The Morning After

The astounding loss in market value as share prices dropped on the news of the acquisition has retail executives nauseated as they contemplate their changed future. One article this past Friday called out that the top 20 traditional retailers collectively lost nearly $40 billion in market value. This, while Amazon actually gained an estimated 3% in value, approximately the cost of the Whole Foods acquisition. That’s adding insult to injury for traditional retailers.

Certainly the most obvious threat is that the acquisition of Whole Foods by Amazon will greatly accelerate the industry’s move online. And the knee-jerk reaction of brick & mortar retailers will be to accelerate their plans to put online shopping capabilities in place as fast as they can to protect top line revenue. This is the type of tactical reaction that supermarket retailers excel at. See threat. React to threat. Next.

The problem for traditional retailers is that Amazon’s move into physical retail carries with it much broader strategic implications than just growing online shopping. Amazon’s acquisition portends a vast transformation of the industry that will play out over the next several years. As I called out on the day of the announcement, Amazon is positioned to leverage its vast technological capabilities to meld the digital and physical worlds and innovate the future of retail at massive scale… and speed. Traditional retailers simply do not have a clue what’s coming at them.

Consider that Amazon can now tie Whole Foods to its Alexa virtual assistant platform and the Dash replenishment services. Not only can the vast array of Whole Foods products be available via a simple Dash button ‘click’ but Amazon will let shoppers simply ask Alexa ‘what’s for dinner tonight from Whole Foods’ and then deliver it. Amazon’s Dash replenishment service, integrated into smart appliances for the automated replenishment of things like laundry detergent, will extend to the refrigerator and pantry. Amazon will be glad to relieve you of the burden of creating a list and going shopping or even placing an order online; your pantry and fridge will just be automatically replenished for you.

Amazon will bring its supply chain prowess and efficient distribution operations to Whole Foods, lowering costs across the board. Amazon has already claimed a 20% reduction in operating costs at its distribution centers through the use of robotics; those same or similar robots will quickly find their way into Whole Foods distribution centers, and eventually even into the stores.

And lest we forget, it is not just retailers that are threatened. Major CPG brands are also being put on notice. Amazon can leverage its scale to lower product costs at the same time it repackages Whole Foods private label products to make them easier to ship and deliver, taking WF private label products online through the Amazon platform and quickly growing sales volume, further lowering costs. All this at a time consumers are searching for healthier alternatives to major CPG brand products. No wonder the markets drove down the share price of manufacturers like Kellogg and General Mills after the announcement.

The reduction in product costs will be used to change the perception of ‘Whole Paycheck’, Amazon growing physical store sales through more competitive pricing. Compounding the impact, it is expected that Amazon will leverage its tech know-how to lower store operating costs, such as using the self-shopping technologies being used in the Amazon Go store to eliminate the need for cashiers.

And while it grows physical store sales, Amazon will build further synergy between the online and physical worlds by letting shoppers pick up merchandise ordered online from the local Whole Foods store.

Few have talked about Amazon entering into the payments world but the acquisition also tees up that opportunity as it is not much of a stretch to enable Whole Foods customers to pay via their Amazon Prime account at checkout. Shares of traditional payments related companies like First Data, Verifone, and Blackhawk Network Holdings took hits as analysts ponder the impact of Amazon on how customers pay in brick & mortar retail. First National Bank of Amazon anyone?

It’s going to take more than a couple aspirin to make this hangover go away.

Warehouse Safety


With more than 145,000 people working in an estimated 7,000 warehouses, keeping employees safe is a priority in the distribution industry and companies want to create a safe environment for all employees1. Distribution center injuries can result in putting employees in harm’s way, the slowing of business, and can cause costly interruptions in the supply chain. Identifying where possible hazards are and what areas to train employees can help prevent or minimize injury-related expenses and their impact on employees and business. A distribution services provider that focuses on customer goals and understands the importance of safety can be a valuable partner for shippers.

