Why small retailers are becoming a big tech commodity

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Why small retailers are becoming a big tech commodity

By Dan Berthiaume - 07/17/2020
lightbulb with shopping cart inside

Technology companies of all types are increasingly offering solutions and services aimed at retail small-to-midsized businesses (SMBs).

A wide variety of tech-focused organizations are turning their attention to retail SMBs. This includes Tier I retailers such as Amazon and Walmart, digital and social platforms such as Google and Facebook, and on-demand delivery providers such as DoorDash and Uber Eats. 

At first glance, these multibillion enterprises may seem too large to worry about small chains and independent operators. But SMBs offer potential for value and growth that is making them attractive to big tech players, especially as the COVID-19 pandemic alters consumer shopping demand and behavior.

The exclusivity factor

Retail marketplaces including eBay, Facebook, Amazon, Walmart and Google have all launched pushes to encourage SMBs to open online storefronts on their platforms. As I mentioned in a previous column, the homogenization and consolidation of retail occurring in the wake of COVID-19 is leaving two types of retailer standing – the mass and the niche. 

By recruiting SMBs to their platforms, mass retailers can easily fill gaps in their assortment and differentiate themselves from competitors offering generally similar merchandise and prices. I also mentioned in my previous column that Walmart’s and Amazon’s emphasis on high-volume products and dominance by established brands, as well as possible competitive issues with Amazon, may dissuade SMBs. 

This may explain why Walmart offers its annual “Open Call” for SMBs to sell on its site and shelves and Amazon says it spent $15 billion during 2019 on logistics, tools, services, programs, and people to help SMBs around the globe succeed in its online stores. 

Serving up on-demand delivery growth 

In the past month, on-demand delivery platforms Grubhub and Postmates have been respectively acquired by Dutch digital delivery provider Just Eat Takeaway.com and Uber Eats in multibillion deals. Just Eat Takeaway cited the “underpenetrated” nature of the U.S. delivery market, while Uber sees value in Postmates’ established relationships with small- and medium-sized restaurants, particularly independent businesses.

Meanwhile, DoorDash is offering services specifically aimed at SMBs, including DoorDash Storefront, a turnkey solution providing on-demand access to local restaurants without need for in-house logistics, as well as a shared commissary kitchen in the Bay Area and local restaurant promotions.  

While large chains represent significant amounts of stores for on-demand delivery providers, they also represent a consolidated marketplace that is slanted toward more populated areas. In addition, many large chains offer on-demand delivery via multiple platforms and/or in-house services.

In contrast, SMB food service retailers represent numerous new contracts that are more likely to be exclusive and offer penetration in more rural and remote areas of the country. They also are more likely to need, rather than want, third-party technology and expertise to support on-demand delivery operations.

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