Day 1 for CPG Retailers

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Day 1 for CPG Retailers

By Mike Troy - 05/12/2017

Apple and Amazon are among the world's most admired companies and rightly so. Their innovative products, services and business models have fostered customer passion and loyalty and made them two of the world's most valuable companies. What the success of Apple and Amazon has to do with food and consumable retailing relates to their approach to innovation, re-invention and customer focus considering food and consumable retailers are grappling with unprecedented change, with much of that change driven by Apple's product lineup and Amazon's overall business model.

Consider Apple's global network of about 500 stores, more than 250 of which are located in the U.S. The stores represent some of the most productive selling space in the retail industry and in cases where those stores are located in malls the Apple stores are key drivers of traffic. Despite this success, Apple is in the process of reimagining its retail experience in new ways that are reflective of how its customers use Apple products. It even wants to get away from referring to the physical spaces as stores, according to Apple's SVP of Retail Angela Ahrendts. She spoke recently at the Global Retail Conference organized by University of Arizona's Terry J. Lundgren Center for Retailing and shed light on how Apple is transforming its retail footprint to be more reflective of how people use Apple products.

For example, she noted that half of Apple's stores were opened prior to 2007, which is the year the iPhone debuted. The iPhone now accounts for 63 percent of the company's annual sales of $216 billion and the manner in which the product is used has change dramatically during the past decades. Photo and video now dominate so Apple is adding positions called "creative pros" to stores. Visually speaking, the stores will maintain their simplicity and minimalism but décor changes will lend the spaces a warmer and more residential feeling. About 30 to 35 stores will be remodeled annually as Apple looks to improve the relevance of its physical spaces rather than waiting until fading customer traffic indicated there was a problem.

Amazon applies a similar "change before it needs to philosophy" that isn't dependent on consumer research because consumers don't always know what they want until a visionary shows them the way. This is one of the reasons why anyone connected to the retail industry owes it to themselves to read Jeff Bezos' annual letter to shareholders. It is filled with interesting nuggets about specific Amazon businesses, but, more important, pearls of wisdom regarding Bezos' management philosophy and the perennial topic of how it is still Day 1 at Amazon. That's a reference to his first shareholders letter 20 years ago that spoke to the abundant opportunity that lay ahead for the company. In a turn, this year's letter sought to answer the question of what Day 2 looks like and offered a somber answer.

"Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1," according to Bezos. "To be sure, this kind of decline would happen in extreme slow motion. An established company might harvest Day 2 for decades, but the final result would still come."

To make sure it stays Day 1 at Amazon, Bezos offered a few defense mechanisms. Topping the list is customer obsession, an Amazon favorite, followed by a skeptical view of proxies, meaning don't become a slave to process or allow market research to be a proxy for intuition when it comes to decision-making. The eager adoption of external trends and high-velocity decision making are other elements of the Bezos credo.

These are challenging times for food and consumable retailers and CPG companies when it comes to driving growth and Bezos and Amazon are big contributors to the challenge. So why not borrow some of the company's philosophies as it appears Apple and apply to your own business.

Mike Troy

Editor-In-Chief
[email protected]