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 moves into the Kombucha aisle in a big way

One day we might look back at June 16, 2017, as the day the retail and grocery business changed forever. It was, after all, the day Amazon decided to stop dipping its toes in brick and mortar retail and instead dive in head-first with the announced $13.7 billion acquisition of Whole Foods Market. While the news itself made a big splash with the public, the overall ripple effect could send waves of change across the industry for years to come.

Just take out the Citizens Banks!

The deal gives Amazon a network of 450 Whole Foods stores in the U.S., Canada, and United Kingdom, many of which are located in affluent neighborhoods and come with a loyal customer base willing to pay a premium for high-quality groceries. It also potentially extends the online retailer’s existing grocery service, Amazon Fresh into new markets while also broadening the assortment of products sold. And almost overnight, Amazon goes from a niche player to a national powerhouse in the $1.4 trillion grocery industry. Combined with Amazon’s well-established expertise in logistics, customer data, and pricing, Whole Foods could become a transformational force in brick-and-mortar as we know it.

So what does it all mean everyone else? Retailers and grocers continue to feel the pressure from shifting consumer habits, with many struggling just to stay relevant. Amazon’s new push into the physical world will likely add to the pressure. Here are five things to watch for as Amazon and Whole Foods move forward:

Flexible distribution

Your local Whole Foods likely won’t change into a massive Amazon warehouse and fulfillment center overnight. But there’s a good chance Amazon’s already thinking about how to leverage these strategically located stores (as well as Whole Foods’ existing network of distribution centers) to get products to customers faster and more efficiently than ever. Especially as the company looks to develop its Amazon Fresh service into a leader in the small, but growing online grocery space. Somewhere between Whole Foods’ in-store experience and Amazon Fresh’s online convenience lies the potential for great synergy – especially when it comes to giving more customers access to the whatever delivery method they prefer.

Experience matters

People don’t just buy products; they choose experiences. And the most successful retailers today understand that experience matters. Whole Foods is a long-time leader in bringing experiences to its stores. Whether it’s through in-store cafes, bakeries, cheese tastings, or coffee roasting, Whole Foods customers have come to expect an opportunity to see, taste, touch, and learn about many products before they buy them. That type of experience remains a tough solve for online-only food retailers. Whole Foods is an opportunity for Amazon to double-down on the ability for customers to experience new products and how to use them. Will it extend these experiences beyond just food products?

Fulfillment-plus

Jeff Bezos was one of the first to propose the idea of delivering orders to a physical location other than a customer’s home or office. Today Amazon Lockers are commonplace, giving customers a secure place to receive orders whenever and wherever it’s most convenient for them. Having an additional 450 Amazon-owned locations could extend the service even further, providing new real estate for deliveries, returns or other shipping services that can’t simply be provided in the back of a 7-Eleven. While there’s no public plans for Amazon shipping centers, it’s certainly within the realm of possibility.

An industry wake-up call

Amazon’s big jump into the grocery business splashes water on the faces of just about everyone else in the industry. Now it’s up to grocers to innovate and refresh their business models in order to stay afloat. Will it lead to traditional grocers adopting more online shopping and deliveries? Will they be able to compete on more than just price? Clearly, customers will choose the experience that suits them best. They ultimately vote with their wallets. It’s up to grocers to gain a better understanding of all the data behind customer interactions, to be able to match pricing and promotions to a customer’s preferences, and to create experiences that delight and reward shoppers for their loyalty.

The landscape is changing fast – don’t get left behind

It used to be that Amazon was the leader in online shopping and services and Walmart was the king of physical retail. But now Amazon is building bookstores and could soon have its own massive grocery chain, while Walmart gets more aggressive online. Somewhat lost in all the news about Amazon and Whole Foods was Walmart’s announced acquisition of online fashion brand, Bonobos – not to mention its recent purchase of Amazon competitor Jet.com. In their quest to be the primary destination for consumers of all walks of life, both Amazon and Walmart have begun aggressively stepping on each other’s turf.

It’s further evidence the lines have blurred between physical and online retail and there’s no single path to success. It’s no longer just about stores or about prices, delivery speed or convenience. Those who succeed will do so by finding the right mix of products, prices, and technology to surround the customer with consistent, seamless, personalized experiences.

Will drone-delivered, organic kombucha come next? Maybe not tomorrow. But all signs point to the dawning of a new age of retail. And it’s only just begun to get interesting.

Remodeling your kitchen – rather than granite think smart counter tops

In a report we recently published we looked at how the Internet of Things (IoT) would impact the retail world. One area we focused on was the food and grocery portion of retail. An idea we explored was how IoT could allow grocers and other players within the food supply chain to extend their reach beyond the store shelf and into the shelves in our pantries and refrigerators. Eventually grocers and manufacturers could leverage this connectivity to better understand demand patterns, usage and even correlations between different items. This use case has taken another step closer to becoming a reality.

Companies like Orange Chef have started to market and sell “smart counters.” Granted the one offered by Orange Chef is more of a chopping block sized device for your kitchen, but let us project out into the future. These counter tops aren’t so much about whether or not you want black granite, Azul Macauba or a fine Italian marble, but how many sensors, beacons and connected nodes your new kitchen counter tops will contain. The smart counter top will be able to identify what you are placing on it. For example you may place on it a nice

About to get a whole lot smarter!

salmon steak or some lamb shanks. The smart counter will then be able to offer you ways to prepare the food offering you recipes and other items you may want to include. The counter will also be able to tie back into your wearables as well as other applications. Training to run a marathon and using your smart phone to keep track of your progress – maybe that bacon isn’t what you should be eating this close to race day – your counter top will tell your phone or wearable, which will tell you. Trying to cut back on red meat – the smart counter will keep tabs on what you are preparing for your dinner. This is a great example of the kitchen becoming smarter and more interactive.