Understanding the Hazards

Knowing common areas that extra attention to safety should be given can help better train operators to preemptively address hazards. According to Occupational Health and Safety Administration (OSHA), the following are the top hazards warehouses receive citations for1

  1. Forklifts
  2. Hazard communications
  3. Electrical, wiring methods
  4. Electrical, system design
  5. Guarding floor and wall openings
  6. Exits
  7. Mechanical power transmissions
  8. Respiratory Protection
  9. Lockout/tagout
  10. Portable fire extinguishers

OSHA identifies forklift operation as the greatest hazard and estimates 855,900 forklifts being operated, 11 percent of those will be involved in an accident2. Utilizing forklifts that meet proper standards and construction requirements as well as ensuring each aspect of the forklift is operating properly are keys to safety. Additionally, providing proper training for operators and ongoing refresher training can keep operations moving safely.

Proper Training Keeps the Supply Chain Moving

Providing employees proper training on potential hazardous areas can help prevent accidents before they happen. Utilizing self-inspection checklists can identify potential risks before shifts begin. OSHA recommends that employees ask the following questions before beginning a shift:

  1. Are exposed or open loading dock doors chained off, roped off, or otherwise blocked?
  2. Are any other areas where employees could fall four feet or more chained off, roped off, or otherwise blocked?
  3. Are floors and aisles clear of clutter, electrical cords, hoses, spills, and any other hazards that could cause employees to slip, trip, or fall?
  4. Do the established job task time expectations allow time for safe work practices?
  5. Is the warehouse well ventilated?
  6. Have employees been trained on how to avoid heat stress in hot, humid environments?
  7. Does all equipment meet proper working standards?

During pre-shift inspections, employees should check all equipment and address anything that is incorrect. Management should empower employees to take equipment out of use and send it for repair. Creating a safety culture where operators feel confident in the company’s willingness to proactively fix problems can lead to a safer environment and operations without disruption3. Shippers should partner with a supply chain solutions provider that includes, encourages, and practices safety as part of its culture and keeps employees safe and products moving without delay.

Giving Praise

A Stanford Psychologist Says This Is the Best Way to Praise Employees (Yet Most Bosses Don’t)

When you’re praising an employee, the easiest thing to say can be the worst thing to say.

CREDIT: Getty Images

Three basic truths: Praising people motivates them. Praising people encourages them. Praising people inspires them to even greater heights.

Impossible to argue with those statements?

Maybe not.

Depending on the approach you take, praising an employee — or praising anyone — can actually have the opposite effect. The difference lies in whether we assume skill is based on innate ability or on hard work and effort.

Put another way, are people born with certain talents, or can talent be developed? (I definitely think talent, even exceptional talent, can be developed.)

According to research on achievement and success by Stanford psychologist Carol Dweck, people tend to embrace one of two mental approaches to talent:

  • Fixed mindset: The belief that intelligence, ability, and skill are inborn and relatively fixed–we “have” what we were born with. People with a fixed mindset typically say things like “I’m just not that smart” or “Math is not my thing.”
  • Growth mindset: The belief that intelligence, ability, and skill can be developed through effort–we are what we work to become. People with a growth mindset typically say things like “With a little more time, I’ll get it” or “That’s OK. I’ll give it another try.”

That difference in perspective can be molded by the kind of praise we receive, and that often starts when we’re kids. For example, say you are praised in one of these ways:

  • “Wow, you figured that out so fast. You are so smart!”
  • “Wow, you are amazing. You got an A without studying!”

Sounds great, right? The problem is that other messages hide inside those statements:

  • “If I don’t figure things out really quickly… I must not be very smart.”
  • “If I do have to study… I must not be amazing.”

The result of those messages is a fixed mindset: We start to assume we are what we are. Then, when the going gets tough and we struggle, we feel helpless because we think what we “are” isn’t good enough.

And when we think that… we stop trying.

