One morning in mid-June, news broke that Amazon had struck a $13.4 billion deal to acquire Whole Foods Market, sending the $600 billion retail grocery industry into a tailspin.
As president of the board of directors of a grocery cooperative in Madison, and connected to a network of grocery retail consultants and professionals nation-wide, I saw the news and responses to it spread faster than an error-riddled Donald Trump tweet through political journalists’ feeds. How could we have not noticed that this digital superpower was planning to move into the space of brick-and-mortar grocery stores?
Sound familiar credit unions? Have you been paying attention to the signal sounded by Square and their recent move to apply for an industrial loan company charter? Experts agree that this won’t be the last fintech to apply for a bank charter.
The threats are symptoms; the disease is losing relevance
The initial reaction in the grocery retail space was a bit of shock, then, like any sudden impact, taking a moment to assess the damage this would cause. The ripple of less obvious impacts rose to the surface quickly through online discussions, but no one quite knew what to do in those initial hours. There was immediate talk about what would become of United Natural Foods, Incorporated, or UNFI–the largest supplier of organic and natural foods in the United States and Canada. They get 30% of their business through Whole Foods. Grocery co-ops large and small rely on UNFI for supplying much of their natural and organic dry, refrigerated and frozen groceries at prices that allow them to compete. If Amazon were to restructure the way they receive and distribute food through Whole Foods storefronts, then the future of UNFI would be in doubt, potentially leaving co-ops without a supplier. Worse, Amazon could make a bid to purchase UNFI and charge loads more for product, over time squeezing out all their competition in the space.
This is a threat to the grocery cooperative industry not unlike many looming threats that exist above the credit union industry. A lesson for credit unions to take in this example is that while this big shiny threat got a lot of attention, it contributed to leaders taking their eyes off of even bigger, potentially more damaging realities. It was a wake-up call for many.
A bigger problem, for credit unions (and grocery cooperatives), is about losing relevance among consumers.
It’s a marketing problem before it’s a leadership problem
This isn’t just a leadership-level issue. This is a marketing and communications issue, too. If you’re not involving your entire marketing team in the conversation about top threats it could be too late for you. Get them in the room right now.
If a business loses marketplace relevance, it’s likely because of two things going wrong. 1) Either you’re not doing a good job delivering what people are asking for, or 2) You’re not doing a good job telling people you have what they want (or even better, they want what you have).
It’s marketing’s job to do the latter. So, if your board and leadership teams aren’t working with marketing on threat scenario planning, you’re putting your entire organization at risk for when, inevitably, one of those threats comes to fruition. Proactive messaging through your marketing efforts can position you to survive likely threats. That’s why if you wait until it’s more than a communication problem, you’ve got a big problem.
How credit unions can prepare for an ‘Amazon emergency’
Make a list: Start with a SWOT analysis and focus on the T. Identify a list of all threats you can imagine likely for your credit union and the industry
Prioritize it: Vet the list to make sure all functional areas (and outside resources) agree with what is on the list and align on what could potentially be the biggest 5 threats. To help prioritize, think about the severity of the risk of each threat—and remember that risk is likeness of the threat happening multiplied by the consequences of it happening.
Identify your landscape: Set the stage for predicting and surviving threats by reading the context of what’s going on around us. Use PESTLE to identify the current Political, Economic, Social, Technological, Legal and Environmental trends and drivers.
Run a scenario exercise: What would be your immediate, mid- and long-term plan if any of your top threats came to fruition? Take a quick look at your balance sheet. How would each of those threats impact your key financial metrics? Finally, answer the question, “In this situation, why does my credit union matter?”
We can’t predict the future and we can’t prevent these things from happening even if we could. Change is inevitable but it can be good for you if you are ready to change with change.
The grocery cooperative industry looks bleak right now, but the financially-strong, well-cashed and large will survive. It’s likely that grocery cooperatives smaller than $4 million will not make it through these competitive times unless they do something bold. But those who make it will have learned a lot about surviving the next big threat.