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EDITORIAL Are supermarkets set to be the new marketplaces?

By Paul Skeldon May 14, 2018 - 12:52 am

Nothing lasts forever. Amazon’s dominance in the marketplace space, which has been a worry for everyone from Donald Trump upwards through the evolutionary chain, could well be under threat.

Nebuchadnezzar, King of Babylon, famously dreamed he had “legs of iron, but feet of clay” – Amazon, like anything elevated to the top, has only one way to go: down. And retailers look to have woken up to the threat that the giant marketplace poses and seismic shifts are rocking the retail world.

The mega-merger between Sainsbury’s and Asda fired the starting gun, but now we see Facebook moving in and we have already covered how Instagram and Google are all jostling for position to become sales platforms. The new retail battleground, it appears, lies in becoming quasi-marketplaces: taking the best bits of in-store, leveraging existing brands and adding in variety and inventory.

The move by Sainsbury’s to buy Asda – which Walmart is ditching due to poor growth in the UK and instead focussing its attentions on India and China – is purely defensive, but does have some interesting potential upsides. The merger is primarily driven by increasing wholesale buying power, however, together the two stores have a massive online and offline footprint, have Argos and would, together, command 30% of the UK grocery market.

This alone could set the new paired group up to take on Amazon in the UK, offering not only a huge variety of goods – not least cheaper foodstuffs – but also offering a truly omni-channel shopping experience with stores as well as online.

The idea isn’t wasted on Amazon, which is coming the other way to not only circling the UK grocery sector, but increasingly looking to the physical world to augment what it does. Amazon is already trialling high tech Amazon Go convenience stores, but it is also showcasing a more physical Amazon experience at a series of ‘Amazon Experience Centers’ in the US. These model homes are designed to primarily push Amazon’s Home Services – handymen, domestic repairs and dash buttons for toilet paper et al – but they show a move towards Amazon wanting to pull in the physical into its digital experience.

It has Alexa and Dash as physical manifestations in the home, but it needs more as it recognises that humans like to physically experience goods and services.

This could be why rumours are now rife that Amazon could buy UK supermarket chain Morrisons. The supermarket sector has been thrown into M&A speculation frenzy following the Sainsbury-Asda merger and, should it go ahead – it has the Monopolies and Mergers Commission to clear yet – it spells trouble for Morrisons of all the other grocery retailers. Waitrose, Lidl, Aldi, Co-op and Budgens are all niche players with their own dedicated market segments. Morrisons would be left hanging in a market dominated by Tesco and ‘Sainsda’.

Amazon, meanwhile, wants in with grocery, needs physical presence and is under threat from the scale of a ‘Sainsda’ entity. You can see why there are rumours.

What is interesting is that battle is no longer just about dominance in the grocery market, but about how marketplaces and supermarkets – which are the marketplaces of the ‘old world’ – are now locked in a battle to dominate omni-channel retail.

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