When you praise employees only for achievements — or criticize employees for short-term failures — you help create a fixed mindset environment. In time, employees see every mistake as a failure. They see a lack of immediate results as a failure. In time, they can lose motivation and even stop trying.

After all, why try when trying won’t matter?

Fortunately, there’s another way: Make sure you focus on praising effort and application, too:

  • “Great job! I can tell you put a lot of time into that. Here are a couple of things you can work on to help you do even ever next time.”
  • “Great work! You finished that much more quickly than the last time. Thanks for working so hard to get it done.”

The difference? You still praise results… but you praise results that are based on the premise of effort, and not on an assumption of innate talent or skill.

By praising effort, you help create an environment where employees feel anything is possible — all they have to do is keep trying.

The same principle applies to how you encourage employees. Don’t say, “I know you’ll get this; you’re really smart.” “You’re really smart” assumes an innate quality the employee either has or does not have.

Instead, say, “I have faith in you. You’re a hard worker. I’ve never seen you give up. I know you’ll get this.”

To consistently improve employee performance, build a work environment with a growth mindset. Not only will your team’s skills improve, but your employees will also be more willing to take more risks.

When failure is seen as a step on the road to eventual achievement, risks are no longer something to avoid. Risk, and occasional failure, will simply be expected steps along the way toward success.

Magical Bottle

This magical bottle might make ‘sell by’ dates obsolete

June 13
Even in 2017, we often decide whether the salmon in the back of our refrigerator is still edible by giving it a sniff and looking at the “sell by” date.

A company called Braskem wants to bring a little more science into the decision.

It has developed a way to make plastic food or beverage containers change color when they react to the changing pH levels of their contents, a sign that certain products may be spoiling. Even though this type of technology has existed in some form for decades, Braskem has certain advantages. The $7 billion plastics and chemical company is the largest producer in the Americas of materials that are molded into bottle caps, jugs, reusable containers, cosmetic packaging and much more. It has production plants in Brazil, the United States, Mexico and Germany.

“Braskem has got the advantages of scale, and they are well known in this particular sector for a good quality product,” said Andrew Manly, communications director for the Active and Intelligent Packaging Industry Association.

The idea for this technology originated in Brazil, which has had its share of food safety scandals, including allegations in March that employees at some food companies bribed government inspectors to allow rotten and salmonella-contaminated meat to be sold.

“In the country, we’ve seen food that was contaminated, or the package was violated and food contaminated in the production or transportation process, or in the supermarket,” said Patrick Teyssonneyre, Braskem’s director of technology and innovation.

Braskem’s pitch for the technology comes as many consumers continue to be confused about what “sell by” dates are supposed to mean and typically decide whether to throw out food by relying on what they see and smell — an imprecise practice that could lead to food poisoning or good food being discarded prematurely.

In the United States, Americans throw away $218 billion worth of food each year, according to the Natural Resources Defense Council. The anti-food-waste coalition ReFED estimates that standardized date labels could help save $1.8 billion.

Bringing a new detection system to market will likely require Braskem to win over not just consumers but also cost-conscious retailers, according to Claire Koelsch Sand, president of the consultancy Packaging Technology and Research and an adjunct professor at Michigan State University. While food manufacturers drove a lot of change in the 1970s, retailers now serve as important gatekeepers. Walmart, for instance, drove adoption of RFID tags for tracking goods, and Amazon has been pushing for better packaging.

“If this company really wanted to succeed, they would need to partner with not only a food manufacturer, but a retailer,” Koelsch Sand said.

Meghan Stasz, senior director, sustainability at the Grocery Manufacturers Association, said a key challenge is likely to be cost.

“Even if you are looking at a penny additional for your packaging, when you multiply that over a million pieces of packaging, it gets cost prohibitive pretty quickly,” Stasz said.

Braskem executives say that costs should come down as the technology gains wide acceptance.

