Why Amazon wants to eat Esselunga
The interest in Esselunga by Amazon, if it were to be confirmed, responds to some fundamental priorities. Here are which ones. The in-depth study by Mario Sassi
In the large-scale retail trade, the engines of change and reorganization have been running for some time. After the Auchan operation carried out by Conad, Couche Tard set his sights on the entire Carrefour while paying for the disappointment of the French government. But that's not all.
Esselunga CEO Sami Kahale himself in a recent interview said he was convinced that acquisitions in the sector will accelerate in 2021 and beyond. The launch of the news of an Amazon interest, immediately denied by the Italian company, could open new scenarios for the entire sector and in any case provoke an interesting acceleration of the changes taking place.
If we look at the issue from the point of view of the Seattle company, I believe it is undeniable that sooner or later it will have to make its choices on large-scale distribution in Europe as well. For now, it has limited itself to several partnerships with national or local distributors without putting the real cards on the table. In the USA, the Whole Foods operation, despite suffering a series of integration difficulties, confirmed the business trajectories.
Amazon Fresh , among other things, has yet to address and resolve the two reasons that prevent the various players in the USA but also from us from achieving substantial profitability. The lack of density and demand despite the exploit of the lockdown. The increase in geographic coverage does not necessarily mean a consolidated increase in customers and therefore a true growth in sales.
Only a different approach that manages to combine the three formats in a new way (physical stores, e-commerce, and collection of groceries) creating an experience that does not yet exist will be the solution that, I believe, Amazon is aiming for with decision. It needs space, more strategic positions, already loyal customers to satisfy through its technological advantage, the offer of millions of products and, finally, to acquire specific know-how.
In the future, the size of the physical store will not be as critical as it is today. The customer can still find everything he is looking for in any point of sale. In the physical store, what is not available on the linear ones, can be viewed on the spot through what technology already makes available today, evaluated in its convenience, ordered and delivered before leaving the store itself or directly at home, without forcing then the customer to go to another sign. In this way the shops, even in the vicinity, will be able to become center stores transforming themselves into multi-format sales points. The old claim of Standa (“Alla Standa has everything”) thanks to technology could become very topical again.
A point of sale where you can find anything at the cheapest price on the market. The speed of the system, at that point fully automated, would allow the customer who has not yet finished purchasing the items for which he had entered the store, to view the entire range of Amazon's offers, personalized discounts and thus any items ordered. from the warehouse they can be processed and ready for the customer before he has finished his tour.
Each store could therefore simultaneously manage three different business models with extremely high levels of technological, supply chain and general logistics complexity. Investments certainly not within everyone's reach which would however lead to an increase in sales per square meter of sure interest for the brand. Without forgetting that customers would have the possibility to use virtual walls, personalized consultations or apps created ad hoc to order everything they want, well beyond what the store can offer on its counters.
Of course, today all this may seem like science fiction or conference matter. The Italian GDO is still a small and quarrelsome courtyard that struggles to look beyond the daily horizon. The few who do stop almost immediately after the change announcements. Then there are the small regional or local chains that fight hand-to-hand in their territory, the franchisees on which to download costs and the workers willing to accept the consequences. But it will not be like this indefinitely. The war on costs (especially that of labor) that has characterized the renewals of the last three CCNLs will soon be at the end of the credits. As well as some stellar discounts when they heavily damage other subjects in the supply chain. However, few will be able to withstand the necessary investments. There will be room for everyone, large and small chains, but those who want to grow and compete on a national level must ask themselves the problem of size.
The interest on the part of Amazon, if it were to be confirmed, responds to some fundamental priorities. Esselunga has a unique brand in our country. It has important sales points that can also be relaunched according to the above logic without resorting to the pure downsizing of large surfaces. For several years (but not forever) it is still unattainable by the competition. It has an excellent line and point of sale operational management, is essentially concentrated in a few regions and last but not least has no particular trade union problems. And then Amazon from a platform of this level could look at the world.
However, the leaders of the Italian company have unequivocally pointed out that Esselunga is not for sale. And so the discussion could end here. But the same company from Pioltello on the outskirts of Milan will have to decide what to do in its future. Outside its traditional comfort zone there are fierce competitors. For some time Esselunga hasn't implemented any new features that can guarantee the competitive advantage gained in the past and the “Esse”, although interesting, certainly does not represent a sufficient prospect. If anything, they are a useful side dish especially in large cities. But the business, the real one, is another.
And therefore, sooner or later this or another multinational will arrive that has vision and financial means capable of making a decisive offer to the property, making stadium chants useless on the defense of Italianness.
However, there would also be another way.
Esselunga, Conad, Coop, just to name a few, could as co-protagonists within a supply chain project together with other brands, the food industry and the agricultural sector look to a wider market, to export in grand style of Made in Italy that rewards our agriculture and our businesses and the ability to establish and propose our large-scale distribution.
Too bad that politics, when needed on strategic issues, risks always looking elsewhere. Of course it is perhaps an unattainable dream but it could represent another useful approach to address the internationalization processes of the national agri-food sector trying to put together the best professionals within a large-scale project.
Easy to say, difficult to do. If so, it may not be better to let fate, here as elsewhere, be fulfilled. Which, however, for the company in question, in my humble opinion, would be characterized as a great destiny.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/amazon-esselunga-cosa-succede/ on Sun, 25 Apr 2021 14:07:20 +0000.