Market Movers Are Moving the Market
Companies with large market share who adopt AI will force others to follow suit.
This is the first essay in a series of essays that will be published as part of an ebook with the preliminary title The Next 18 Month: What to Do When AI Takes Your Job. The ebook will analyze why workers can expect to lose their jobs over the next 18 months (spoiler alert: it’s not just because of AI), who is most at risk, and what they can do to prepare. Become a full subscriber to get new chapters and first access to the ebook when it is released.
In June 2017, Amazon made a risky bet. The e-commerce giant had long anticipated consumers would eventually buy everything online – including groceries. But not everyone agreed. There was skepticism that consumers would entrust a company like Amazon to pick the right avocado or deliver an unbruised bunch of bananas to their front door.
Even though demand wasn’t there quite yet, Amazon believed shoppers would one day buy groceries online too. They placed their bet, purchasing Whole Foods for a whopping $13.7 billion, the largest acquisition in the company’s history.
While the technological foundation for ordering groceries online was being built, few retailers saw the future the way Amazon did. In 2019, less than 4% of shoppers were shopping for groceries online. When they did, there were one of two third-party providers to order from: Instacart or Shipt. Stores didn’t have in-house teams of pick and packers like they do today.
COVID changed everything. Quarantined at home, many consumers had no option but to order groceries and have them delivered to their front door. This accelerated a shift in the market Amazon had been banking on. According to one survey, 60% of consumers who started buying groceries online during the pandemic said they would continue to do so once the pandemic ended. That’s why McKinsey projects that 25% of shoppers will be ordering their groceries online by the end of the decade.
Amazon’s acquisition of Whole Foods was perplexing at first. But it wasn’t just about pivoting into grocery or adding brick-and-mortar stores to its empire. Amazon saw the future of retail. And that future was more digitally integrated than ever before.
COVID accelerated the digitization of shopping that was already underway. While Amazon’s competitors scrambled to develop online ordering platforms, apps, and an in-store fulfillment system, Amazon capitalized on the moment.
Today, Amazon is second to Walmart in digital grocery market share with 18.5% of the market.1 Compare that to Kroger, one of the largest grocery chains in the United States, who only has 7% of the market.
Amazon and its rival Walmart are shaping the future of online grocery shopping. When market shapers like Amazon and Walmart make decisions, other players in the market follow their lead. That’s why Target acquired Shipt a few months after Amazon’s acquisition of Whole Foods and why Kroger says e-commerce is now one of the company’s top priorities.2
When a company who has market share within an industry makes a decision about the future trajectory of that industry, they are the ones creating the future that emerges. Their competitors have to adapt to stay competitive. This makes companies with market share not just market shapers but market movers.