“There are plenty of opportunities when scaling up this technology to reduce the cost. We believe that we could provide to the market a very cost-competitive solution, especially when comparing to the benefits that it will bring to the consumers,” Teyssonneyre said.

Still, the value must be evident, experts say.

“If it’s just one of those situations where the technology is no better than what the consumer already has, which is their own nose and their own sight, then [companies] are going to be reluctant to add cost to the system,”  said Bob Whitaker, chief science and technology officer for the Produce Marketing Association.

One way to get retailers on board would be to convince them of the benefits not only of more transparency around food expiration but also the way the technology could help catch food fraud, such as added filler ingredients in pet foodand increase food safety.

“If we can get a retailer to see it from a more holistic point of view, as opposed to just this is an added cost to my packaging, we might be getting somewhere,” said Manly, from the intelligent packaging industry.

The Brazil-based company began developing the technology in 2013, creating a prototype in 2015. The company still needs to do extensive testing to ensure its technology accurately detects spoilage and does not produce false positives. It would also need to figure out which indicators beyond pH changes will matter to producers and retailers and ensure consumers understand the limits of the technology’s assurances.

“That’s a huge risk, to say something is okay, and then it won’t be,” Koelsch Sand said.

Still, Braskem hopes it can find a partner and begin delivering the containers to store shelves in two to three years.

Obsessed with Groceries

Why Jeff Bezos is obsessed with groceries

June 16, 2017

Jeff Bezos has been chasing online grocery since 2007.

That August, AmazonFresh debuted on Mercer Island, a suburb of Seattle. For the next six years Amazon tweaked the model. It tried a free loyalty program called “Big Radish” and tested free or discounted delivery based on a customer’s spending. In 2013, AmazonFresh expanded to Los Angeles and San Francisco.

But a decade later, AmazonFresh has yet to become a household name like its sister program, Amazon Prime. Now, Bezos is buying Whole Foods for $13.7 billion.

Online grocery is the holy grail of retail. Groceries are one of the few things that most people buy routinely, and companies from Amazon to Walmart and Target believe that a reliable grocery offering is the key to attracting more customers, and turning their existing ones into better, more loyal shoppers.

Webvan, one of the most spectacular flameouts of the first dot-com bubble, made a bad name for online grocery. The company launched in June 1999 and went public later that year, soaring to a $7.9 billion valuation on its first day of trading. Then, in 2001, it collapsed. Two thousand people lost their jobs. Webvan, it turned out, had never managed to make online grocery sales profitable.

Nearly two decades later, the next round of competitors insist that, this time, things are different. They include AmazonFresh, Silicon Valley startup Instacart, and Walmart, which last year partnered with Uber and Lyft to test same-day grocery delivery. But no one—especially Amazon’s CEO—has yet called online grocery easy.

“[W]hoever your anonymous sources are on this story… they’ve mixed up their meds!” Bezos tweeted earlier this year, responding to a story in the New York Post that claimed Amazon Go, an automated grocery-slash-convenience store the company is testing, would need just three human workers and would yield operating profits margins of more than 20%. “And on the NYPost article, if anybody knows how to get 20% margins in groceries, call me! :)” Bezos added.

Selling groceries is a notoriously tricky business, both on- and offline. For every $100 shoppers spend, stores usually keep only $1 to $3. Groceries are also perishable, meaning vendors always carry the risk that some of their merchandise will go bad before it can be sold. Startups like Instacart and Shipt have tried to get around this—and avoid becoming the next Webvan—by facilitating only the delivery of groceries from existing stores, rather than holding any inventory themselves. “We’re not building all these capital-intensive assets,” Shipt CEO Bill Smith recently told Quartz. This model, of course, sets these companies up as middlemen, making them an additive cost. Consumers are extremely price sensitive when it comes to groceries.

