From the Publisher: Keeping ahead of Amazon

Grocers can fend off Amazon.com’s advances by doing what they do best, offer good products at good prices.

The hubbub around Thanksgiving about Amazon.com using drones to deliver products to SethNEW10-10a shopper’s front step in the future got me thinking: Is Amazon’s new delivery of products simply a ruse to pull the wool over our eyes in an effort to raise its stock price?

Follow my logic, if you would. Amazon has done a fantastic job marketing itself as the future of American retailing and, in many respects, the company has done an incredible job of changing the way consumers purchase merchandise. Heck, I even use it for the purchase of books, which I read on my Amazon Kindle, and other hard-to-find merchandise.

The result has been a quadrupling of its stock price to about $400 a share since it first went public in 2007. Like Apple Computer, Amazon has become a darling of Wall Street, but unlike Apple its stock price is at an astronomically high price because of its future potential, not its current results. Amazon lost money in the third quarter, yet its stock price kept rising.

Business 101 tells us that Wall Street is all about the future. So that means keeping investors invigorated and informed on how, in just a few years time, Amazon will be the biggest player in more and more industries and categories.

For now, though, Amazon must keep its investors happy and that means throwing out as much information as possible about its amazing future. Wall Street can be unforgiving and the slightest misstep could take, say, a $400 stock down to normal levels in a New York minute. With the pressure building, Amazon appears to have decided that the next target, and the biggest one yet, is the supermarket industry.

Unlike many other industries, food stores thrive on offering fresh products for immediate or near-immediate consumption. Next day delivery of meat, fish and produce just does not have a very good ring to it, especially for a mom trying to make that evening’s meal.

Amazon officials know that to crack the supermarket outside of several bulky and hard-to-carry categories (pet food, paper products, diapers), they have to convince shoppers that they offer a logical alternative to getting in the car, driving a couple of miles to the store and buying the product at their convenience.

Hence, the talk of drones shooting down from the sky with product delivered right to your door. Amazon is trying to trick us, or actually Wall Street, that it is developing ways to beat the supermarket industry, when all grocers have to do to stay ahead of this tiger is to keep doing what they have been doing for the last century: offer quality merchandise at competitive prices in a convenient location.

Seth Mendelson can be reached at  646-274-3507, or smendelson@groceryheadquarters.com.

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