloud-based platforms operate through on SAP Ariba’s UAE public cloud data centre and connects to the Ariba Network.
Expo 2020 "a long-term investment"
Mohammed AlHashmi, Chief Technology Officer, Expo 2020 Dubai, said the world trade event is “a long-term investment in the future that aims to enhance opportunities for sustainable business connectivity and growth”, which stretches beyond Expo 2020’s six-month window.
“Our partnership with SAP is an example of what can be achieved with the invaluable support of our technology partners to host one of the most digitally advanced World Expos ever,” he added. “The implementation of SAP Ariba solutions has transformed our end-to-end procure-to-pay cycle and helped set new standards of procurement automation for projects of this scale.”
To date, more than AED 1bn has already been transacted by Expo 2020 suppliers through SAP Ariba. The platform promotes collaborative partnerships and allows registered users to participate in sourcing events, negotiate and initiate contracts, and centralise their invoicing and payments in real time.
Claudio Muruzabal, President of EMEA South, SAP, said: “Expo 2020 Dubai is demonstrating global best practices in digitising its procurement process with SAP Ariba solutions to help gain visibility into its spend, tighten collaboration with its suppliers, and achieve process automation, including completely paperless invoicing.”
About Expo 2020 Dubai
Expo 2020 will take place in Dubai and is the first of the long-running World Expos to be hosted in the Middle East, Africa and South Asia territory. The original World Expo, called the Great Exhibiton, was hosted in 1851 at the Crystal Palace in London, designed as a showcase for the innovations of the Industrial Revolution.
Expo 2020 was originally due to run 20 October 2020 to 10 April 2021, but was last year postponed in light of COVID-19 restrictions - though some business has already taken place virtually. The event will place greater emphasis on innovation in sustainable solutions through the Sustainability District, blending technology and culture. It is expected that around 70 per cent of the 25 million attendees will be international visitors.