AmazonFresh has so far opted to build its own warehouses, but even for the world’s foremost logistics expert, that approach has proved challenging. Online retail prizes consistency, but groceries—especially fresh ones—rarely allow for that. At its Seattle fulfillment center, for example, Amazon used to waste nearly a third of the bananas it purchased because Fresh only sold the fruit in bunches of five. Workers would discard any bunches of three or four, and tear off and throw out the extra banana on a bunch of six, a research paper by a student at MIT explained in 2015.

Aside from his tweets, Bezos has been relatively tight-lipped on grocery. The first Amazon Go was supposed to open in Seattle earlier this year but has been delayed. Fresh has continued to expand to new markets in the US and recently launched in Tokyo, but Amazon executives have given little insight into its actual performance. “Certainly a business where we continue to work on costs and profitability, but we are finding it’s a very attractive service to our customers, which is what we’re after,” Brian Olsavsky, Amazon’s chief financial officer, said on the company’s third-quarter earnings call last year.

But on one point there should be no doubt: Bezos has his sights set on online grocery, and he’s determined to win. It may happen with AmazonFresh, AmazonGo, Amazon Prime Now, or something that Amazon has yet to try—like an acquisition of Whole Foods, whose hundreds of US stores are ready-made distribution centers. Online grocery sales totaled $20.5 billion in the US last year and analysts believe it could be a $100 billion market by 2025. If buying Whole Foods is what it takes to make Amazon a household name in that market, $13.7 billion will have been a bargain.


Changing Center Store

Most of us would agree that over the past twenty years the lion’s share of the focus and creativity within the supermarket has occurred on the perimeter of store. This is true for a number of reasons. Retailers have deliberately placed their fresh foods departments on the perimeter to be close to prep rooms and refrigeration. In addition, the majority of the store’s best deals reside on end cap displays on the back and front aisles of the store.

This all made a lot of sense until it was discovered that over time, fewer and fewer shoppers were entering the “center” area of the store and consequently, the categories and items found in this forgotten area were beginning to suffer from the resulting under exposure.  Understandably, for the past decade or more, retailers and their brand partners have frantically worked to devise new incentives to lure the shopper from their current behavior of remaining on the perimeter to venture down the long and arduous aisles of Center Store.

Some of their efforts have paid dividends, but despite new ‘intrusive” signage, fixtures and fixture configurations, Center Store is still very much under siege. While gains in Dairy, Frozen and Salty Snacks are encouraging, the majority of the remaining Center Store categories have seen sharp decreases in unit sales and in some cases as much as three to five percent over the past five years*

Further, the driving forces behind Center Store decline are largely out of the control of bricks and mortar retailers. For example;

1.    Smaller household sizes yield fewer stock-up trips, meaning fewer trips down the center aisles of the store.

2.    New Competition, in the form of smaller specialty stores, sometimes called ‘category killers’ have diluted the sales of supermarket Center Stores over the past decade, with more of this type of competition to come.

3.    Finally, shoppers have found that buying those Center Store items consumed on a regular basis such as baby products, pet food, water and beverages, paper and detergent can be conveniently purchased on-line and scheduled for home delivery.

This downward trend of Center Store performance begs several questions, chief among them is “Can Center Store survive without radical changes?’

If you believe as many do that the answer is an emphatic “NO”, then the next logical question must focus on what should and what can be done. The true transformation of Center Store should begin with an honest assessment of the controllable factors that are attributing to its diminished shopper relevance.

From the shopper’s view, research and intuition tell us that today’s Center Store presents a number of negative issues;

·      Configuration: Long aisles within Center Store are uninviting to shoppers as they look down the aisle from the perimeter and quickly become visually overwhelmed.

·      Item Count: Once down the aisle, there are too many items crowded into tight category sets that make it difficult to find items. Variety is good, but too much variety suppresses sales.

·      Visual Clutter: Overuse of large signs, shelf tags and other point of sale materials clutter the shopper’s view even more. In an attempt to make things better for the shopper, retailers are providing a busy shopper too much to read and absorb.

