Amazon’s interesting play with their new stores.

Hey look Amazon is in the news again! Surprise surprise. They just announced their first Fresh grocery store – click here for article. On the surface it appears to be a traditional grocery store, but with a number of technological goodies from Amazon. From Amazon Echos allowing patrons to ask for directions and help in the aisles to smart shopping carts that allow for frictionless transactions. Of course all this can be tied to the customers’ Prime account. It is almost as if Amazon was looking to combine the online experience to the brick and mortar world. So is there something beyond simply grocery shopping here? Absolutely.

Bezos always has some secondary goals with his efforts. Other than world domination. Let’s go beyond the fact Amazon wants to capture even more of your household spend. This concept grocery store is an opening to more micro-fulfillment centers for Amazon. Amazon is known for opening mega fulfillment centers to service geographic areas. These distribution centers are sprinkled across the country, with the idea in mind to ensure customers are within easy reach of an Amazon fulfillment center. If you want to see where the centers are located, check out this wiki page. But what about getting into denser population centers. Where having a massive distribution center might not be optimal? What about having a micro-fulfillment center where consumers are trained to interact with automation? Hmmmm….exactly.

These Fresh grocery stores will allow Amazon to offer a location for their

customers to get groceries and pick up or return orders. They have an opportunity to interact face to face with these customers. Amazon will also be able to fulfill online grocery orders within the store. Adding the automated grocery cart mimics similar technology leveraged in traditional warehouses where eaches picking is done with automation. Could Amazon leverage the automated shopping carts to do order picking when the store was closed to the public…or even where the store was live. Amazon could basically flip between a traditional grocery store and a micro-fulfillment, warehouse lite. The technology could empower more sophisticated home delivery or BOPAC (buy online pick up at curb) from the store. Amazon could also leverage these facilities to train consumers to interact with more in store automation. Consumers would be introduced to the automated shopping carts. A shopping cart that could guide the consumer through their shopping lists. Next step would be getting used to having other automated devices doing replenishment, cleaning, stock counting or security within the store.

These new store concepts are not simply about getting you to buy groceries from Amazon. They could prove to be the beginning of new play from Amazon to create more micro-fulfillment centers and introduce more automation into the shopping experience. So the ecommerce giant continues to expand its brick and mortar presence. How times continue to change!

Amazon fulfillment center coming to a mall near you. Not as bad as you think.

There has been some recent reporting that Amazon is in talks with mall management companies to take over some of the space from anchor tenants. Click here for a recent piece in the WSJ. Legacy tenants such as Sears and JCPenney. Legacy names that have fallen on hard times and faded away from the mainstream retail conversation. Many are fretting that this would be a terrible move for malls, letting the very player that has put these malls under duress come right into their house! Set up a fulfillment center, and just crush whatever life there is left for these malls. Not so fast!

I’m not convinced. First, what choice do malls have? The days of having mega retailers act as the anchor tenant have gone. The internet made sure of that. The advent of the World Wide Web meant that the mega shopping malls, were just a click away. I remember working at Forrester in the late 1990s, I had a large mall owner as a client. We had a conversation that went something like this:

Mall owner: “We are really excited about the web. We want to create a portal, where the brands and retailers that are in our mall could be part of our portal. Customers can then access our site and get to their pages.”

Response: “The internet is that portal. Why would you need to go through a secondary portal when I can get to those brands and retailers directly?”

Needless to say the silence after that conversation was deafening. This was retail thinking driven by a brick and mortar only mentality.

So fast forward 20+ years. Malls are taking it on the chin. They are scrambling to figure out how to get foot traffic into their physical locations. Many have turned to more experiential type tenants – restaurants, salons, gyms, medical offices or amusement park style operators (visit the Mall of America in Minnesota for a true experience). Some have looked to add residential inventory as well – or built around a larger attraction such as a sports venue. The Atlanta Braves’ new baseball park, Truist Park, is built with an outdoor mall and residential space – the Battery.

But many malls are still stuck with massive anchor footprints, a reminder of the Jurassic time in retail. Some are looking to bring grocers into those spaces. A local mall in the Boston region added a Wegmans a few years ago, hoping to attract foot traffic. And now, some mall owners are considering bringing in their biggest nemesis of all – Amazon – into that space. Here is why that might not be as bad as some believe:

• Create some buzz – want to bring your property some buzz? Let Amazon put up a distribution center. The local media will certainly pick up on it. There will be news reports on the automation that Amazon will be using to fulfill orders, clips of the boxes zipping around the conveyors and on Kiva Robots. There will be talk of how many employees the fulfillment center will now employ.
• Amazon employed foot traffic – maybe a small victory, but any mall should be happy to have bump in terms of having “guaranteed” foot traffic as Amazon employees will be present through out the day. There is the potential for these employees to become patrons of the other services within the mall. Maybe that is fool’s gold. But at least there is some opportunity to have a pseudo captured audience.
• Incentivize Amazon to do more than simply deliver – Malls who look to Amazon to take some fo the real estate space, should work with Amazon to not simply use the space to do last mile order fulfillment, but also BOPAC (buy online pick up at curb). Think of it. What do malls have other than a lot of physical store space? Lots of parking and are usually located in convenient geographic locations. Amazon could offer customers the ability to come and pick up their orders as well. Create designated curb side pick up spots, create spots where patrons can pick up merchandise but also park for a period of time in case they want to also go into the mall to pick up something. Could Amazon take some of the real estate and create seasonal stores – small footprint stores with the high demand merchandise and other Amazon products. Much like what they already do with their pop up and other physical stores now. Finally leverage this footprint to process returns. Maybe once the patrons return items, they might also stop at the food court or see what is going on in the mall.
• Leverage the Amazon fulfillment know how – This might be a stretch, but what if the Amazon fulfillment anchor tenants, also took on last mile fulfillment for the other tenants on the property. Amazon is already working on becoming a 3PL, delivering and fulfilling for other brands and retailers. Imagine if as an anchor tenant, Amazon worked with the other tenants to deliver merchandise from the stores. Either last mile fulfillment or BOPAC. Of course they would make their money in the services they offered. While the tenants would be able to take advantage of the fulfillment infrastructure and knowledge of Amazon. This may feel like giving up even more to Amazon, but sometimes if you can’t beat them, join them.

While I am sure that mall owners would prefer that their anchor tenants were not named Amazon and that they could still draw the foot traffic needed to make the property profitable, those times are in the rear view mirror. Mall owners need to face today’s reality. Having an anchor tenant such as Amazon, using the real estate to fulfill eCommerce orders, might be one of the few ways to get someone to pay for that space. But if you can work with them to offer other services such as BOPAC or become a returns hub, you now have new ways to getting people into the mall.

Yes Amazon will continue to eat at some of the mall’s core business, but might as well try to profit from their physical presence. It isn’t a pretty relationship, but it might just give malls some extended life.

Amazon in a decade, the inevitable break up?

It can be argued that the biggest disruptor over the past decade has been Amazon. Granted Bezos started the business in the mid 1990s, but it was last decade that they surpassed Walmart as the most valuable retailer. And the rise of AWS has made Amazon a mega-tech vendor. But can Amazon and Bezos keep this streak alive? Is Amazon destined to see more downturns rather than continued success?

Not all smiles…

Or will Amazon be forced to go through some level of a break up similar to past industry giants like Standard Oil and US Steel? There is no secret that President Trump is no huge fan of Bezos and Amazon, would a second term allow Trump to go after Amazon and breaking up the technology giant? But it is not just President Trump, talk tracks from certain Democratic candidates – Elizabeth Warren in particular – has made it a campaign theme to target big tech like Amazon and Google.

So what does this mean? Amazon will be facing increasing pressures to change their ways. This will make the company look very different over the next decade.

• Amazon’s labor practices will draw increased unwanted attention. There have been a number of stories about the issues Amazon labor faces in its warehouses as well as those working for the delivery side of the house. Stories ranging from drivers having to pee in bottles so as to not lose time in their routes or warehouse employees having to take personal time just to go to the rest room, Amazon is facing a growing tide of negative stories about their overall work environments. This cannot simply be brushed under the rug. As more of these stories see the light of day, look for consumers to start pushing against Amazon. Consumers will start questioning how their buying decisions are impacting the environment and labor. Conscientious consumers will start seeking alternatives to the Bezos’ machine.
• Governments will step in and force changes with Amazon. Speaking of consumers ire, look for governments to force changes within Amazon. Pressure from all levels of governments will force Amazon to make drastic changes. Amazon will be forced to spin off their AWS division as a stand alone software company. Pitting the firm against the likes of Oracle, Microsoft and Google. Alexa, the Kindle and other hardware will create the core of Amazon hardware. Amazon hardware will compete on its own, but will also be decoupled from not only AWS but also from Amazon having access to the consumer data being generated from the hardware. Finally Amazon retail will return to their yesteryear. Granted selling more than CDs and books….the question is will Amazon fulfillment be a part of this entity.
• Other major fulfillment networks will emerge. It is clear that Amazon’s desire to provide a world class fulfillment service is another step in the Bezos’ master plan. They have been investing in the physical assets – warehouses, trucks, planes even ships – to provide a global fulfillment solution. Much like retailers refusing to work with service providers that leverage AWS, many brands and retailers will look to avoid putting their goods in the hands of Amazon. This will open the market for other fulfillment networks – from large networks built around the likes of Walmart and Target to localized networks based on regional players. Regional fulfillment networks could be made of local 3PLs with regional retailers who have local distribution assets. Finally one cannot underestimate the rise of service offerings from the likes of Shopify, Stripe, Ebay or Square to create their own options for fulfillment.

Bottom line, Amazon will look very different in 10 years. Amazon’s growth has been nothing short of amazing, but also has called many of their business practices into question. There will be too much pressure from governments as well as the populous that will be too much for Bezos and company to fight off for the following decade.

Who needs Amazon? Nike doesn’t. The decoupling continues.

