Paul Nair thought his four tiny gourmet and organic groceries in metro Atlanta competed directly with a really big rival: Whole Foods, which snagged nearly $16 billion in sales last year.
But he had an odd reaction after learning his little Savi Provisions shops in Brookhaven, Midtown, Inman Park and Buckhead will soon face a far bigger competitor, one that has already shredded lots of retail rivals and reshaped the way we shop. Amazon, the giant retail revolutionary, announced it will buy Whole Foods.
“It is going to benefit us,” Nair told me with a straight face.
Somewhere between his fresh prepped dinners-to-go, Japanese plum ale, $7.99 jars of locally pickled carrots and $6.99 bags of Chocolate Island Coconut granola, Nair is expecting to withstand the coming confrontation.
He pounded out an email to his top managers. Be ready, he wrote, to discuss the “good, bad and the ugly.”
Nair told me he expects Amazon to beef up Whole Food’s technology, increase automation and cut costs.
But he also predicts Amazonification will cause Whole Foods to lose much of its human touch with customers, which will give his own shops an exploitable advantage.
“When it comes to gourmet, it is about interacting with people,” he said.
As a shopper will you worry about less human touch if the trade-off is that you might pay less for Tofurky Pizza and possibly get it delivered by a drone?
Amazon doesn’t leave much wiggle room for its rivals, at least not with the big chunk of Americans who are willing to do more of their shopping online. Which I guess is why some shareholders who invested in other grocers and related retailers acted like the Huns were coming and retreated for the hills when they heard Amazon will buy Whole Foods.
I’ve talked to scattered consumers who are uncomfortable with Amazon’s power and try to avoid patronizing the company. Then again, I heard the same thing about Wal-Mart, where a stunning 95 percent of U.S. consumers shopped last year.
By the way, as big as Whole Foods is in the world of fancy and organic groceries, it reportedly captures only 1 to 2 percent of the nation’s overall grocery spending. And as low as Amazon’s prices can be on lots of items, there are plenty of times when it is not the cheapest, according to one spot check by Clark.com (which is part of the same corporate family as the AJC).
Retailer gut check
Still, the prospect of a run-in with Amazon should give any retailer a gut check, including Nair, who told me he did well in the past owning gas stations, billboards and real estate.
He’s deep into plans to expand Savi Provisions, whose stores take up a fraction of the space covered by typical Whole Foods or Trader Joe’s. He plans to open an outlet on Pharr Road in Buckhead in late fall and another this summer in Decatur where a Cook’s Warehouse had been.
Nair already had plans to significantly increase his focus on chef-driven, fresh-made meals. He hopes that plus the human touch and a push to add more locally grown and produced foods will help distinguish his groceries from a Whole Foods/Amazon combo.
Talking to Nair reminded me of how owners of independent book shops responded to the threat of big box store chains and Amazon in the past.
Many of them lost that gamble. But not all of them disappeared. Heck, some courageous new ones have sprouted in terrain already burned over by Amazon.
I visited one to get hints about how Nair and other retail independents might have any hope of thriving in a shopping world increasingly dominated by businesses like Amazon and Wal-Mart.
“I’d be nervous,” said Dave Shallenberger, who is co-owner of Little Shop of Stories, a children’s book store on the square in Decatur.
“We can’t match Amazon on price, not if we want to stay in business,” he said.
Yet his shop was buzzing with kids, moms and au pairs when I visited on a recent morning.
Price isn’t everything
So maybe price isn’t everything all the time. Which is a beautiful thing, even for a cheapo like me. It’s nice to see entrepreneurs with dreams to provide an extra deep connection to customers.
Know your niche and then “do it really, really well,” Shallenberger said. “This wouldn’t have worked if we were a book store that tried to be all things to all people.”
So Shallenberger, a recovering attorney, and co-owner Diane Capriola launched in what they hoped would be a prime spot for community-minded book lovers in Decatur. They offer extras to personalize the experience, like a club that includes reading rewards of free donuts and ice cream at local shops. They host book-themed summer camps, connect with local schools, host author events, provide gift wrapping, have play areas for kids and encourage donations of pennies to turn part of the store’s floor into a coppery setting for the word “read.” A legit published author works behind the counter.
“Every kind of added service related to children’s books we have tried to include in our store,” Shallenberger said.
“It’s still tough,” he told me. “Our margins are really thin.”
As we spoke, a UPS delivery guy showed up with boxes of fresh books for the store. Included in the mix: office supplies from Wal-Mart.
If you can fight them, sometimes you also have to join them.
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