·      Size: Many Center Stores simply occupy too much floor space and are counter-efficient, consuming too much of shopper’s precious time in order to find what they are looking for.   ‘Bigger’ has become an albatross, rather than the panacea retailers once regarded it to be.

From the shopper’s perspective the entire physical concept of ‘Center Store” is becoming ‘unnatural’ when compared to their experiences either on-line or in smaller specialty stores. Most recent remedial solutions for Center Store deal with making ad hoc changes to category variety, new fixtures, additional signs and of late, new technology such as in-aisle digital engagement through mobile devices. Few if any however, deal with seriously re-thinking the entire concept of Center Store.

Re-categorize According to How Shoppers Buy

Any serious improvement to Center Store must involve the mitigating the four aforementioned negative attributes.  A logical first step in that process involves a re-categorization of Center Store, from the contemporary shopper’s perspective.

The above chart depicts four quadrants of Center Store items that reflect current shopper behavior and options.

·      Quadrant 1: Those Top Selling items that are consumed by most of the shoppers for everyday consumption comprise a very important list of categories and items. This group typically includes the retailer’s list of top 300-500 selling items. Sometimes referred to as the ‘Big Head’ these are the items that the contemporary shopper must have easy access to, without searching and wandering thorough the Center Store to find. Top Sellers should be accessible in this quadrant, even if only through secondary display.

·      Quadrant 2: The second category of items is a subset of the first. This group contains the permanent shelf placement of Top Selling items that lend themselves to scheduled consumption. Paper Towels, Bathroom Tissue, Bottled Water, Pet Food, Diapers and others are all conducive to having their in-store inventory and space they occupy reduced as shoppers are incentivized to schedule their delivery at home or for in-store pickup (BOPIS).

·      Quadrant 3: This leaves the slower moving items, which unfortunately comprise the vast majority of Center Store inventory. As opposed to the ‘Big Head’, these items represent the ‘Long Tail’ and their presence in store should be reevaluated. Quadrant 3 contains those Infrequent Selling items that have High Affinity with Top Selling (Immediate Use) items, meaning that these items are often bought with Top Selling (Immediate Use) items.  These sku’s should be stocked in-store, but aggressively merchandised via secondary display with those fast-selling items with which they have affinity.

·      Quadrant 4: This group contains items that most food retailers stock either because brand partners pay them to do so or retailers believe they must carry deep variety in a particular category. In today’s shopper centric environment, these are the items that make viable candidates for removing from the in-store shelves, de-listing those that show little or no movement, but keeping others that have seasonal value or index higher among the retailer’s best shoppers.  In order to necessarily reduce item count, many of these slow moving ‘keepers’ would no longer be stocked in the store’s showroom, rather be available via on-line or in-store kiosk purchase only.

Where to Put What

As monumental of an endeavor as the re-categorization of the Center Store will be for bricks and mortar retailers, dealing with the size and configuration of Center Store will even be a larger challenge. Of those leading bricks and mortar food retailers are designing and build smaller formats. Within these smaller stores, the process of re-thinking which items are kept and which is discarded is critical.

The graphic illustrates the beginning of the re-organization of Center Store. Notice that each of the four Center Store Quadrants are contained within this layout as well as multiple opportunities for shoppers to pre-order in-store for immediate consumption or simply pick up to take home. What is also note worthy is the placement of Top Selling-Immediate Use items positioned where shoppers can more easily access them coupled with the placement of Top Selling-Scheduled Use items being available closer to the kiosks where they can also be ordered for regular delivery.

As opposed to long aisles with multiple categories, this approach compartmentalizesitems according to their relevance to the shopper and how they would likely prioritize placing them into their shopping cart. With this approach there is no ‘racetrack’ around the store’s perimeter, but rather a natural flow from one shopping ‘priority’ area to the next.

Perhaps the most critical aspect of this approach is the tangible merging of Center Store with On-line. While reducing inventory and clutter, the retailer offers the shopper an easy and practical means to access additional items via kiosks for either same trip pick up or delivery to the home or office.