Nike made news again recently in their announcement that they would no longer be selling clothing or footwear on Amazon. A bold move from one of the biggest consumer brands. But not entirely surprising. Nike grudgingly sold their product on Amazon after resisting for ages. Clearly, the Nike brand can stand on its own, and clearly, they didn’t like giving some control to Amazon.

Not coming to Amazon….

It is a move we should have seen coming. Earlier this year Nike made acquired technology vendor Celect. Many an eyebrow was raised as the footwear giant brought inhouse a technology player to bolster their digital play. They have also been working with last-mile parcel delivery technologies to enhance their ability to go direct to consumer (DTC). When you piece it all together it becomes clear that Nike felt it was better to build and support their own fulfillment and distribution network, take greater control of online shopping and harvest the bulk of data created by their customers’ digital exhaust. So what does this mean?

• The line between “retail” and “consumer product” has truly been eradicated. CPG firms and retailers are both swimming in each others’ pool…actually the two pools have become one. Companies such as Nike will still do a significant amount of their business via wholesale, according to CNBC, 2/3 of their revenue is driven from this channel. They will still work with the likes of Dick’s Sporting Goods and Footlocker. However whether via their own online channels or their own physical stores, look for Nike to continue to push towards having a greater direct to consumer focus. And they are not the only ones. Under Armour and Adidas are themselves pushing out more physical stores while also enhancing their online and mobile presence.
• Digital has accelerated this decoupling. I had a recent conversation about the fact that digital transformation has been going on a lot longer than the past few years. It is just that consumers are now at the forefront of much of the digital transformation, so it has become more personal. That personal aspect of digitization has been a major catalyst in driving these changes. Consumers are more educated, have more choices and have unlimited reach when it comes to how they shop. Brands like Nike have been able to connect directly with these consumers, and they don’t want to have a layer between them.
• Fulfillment comes to the masses. A great strength of the likes of Amazon and Walmart is their world-class supply chain and fulfillment capabilities. This drove many brands to lean on these giants to distribute their goods. No longer is this the case. While their supply chains remain top-notch, the ability for brands to create or lean on 3rd party fulfillment services has become a realistic option. Whether is it leaning on 3Pls to take on fulfillment, bundle together best of breed players in warehousing and distribution or looking to flexible service providers, brands have options to create their own DTC offering.

We should not be surprised to see this move by Nike. It mimics what we have seen in the entertainment world. Netflix demonstrated that you no longer had to rely on the traditional media distributors to get your content out. Now the likes of Disney and Apple are racing to create their own direct to consumer services. Another similarity is the idea that no one is solely a distributor or solely a producer anymore. While Nike is pulling out of the Amazon channel, Amazon is starting to creep into Nike’s world by increasing their private label business. The pools have truly become one.

The industry has truly been disrupted. Retail is certainly not dead as some would have you believe, but it is undergoing a massive change. As consumers, we should reap the benefits.

Digitally native brands, need customer touch points…you don’t say.

A recent interview with founder of Bonobos, Andy Dunn, caught my eye. In large because of the shade he threw on what was previously his mantra – digitally native brands are the future. According to Dunn, “I don’t really like digitally native vertical brands,” Dunn said. “What gets me excited are brands that are really strong and direct-to-consumer, but also have got omni.” Click here for the article.

Interesting 180 degree change from someone who was a strong advocate for brands being “digitally native.” Also interesting to see some folks falling all over themselves on social media trumpeting this statement as a “eureka” moment. Let’s rewind to when companies such as Bonobos, Casper, Warby Parker and others were seen as the future of retail. Pundits fawned over how they had captured mind share for a specific part of retail, and bypassed traditional vendors by not having the burden of that pesky brick and mortar albatross. Whether in men’s apparel, Bonobos, mattresses, Casper or eye wear, Warby Parker, these brands were turning retail upside down. One aspect that was ignored, as these digitally native brands were making noise, was that the granddaddy of all digitally native brands – Amazon – was starting to dip into the physical world. Whether via their own branded pop up stores, Amazon Go stores or when they made the bold move of acquiring Whole Foods, the biggest digitally native brand was admitting what many knew – you cannot grow without offering some physical touch points for your consumers.

While it is refreshing to hear Andy Dunn talk about the need to have a multi-pronged approach to retail, those that look at this as an “a-ha” moment are missing the point. Digitally native retailers that are just now realizing this are already behind, just like traditional retailers who scoffed at the dot com rise and saw that as a fad. What all retailers need to realize, if they haven’t already, is the digitally empowered consumer now runs the show. She dictates where, when, how and why she will interact with your brand. And she is not a one size fits all persona. Retailers need to be wherever that consumer wants them to be.

We need to pivot the conversation away from omni-channel, digitally native, brick and mortar or mobile to simple commerce. When consumers interact with a brand, the distinction between in a store, at a kiosk, on line, via an app has evaporated. Instead they expect and assume that the experience they have with that brand will be the same regardless of the medium. The challenge for retailers and brands is to constantly think of their touch points with consumers under this lens. How does my consumer want to interact with me? Where are some hidden opportunities to touch and amaze my customer?

I am glad to see Mr Dunn realizes the importance of multiple customer touch points. Sometimes you just have to continually repeat yourself to be heard.