I recall walking through my local grocer, sometime in early 2013, and noting that boxes of my favorite granola bars, Kashi’s Mocha Almond Bars, were on sale, 2 boxes for 6.00. I bought four boxes.
When my supply of granola bars was exhausted, the price was then 4.49 per box when I returned to my local grocer. The sale that compelled me to “stock up” now made me keenly aware of the regular price… and I didn’t like it. I did not purchase any that day, feeling that the regular price was more than I cared to spend, and I would seek an alternative.
The sale had successfully engaged my attention to compel my active thinking regarding price of an item that I might otherwise not have thought twice to purchase. We know from behavioral economics that anchoring plays a very big role in our evaluations of pricing value, but now this new anchor of 3.00 per box entailed a view that a favored product does go on sale and my purchasing patterns benefit from altering my consumption. Additionally, my view that the product was basically a commodity that could be had from any number of retailers compelled a view that I may wish to seek purchase elsewhere.
Returning home, I checked the price online and found that I could purchase my granola bars in 6 box packs thru Amazon for 12.80 (April 23, 2013 price). At just 2.13 per box… why would I buy them for 4.49? What was once a purchase that did not engage any higher level rational thinking was now a product that my local grocer converted into a game of convenience and price.
It is worthy to note that I now check the price of these granola bars weekly on Amazon, and I have never been able to capture a price so low. The price fluctuates weekly… a grocery staple had moved to become a sort of commodity stock… and that market exchange was typically Amazon (particularly since it was not Amazon that was actually selling the item, they were just the marketplace facilitator).
Amazon is generally dependent upon local brick and mortar stores to model products to the consuming public, and as FastCompany’s John Brownlee keenly notes, “Amazon wants to steal eggs from the retail hen house, not slaughter the chickens that lay them,” thus killing off retail ultimately threatens a necessary distribution network. Amazon puts significant downward pressure on prices and profit margins for local retailers… and there lies a systemic strategy problem with Amazon’s new application ‘Flow.’ The problem is one of linearity, but is dependent upon a holistic symbiosis of brick and mortars.
Flow turns your phone into a sort of fast acting price gun that delivers almost immediate price comparison for mass market products… while you are right there in the store! While the first level thought is this is great for the bargain seeking consumer and a threat to retailers… but let’s think about this strategically for a moment.
Good strategy, if you are not going to be the low cost provider, relies upon points of differentiation. Points of differentiation can be in the experience of shopping environment or it can be in the products offered. Shopping at Target is a very different experience from Wal-Mart, although many of the products are identical.
As a result, the local ‘mom and pop’ retailer should view Amazon Flow without fear, but a call to action to fill their shelves with local and artisanal goods that have not reached the mass market… the purveyor that doesn’t have the capacity to sell nationwide, but is yet doing well growing organically in the local market. The retailers that stand to be harmed by the ease of use of Amazon Flow are the non-perishable, fungible items that are available most everywhere… now it is not just a gallon of gasoline that is the same as any other, it is also nearly all mass market products.
Success in this new paradigm will rely upon emphasizing what is different to your product… just as it has before, but now the competitive space is about to get ever more brutal for those that aim to retail the same items as everyone else. Immediate gratification will still serve the local grocer or retailer, but now the margins are going to be exposed to even more downward pressure.
Mass market products may be the idealized goal of start ups and purveyors that watch one to many episodes of Shark Tank, a favorite show of mine too, but the logistic and environmental concerns surrounding mass market are many. Concentrating production and standardizing inputs to maintain output, on a mass scale, invariably brings with it concerns of ethics and environmental hazards (e.g. factory farming or mono crop cultivation).
As an advocate of sustainability and the slow food movement, artisanal and craft purveyors should view Amazon Flow as a strategic marketing opportunity to reach a larger community of retail distribution… local and regional… but beware the national market! Environmentally, this is a mixed bag… as it may compel more concentrated purchasing of certain items, and the lower prices may compel additional consumption… OR… it may compel more people to consume locally and reduce natural resource pressures.
So… one moral to this story… if you run a sale on a mass market item that is widely available, beware you don’t compel disadvantageous alterations of your customer’s buying patterns, such that you get the an immediate transaction sale, yet sacrifice all future relationship commerce (what was once a regular purchase was sacrificed to be viewed as a fungible commodity resulted in reduced consumption and keen attention to pricing… not a desirable outcome for a retailer).
Secondly… support your local artisans and craftsman… need some help looking for some great stories of unique local products? The Food Craftsmen is a great site that showcases local products and purveyors, as well as the stories behind the scenes… check it out!