Shopper Logic

Finally, this new configuration of Center Store categories also serves the needs of traditional types of shopping trips, Quick Trip, Fill-In, Stock Up. Contrary to most current supermarket layouts, this approach facilitates a quick trip when one is warranted, but also efficiently accommodates larger trip sizes when shopper’s needs change.

Any approach to keeping Center Store categories viable within the bricks mortar store must be in context to the many options of convenient alternatives now available to shoppers. While very basic, this approach represents leveraging shopper behavior data to re-think and reconfigure a vital part of the supermarket that most would agree is in need of updating and in a way that actually makes sense for the shopper.

Amazon vs Walmart

The Amazon-Walmart Showdown That Explains the Modern Economy


With Amazon buying the high-end grocery chain Whole Foods, something retail analysts have known for years is now apparent to everyone: The online retailer is on a collision course with Walmart to try to be the predominant seller of pretty much everything you buy.

Each one is trying to become more like the other — Walmart by investing heavily in its technology, Amazon by opening physical bookstores and now buying physical supermarkets. But this is more than a battle between two business titans. Their rivalry sheds light on the shifting economics of nearly every major industry, replete with winner-take-all effects and huge advantages that accrue to the biggest and best-run organizations, to the detriment of upstarts and second-fiddle players.

That in turn has been a boon for consumers but also has more worrying implications for jobs, wages and inequality.

To understand this epic shift, you can look not just to the grocery business, but also to my closet, and to another retail acquisition announced Friday morning.

I used to buy my dress shirts from a Hong Kong tailor. They fit perfectly, but ordering required an awkward meeting with a visiting salesman in a hotel suite. They took six weeks to arrive, and they cost around $120 each, which adds up fast when you need to buy eight or 10 a year to keep up with wear and tear.

Then several years ago I realized that a company called Bonobos was making shirts that fit me nearly as well, that were often sold three for $220, or $73 each, and that would arrive in two days.

Bonobos became my main shirt provider, at least until recently, when I learned that Amazon was trying to get into the upper-end men’s shirt game. The firm’s “Buttoned Down” line, offered to Amazon Prime customers, uses high-quality fabric and is a good value at $40 for basic shirts. I bought a few; they don’t fit me quite as well as the Bonobos, but I do prefer the stitching.

I’m on the fence as to which company will provide my next shirt order, and a new deal this week makes it a doubly interesting quandary: Walmart is buying Bonobos.

Amazon vs. Walmart

Walmart’s move might seem a strange decision. It is not a retailer people typically turn to for $88 summer weight shirts in Ruby Wynwood Plaid or $750 Italian wool suits. Then again, Amazon is best known as a reseller of goods made by others.

Walmart and Amazon have had their sights on each other for years, each aiming to be the dominant seller of goods — however consumers of the future want to buy them. It increasingly looks like that “however” is a hybrid of physical stores and online-ordering channels, and each company is coming at the goal from a different starting point.

Amazon is the dominant player in online sales, and is particularly strong among affluent consumers in major cities. It is now experimenting with physical bookstores and groceries as it looks to broaden its reach.

Walmart has thousands of stores that sell hundreds of billions of dollars’ worth of goods. It is particularly strong in suburban and rural areas and among low- and middle-income consumers, but it’s playing catch-up with online sales and affluent urbanites.

Why are these two mega-retailers both trying to sell me shirts? The short answer is because they both want to sell everything.

More specifically, Bonobos is known as an innovator in exactly this type of hybrid of online and physical store sales. Its website and online customer service are excellent, and it operates stores in major cities where you can try on garments and order items to be shipped directly. Because all the actual inventory is centralized, the stores themselves can occupy minimal square footage.

