Retail Disruption is not the Whole Story with Amazon's Latest Acquisition

Blog /Retail Disruption is not the Whole Story with Amazons Latest Acquisition
NTT DATA Services blog 5

Last month Amazon finalized its acquisition and took the helm of premium grocer Whole Foods in a move that captured the attention of the technology and retail industries. On its surface, the acquisition of a grocery chain with 450+ physical stores might seem like an odd play for the technology giant. However, if you dig deeper, the transaction aligns well with the strategic direction that Amazon needs to take if it is going to continue its path of growth and industry disruption.

Since this deal unfolded back in June most of the coverage has been focused on the implications to the retail grocery industry and how this roughly $650 billion industry will be disrupted by the online giant. But the retail implications of this acquisition are only part of the story. Along with those 450+ brick-and-mortar locations, the Whole Foods acquisition brings to Amazon the 365 Everyday Value and Allegro product lines with about 5,300 unique SKUs. Vertical integration is not a new strategy for Amazon, which has quietly introduced private label clothing, food, and household goods brands. But with this latest acquisition, Amazon will be in a position to compete directly with consumer packaged goods (CPG) companies in everything from pantry stables, to household goods, to health and beauty products.

To respond to the threat that Amazon now presents to the consumer packaged goods market and maintain their market share, CPG companies need to reevaluate their place in the supply chain, reconsider their business model, and make investments to improve their standing in the key area where Amazon will impact the industry most: customer experience. Direct consumer interaction will be the next battle ground for an industry that has traditionally remained one step removed from the end-customer.

Consumers today are used to on-demand service, anywhere, anytime, on any device, from any channel. Amazon has recognized this across its business and I would expect that we’ll start to see an effort to unify the online, delivery, and now in-store aspects of its business. Whether customers are researching, asking questions, purchasing, or trying to resolve an issue, they want to have a frictionless experience – and this goes far beyond retail. Even though CPG companies are often seen as the middle man between partners, suppliers, and consumers, customers hold same high expectations for their digital interactions with these companies that they have with other, traditionally more consumer-facing industries. This means that identifying and reducing the causes of customer challenges, or friction, throughout the customer journey is now a business imperative for CPG organizations. Your interactions with your customers will make or break your organization: providing a better customer experience has been directly linked to higher revenue growth and gross margin1.

NTT DATA recently released a Customer Friction Faction (CFF℠) Assessment for the consumer packaged goods industry, based on measuring various digital customer friction points within 15 top-tier CPG organizations. Our team searched for a product, researched that product, and then determined where it could be purchased with each brand through its online presence. The research confirmed that the consumer experience is an area for improvement which is impacting the performance of CPG organizations.

Each company was assigned a quantifiable score across the following five categories, based on user experience. The higher the friction, the higher the score therefore lower scores provide a better experience.

  • Engagement: How the company interacts with customers and presents itself to the market
  • Process: The focus on the company and customer activities and channels contained within a process
  • Technology: Attention to friction based on technology architecture and customer inputs
  • Knowledge: Availability, accuracy and utilization of the company’s customer and product knowledge
  • Ecosystem: The measurement of organization integration and knowledge sharing within itself and third parties

Results were consistent with other cross-industry studies - the lower the number of customer friction points, the lower the score, the better the business outcomes.

The CPG companies that had the least amount of customer friction also had an average 31% increase in asset turnover and 13% lead in gross margin over those with higher friction scores.

Which categories presented the greatest challenges?

Not surprisingly, engagement presented the fewest issues, while the process, technology, and knowledge categories represented the greatest opportunity for improvement. Process represented 32% of friction within the 15 evaluated sites, technology accounted for 21%, and knowledge made up 16%.


From start to finish, lagging CPG sites asked customer to perform, on average, 55% more steps to accomplish the same transaction. Essentially, they are asking the customer to work harder for the same outcome provided by their competitors.  Making things more difficult for customers is not a winning proposition. Every extra step is one more opportunity for a customer to step away from your organization and see what a competitor has to offer. Amazon pioneered one-click shopping for just this reason. Customers shouldn’t have to reinvent the wheel in order to get the results they need. In our assessment of CPG companies, we found that not only were there too many steps, but CPG companies routinely asked for steps to be repeated and presented unnecessary decision points. CPG companies need to look for ways to leverage digital technologies to streamline how they work with current and potential customers.


Technology accounted for 21% of the customer friction that our team experienced when working with CPG organizations. High friction scoring sites contained UX design challenges such as confusing navigational menus, inconsistent/confusing design elements, and difficult to interpret or invalid search results. In addition, many banners, pop-ups and other marketing-centric techniques distracted customers and inhibited them from completing their goals. Amazon has focused its online presence and all aspects of its technology stack on enabling the customer to get things done -whether that is placing an order, researching a product, or making a shopping list. CPG companies need to take a close look at why consumers are coming to their organization, and design technology assets to meet those needs. This represents a shift away from a marketing-centric view of technology toward a transactional focus.


The CPG company websites which scored poorly in this area contained product information that was presented in a confusing manner and/or does not help the customer on their journey. No matter how much information you have, if customers can’t find it or it is not presented in a way that will help them, it is useless. At the same time, very few CPG companies gave any credence to customer data, either using it to tailor the experience or providing mechanisms to better engage their customers through knowledge. The customer data that Amazon will obtain from Whole Foods represents a treasure-trove of consumer data that will enable them to uncover new insights about products, customers, and buying patterns. Combine this data with the existing plethora of data from prime users and you better believe that Amazon will be designing products, services and methods of engagement tailored to the specific needs of their customers. If you do not know your customers, there is no way to devise a product that they will value.

Identifying your path toward success

Providing a positive customer experience is rapidly becoming the leading point of competitive differentiation across the CPG industry. As more and more aspects of our daily lives are commoditized, the customer experience is going to become the last differentiator for the majority of companies.  If every touchpoint across your business isn’t customer oriented, you run the risk of lagging behind your competition – and losing business.  By focusing on the key areas of process, technology, and knowledge, CPG companies can start making incremental changes to better provide customers with a lower-friction experience that will increase both their satisfaction and brand loyalty.

Find out more about our research, methodology, and survey results, plus our recommendations for the four key topics CPG companies should be focusing on in order to transform their customers’ experience. View our webinar and you will receive in our full report, Friction Challenges for the Consumer Packaged Goods Industry.

NTT DATA’s unique two-pronged approach combines our Customer Friction Factor℠ service with practice expertise for rapid friction resolution. Access our Consumer Packaged Goods Knowledge Center to learn how reducing your customer friction points can improve business outcomes while delivering greater time-to-value.

1. Forrester Research Report, Improving CX Through Business Discipline Drives Growth, June 19, 2017

Post Date: 9/25/2017

Matt Leach Matt Leach

About the author

On his first day as an engineer, someone decided that Matt Leach should write requirements. He soon discovered that project success is not just about technology, but a holistic solution that solves the right problem. Since then, he has helped organizations better understand their business and their customers while delivering solutions that delight both. Currently, Mr. Leach is a Vice President in NTT DATA’s Digital, Applications and Information Management Practice where he leads the Business Analysis and Project Management Practices.