Whole foods has scale. In fact, they have 1.7% of the US market (according to Statista). Given that credit unions account for approximately 7-8% of the US market, Whole Foods is kind of like the Navy FCU of grocery stores. Great brand. Great return. Loyal consumers. Then you have Amazon, an E*commerce juggernaut that accounts for over 40% of all internet sales (according to Business Insider). In revenue terms – Amazon is around $150b in annual sales and Whole Foods is approximately $15b. Either way – Amazon has succeeded in delivering an online experience and building consumer loyalty without ever meeting a single customer. So what can credit unions learn from this acquisition?
- It pays to move away from a traditional brick and mortar mindset.
No credit union has an agile culture like that of a grounds up E*Commerce company. This is because E*commerce, at its core, is a philosophy as much as it is a style of business. E*commerce is all about:
- Real-Time Data Driven Decisions
- Real-Time Data Driven Personalization
- Digital Experience
- Constant Communication
- Ease of Accessibility (login from anywhere and anything)
- Social Reinforcement (Crowd sourced feedback)
- Brand Promise
We need to recreate our business model with a digital-first focus while using brick and mortar as a support mechanism. Foremost though, the principals above must lead our thinking.
- Focus on agility and nimbleness will win in the end.
No credit union has scale that can be achieved without the constant automation and optimization that comes from being an E*Commerce first company. When the biggest of our credit union brethren isn’t truly relevant, the rest of us aren’t really either. This means that we need to be hyper nimble, agile, rapid fire, and fiercely competitive about how we build relationships locally and digitally. The internet gives scale by enabling a one to many connection. This is crucial. Through the principals above, Amazon is able to feel like your store. The credit union can achieve this too. But, believing that getting to $1 billion or $10 billion will bring scale that keeps credit unions around is a fallacy. The only thing that keeps the old credit union model relevant is converting to the new model. The “new” Amazon model is now 20 years old at this point, and at this point Amazon’s model has evolved several times over. Credit unions must convert to stay relevant!
- Motivating clients keeps them loyal.
Certainly Whole Foods had loyal customers, but Amazon has Prime. Prime is Amazon’s ever expanding club that provides free delivery, music, movies, and more if your part of it. Whole foods had no club and thus no motivation for customers to want to shop exclusively there. Credit unions must tap into their cooperative roots and leverage their club that is already in place. 5 key ways to do this are:
- Make it feel like a club, members should feel that they are part of something
- Put your community first
- Educate digitally
- Socially engage
- Don’t be afraid of the naysayers
Last week, I launched Credit Union 2.0 – A guide to helping credit unions compete in the digital age. The Amazon acquisition of Whole Foods only highlights the importance of credit unions getting aware, scared, and focused on reinventing their business model and being competitive in the digital marketplace. If you don’t want to be the acquired, then you must start now! Paypal is the Amazon of the credit union industry. While I don’t think they will acquire a credit union anytime soon (given our ownership structures), they did recently acquire a bill pay vendor. Paypal is an E*Commerce first company focused on taking market share and wallet share from US consumers. They are more nimble, agile, and real-time then the average credit union. Eventually they may also acquire a brick and mortar financial industry outlet. Then, we will all wonder what happened to our local community advantage once Paypal can deliver everything we can both digitally and locally!
This article was originally published on CU Insight. Click here to read.