“Death by Jeff?” aka Amazon. Who is next?
Will Natural Pharmacies, Apothecaries, and Natural Markets survive the Amazon invasion. I believe the answer is yes if you are smart and act quickly.
by Bob Root, Keys co-founder and Chief Technologist and Scientist.
You may know me as the formulator and one of the founders of Keys. Less known is that I am an entrepreneur survivor of the photography industry and the personal computer collapses.
Keys is a company that made a conscious decision to only sell our products exclusively through established brick and mortar Natural Pharmacies, Apothecaries, and Natural Markets. We have flourished in what has become a commodity market. Now it is becoming a war zone between the grocery titans that are threatened by the Amazon juggernaut.
We are more than concerned now than ever that our channels are now under attack by Amazon and its new subsidiaries. Referred to as “Death by Jeff,” there are several books about the topic, so it probably is a survival tool to make yourself aware.
There used to be a camera store on every corner and a computer store on every block. Both have all but disappeared for numerous reasons, but primarily because of the onslaught of Amazon into these markets. Amazon is the largest retailer of computers, tech, and cameras. The retailers who thrived in these markets are gone. Why? Where did all the bookstores go? Yesterday, Pier 1 announced they are closing half for their 900 stores and filed for Chapter 11 bankruptcy. In the natural markets sector, Lucky’s, Earthfare are gone and Sprouts stock is plummeting. All because of Amazon.
Living through the morphing of these two industries not only saw retail channels collapse, but many brands died in the process. There was a common thread as to why both went out of business. “They tried to compete on price and bought products primarily through distribution for convenience.”
When Walmart became a food supermarket, it started the movement to big box stores concept where they became the one-stop place for food, household items, and prescriptions. Cameras and computers were too technical for commodity stores in the early days. Same as in natural products, differentiation between conventional products with nasty pesticides and chemicals were quite easy ten years ago, and many brands traded only on the fact that they were chemical-free without offering differentiated features, benefits, and advantages to their customers. NGOs like the EWG trade on fear and drove to educate consumers about harmful chemicals in conventional products. The “Dirty Dozen” chemicals are almost gone, driving all stores to more commodity and price-based shopping for natural products. Big box stores are now as natural as they are conventional, making them the preferred markets of choice.
Today, Amazon owns Whole Foods, is sweeping urban markets with Amazon Go convenience stores, and will be announcing an entire new chain of local grocery stores coming in 2020. Their goal is simple to understand. It is “Domination.” Like a scorpion stings anything, it is merely their nature. Competing with them toe-to-toe is death. They plan to target a broad range of customers while also providing a full array of online products deliverable to their stores for pickup. Not only does it look like an unstoppable machine. It is unstoppable.
There literally are bunches of books written about Amazon as a market eating machine, but coming from two markets that were devoured by Amazon gives me a unique perspective that I feel I need to share.
Camera stores, computer stores, and natural product sellers all started the same. They differentiated themselves through unique product offerings and customized services, all cemented by consumer education. Not too long ago, you could march into a camera store with a roll of film or a memory card and get pictures to share with your friends. That is gone.
The emphasis is on differentiated products. Last year we saw a 300% increase in natural markets going out of business. Why? Frankly, it is simple to see from a high altitude, but they probably did not see their death coming. What they did to kill themselves was to buy exclusively from distributors the same products that Amazon, big-box, and grocery stores have and trying to sell at higher prices. They honestly expected loyal customers to pay more for the same products. What they forgot was to differentiate their product offering, making it desirable for people looking for products that work and are not the same things as Kroger or Walmart sells. When Amazon bought Whole Foods, they brought their buying power and AI systems to the grocery market, starting a war a couple of years back. Again, I could probably write a 1000 page book detailing the problem and solution, but here it is in a nutshell.
For pharmacies, apothecaries, and natural markets to survive Amazon, they have to return to their origins and differentiate their product offerings and themselves by:
- Join the “Buy Direct” movement and carry only products not sold by distribution (aka commodity)
- Carry products that not sold in mainstream grocery stores or Amazon’s grocery stores
- Carry products that are functional and on purpose
- Regain margins by offering differentiated products
- Educate consumers as to why the products you carry are better than the commodity stores
- Reinstate the Pharmacy, Apothecary and Natural market as a trusted advisor in the community
- Stop trying to compete with big-box stores by driving down manufacturers’ pricing stifling their product innovation.
- Hire buyers that know product differentiation in place of beating up salespeople for BOGOs, better pricing, and Free-Fills.
So, if you find yourself asking your vendors to lower their price and be “Cheaper Please Cheaper,” you are driving yourself and them out of business. So get on the high side of things and offer your customers new and different products than those carried by Walmart, Kroger, and any other super-duper markets. It goes beyond supporting the small boutique product manufacturers. Frankly, they do not need your charity; they need your business because distributors won’t carry their products because they are not cheap enough. Become the boutique reseller you once were through differentiated products, education, being their trusted advisor, and refocusing your attention on the customer.
Bob
Keys products are functional and integrated medicine natural products that have measurable results. Bob is the Chief Technology Officer and head formulator. Keys was born after he created his products for his wife, Wendy, after her Melanoma diagnosis and subsequent battle with chemicals in her prescription products. Bob is a former High Tech CEO and engineer from Silicon Valley. He began his career at Polaroid before migrating to the personal computer industry in its fledgling days. Bob is the author of “Chemical-Free Skin Health®,” “Keto Plus” and “Defining Moments,” books. He has written hundreds of articles on the natural products market and was a member of the Washington Speakers Bureau. He is a member of the World Future Society who specialized in skip-generation technology and scenario planning.
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