Posted by John Bek, Segment Leader, NetSuite Food and Beverage

As Amazon continues to pursue major market share across numerous industries, electronics retailers, pharmacies, consumable manufacturers, department stores, food delivery companies and grocery stores stand among those sectors most impacted by the ecommerce giant’s expansion.

The fourth-largest company in the world by market cap, Amazon is a contender on both the B2C and B2B fronts—a reality that at some point will likely impact the food and beverage service industry. Take restaurants, for example. Unlike institutional customers (i.e., hospitals, schools, military bases, etc.), which usually buy on contract, restaurants would be a fairly easy chunk of business for Amazon to bite off in the future.

In fact, for the thousands of independent eateries and smaller restaurant chains that aren’t buying from any one supplier, Amazon’s offer of an easier, more streamlined way to shop for food and beverages would be a no-brainer. After all, these buyers are consumers themselves, and they’re used to shopping like that anyway.

Here’s the disruptive part: even if customers know that they’re not getting the best possible price, the reason they stick around is because they know the experience will be convenient and easy—and that delivery will be quick. They’ll put a few items in their shopping carts and, at some point, hit the “buy now” button, knowing that their goods will arrive in the next day or two, guaranteed. It’s this “once I’m in, I’m in” mentality that keeps Amazon moving steadily into new industries. In other words, a buyer for a local restaurant isn’t just a buyer for that establishment; he or she may also be an Amazon Prime member who would like to extend the B2C experience into the restaurant’s procurement strategy. It's the evolution of consumer expectations making the leap into B2B procurement that food and beverage distributors should keep in mind.

Stepping Up to the Plate Now

So, what can food and beverage distributors be doing now to ward off any potential threats from Amazon? For starters, one of the best strategies will be to offer support that rivals Amazon’s own offering. For example, Amazon’s secret sauce lies not only in its ecommerce shopping cart, but also in the logic behind that cart in terms of creating the right flow, process and product at the right time. Making that happen requires both ecommerce and a complete logistics infrastructure. Amazon has infrastructure in place that allows it to store the sellers’ products (i.e., Fulfillment by Amazon or “FBA”) and fulfill orders very rapidly and efficiently.

Here are four more important steps that all food and beverage companies should be taking now:

1. Don’t wait until the inevitable happens. Five years ago, Walgreens probably would have laughed off the fact that the world’s largest online book seller could invade its turf, but that’s exactly what happened when Amazon bought PillPack last year. The best strategy is to prepare now by updating or replacing any antiquated systems, developing good ecommerce strategies and shoring up valued customer relationships that may need attention.
2. Integrate automation into your operations. If there’s one thing that Amazon is great at, it’s getting orders out the distribution center (DC) door and out to its customers quickly. Credit some of the company’s automation investments (i.e., its purchase of robotics maker Kiva Systems in 2012), with helping to propel that speedy-delivery mission. An industry that was historically rooted in one sales representative matched up with one restaurant owner, the food and beverage sector could benefit greatly from a more automated, streamlined approach made possible by an enterprise resource planning (ERP) platform combined with a customer relationship management (CRM) solution and other tools that enable high levels of automation.
3. Take an introspective look at your operations. Look inward at your company’s processes; evaluate them for potential inefficiencies, rigidity and errors; and find the gaps that need to be filled. Recognize that you’re dealing with a business landscape that’s evolving, and that even your best customer relationships may not withstand the powerful draw of a competitor like Amazon. Using advanced technologies and automation, you start to position your company for success—should the threat become a reality.
4. Utilize a robust, omnichannel technology platform. Thanks to the overall shift to ecommerce selling (versus face-to-face sales), food and beverage companies should be using ERP, CRM and other tools that allow them to sell online, via mobile device, face-to-face or using the phone—whatever the customer prefers. NetSuite, for example, helps companies create an Amazon-like omnichannel experience that’s vastly different than what most food and beverage companies have used historically.

Who’s Next?

Right now, food and beverage distributors aren’t seeing much competition from Amazon. The idea has reared its head from time to time—a 2017 report from JPMorgan claimed that at the time Amazon wanted to “dive into food service distribution, potentially shaking up an industry now dominated by three large players”—but has yet to transpire. Spurred on by the Whole Foods acquisition, which took place around the same time, consultants like Caryn Hecht were predicting a similar fate for wholesale food distribution.

“Amazon will continue to leverage increased buying power and lower volume cost, provide a greater product selection, and now have the infrastructure for faster delivery completely by-passing wholesalers,” Hecht wrote in How Amazon Acquisition Impacts Wholesale Distribution.

“The faster to market advantage of traditional wholesale distribution will be threatened by this new model,” Hecht added. “To remain relevant in the new frontier of retail, wholesale distributors must be ready to differentiate their offerings and services through a deep understanding of their industry and customers.”

Learn more about NetSuite’s software for food and beverage distributors.