So the acquisition may help Walmart build expertise in the very areas where it is trying to gain on Amazon. You can look at the Amazon acquisition of Whole Foods through the same lens. The grocery business has a whole different set of challenges from the types of goods that Amazon has specialized in; you can’t store a steak or a banana the way you do books or toys. And people want to be able to make purchases and take them home on the spur of the moment.

Just as Walmart is using Bonobos to get access to higher-end consumers and a more technologically savvy way of selling clothes, Amazon is using Whole Foods to get the expertise and physical presence it takes to sell fresh foods.

A Positive Returns-to-Scale World

The apparel business has long been a highly competitive industry in which countless players could find a niche. Any insight that one shirt-maker developed could be rapidly copied by others, and consumer prices reflected the retailer’s real estate costs and branding approach as much as anything.

That helps explain why there are thousands of options worldwide for someone who wants a decent-quality men’s shirt. In that world, any shirt-maker that tried to get too big rapidly faced diminishing returns. It would have to pay more and more to lease the real estate for far-flung stores, and would have to outbid competitors to hire all the experienced shirt-makers. The expansion wouldn’t offer any meaningful cost savings and would entail a lot more headaches trying to manage it all.

But more and more businesses in the modern economy, rather than reflecting those diminishing returns to scale, show positive returns to scale: The biggest companies have a huge advantage over smaller players. That tends to tilt markets toward a handful of players or even a monopoly, rather than an even playing field with countless competitors.

The most extreme example of this would be the software business, where a company can invest bottomless sums in a piece of software, but then sell it to each additional customer for practically nothing. The apparel industry isn’t that extreme — the price of making a shirt is still linked to the cost of fabric and the workers to do the stitching — but it is moving in that direction.

And that helps explain why Walmart and Amazon are so eager to put a shirt on my back.

Already, retailers need to figure out how to manage sophisticated supply chains connecting Southeast Asia with stores in big American cities so that they rarely run out of product. They need mobile apps and websites that offer a seamless user experience so that nothing stands between a would-be purchaser and an order.

Larger companies that are good at supply chain management and technology can spread those more-or-less fixed costs around more total sales, enabling them to keep prices lower than a niche player and entrench their advantage.

These positive returns to scale could become even more pronounced. Perhaps in the future, rather than manufacture a bunch of shirts in Indonesia and Malaysia and ship them to the United States to be sold one at a time to urban office workers, a company will have a robot manufacture shirts to my specifications somewhere nearby.

If that’s the future of clothing, and quite a few companies are working on just that, apparel will become a landscape of high fixed costs and enormous returns to scale. The handful of companies with the very best shirt-making robots will win the market, and any company that can’t afford to develop shirt-making robots, or isn’t very good at it, might find itself left in the cold.

What It Means for the Economy

If retail were the only industry becoming more concentrated, it would be one thing. But a relative few winners are taking a disproportionate share of business in a wide range of industries, including banking, airlines and telecommunications. A study by the Obama White House’s Council of Economic Advisers found that in 12 of 13 industry sectors, the share of revenue earned by the 50 largest firms rose between 1997 and 2012.

That in turn may help explain why the income gap has widened in recent years. Essentially, the corporate world is bifurcating between winners and losers, with big implications for their workers.

Research by Jae Song of the Social Security administration and four colleagues found that most of the rise of inequality in pay from 1978 to 2013 was because some companies were paying more than others — not because of a wider gap between high-paid and low-paid workers within a company.

“Employees inside winning companies enjoy rising incomes and interesting cognitive challenges,” the Stanford economist Nicholas Bloom, one of the co-authors of that paper, wrote recently in Harvard Business Review. “Workers outside this charmed circle experience something quite different.”

How much of that is because of shifting technology — as opposed to changing corporate behavior, or loose antitrust policy — is an open debate.

What isn’t is this: The decision by Amazon and Walmart to compete for my grocery business — as well as for space in my closet — is a tiny battle in a war to dominate a changing global economy.

And for companies that can’t compete on price and technology, it could cost them the shirt off their backs.