It is not a big leap to go from the kitchen and your counter top being proactive in your meal preparation to being tied into a larger network – say in your neighborhood – that would communicate with local grocers and even distributors to better manage what they stock. Maybe the paleo diet is catching on your neighborhood, if the smart kitchens figure this out, the local stores might want to ramp down on some of their processed food orders.

Of course this will also come with the expected questions around privacy and information sharing. Will consumers trust the likes of Tyson Foods, Mondelez, Kraft, Dannon and other large food providers to have access to such data? If these companies or a third party (think Nest for your grocery bill) can demonstrate or help consumers with their spending then consumers will become more at ease with sharing their information. The fact that households in the United States spend on average $166 a month on energy – the target for Nest – yet they spend 30% more a month on their grocery bill (based on U.S. Department of Energy and the U.S. Bureau of Labor Statistics) would indicate that there is an opportunity for enhanced intelligence to be applied to this sector. IoT empowered devices could bridge that last consumer mile for grocers, CPG and food manufacturers.

We wouldn’t just have our mothers and significant others to remind us that late night ice cream isn’t good for us, our smart kitchen will do it as well.

Get your milk and eggs delivered by … Amazon. The eCommerce giant tackles a big nut

One of my fondest memories as a child was being able to spend the summer with my grandmother in France. At the time she lived in a small village about an hour from Paris – Morsains. The village had no commercial establishments so every morning a number of food trucks (really vans) would come by and offer the residents the ability to purchase the usual staples: fresh baguette, cheese, meats, milk to name a few. As a kid it was always exciting to hear that horn (they would honk when they got to the village), because sometimes you were able to purchase candy or some pastries as well. This was back in the 1980s. Interesting that the ability to deliver in this manner lost momentum. Of course we saw this type of delivery start up again in the 1990s when the dot com boom struck. Everyone from Webvan to Kozmo looked to bring just in time food delivery to your front door back to the mainstream. During those hey days I was working at Forrester Research and remember seeing these companies come to brief us and ask our opinion but also, especially when it came to Kozmo, I would see them deliver to myself and fellow co workers on a daily basis. Unfortunately, these companies were not able to solve the nut that is grocery, last mile delivery. Webvan in particular ran into major problems – how to delivery if no one was home, what to do with perishables, what about frozen goods? I remember one discussion we had at Forrester that to be successful Webvan would have to find a way of putting refrigerators in customers garages our somewhere accessible if no one was home. But the investment that would require would destroy their margins…oh wait those already got destroyed. Unfortunately, Webvan and the likes burned through a lot of cash and could never capture profitability. Traditional grocery chains such

Amazon really going after UPS and FedEx?

as Whole Foods have also expanded their home delivery. So consumers have plenty of options. Now add another option…a big one. Amazon.

The eCommerce giant is finally wading into the online grocery and home delivery market. Not a surprise. And could have a major impact on the market. Can Amazon be successful? Of course. Unlike the likes of Webvan, Amazon has been perfecting their order management, inventory optimization and delivery for the past 20+ years. In doing so they have also built a fairly vibrant business (to the tune of $60b in revenue). Groceries are not going to make or break Amazon. However being able to apply what they know of eCommerce will give them a leg up on the start ups from the 1990s. Also, if their past is any indication, they will ease into this. They have already tested this out in their home market and are slowly rolling this out to other large metropolises where their distribution network can be best leveraged. Amazon also knows how to manage multiple smaller retailers. Have you ever noticed when you order products on Amazon that many times it is from another supplier…not named Amazon. They understand how to tie inventory from disparate sources, consolidate payments and move merchandise from these retailers.

Of course the food business is different than delivering books or CDs to your door. The largest issue is around food safety. Unlike the majority of other products that Amazon can deliver to your front door, groceries have a shelf life. This has haunted others who have ventured into this realm. With Amazon’s slow roll out of the offering I am going to assume they are working out the kinks with this aspect. They are already tackling one of the issues with forcing users to choose from two windows for delivery – hopefully cutting down on non deliverable items. That is a major issue with groceries…re-slotting a book in the warehouse is one thing, but having to transport and re-warehouse items like milk or seafood or frozen good is a whole other dilemma. If Amazon can solve this problem, how much harder will it be to deliver other items “same day.” Probably not that difficult. As this article points out, click here, if Amazon can solve the math they can most likely deliver anything from apricots to zubaz pants.

Finally could this foray into grocery delivery also lead to Amazon creating their very own fleet of trucks? Going after the last remaining dollars that Amazon has to share? Rather than having to rely on FedEx or UPS, Amazon can just leverage a delivery fleet to ship some of their items. They can also pocket all the shipping fees. One could envision a “value” add service, an expansion of the Amazon Prime. Pay for a premium service and 75% of your items will be delivered same day via the Amazon truck fleet. Cutting out reliance on 3rd party logistics.

Maybe Amazon’s foray into groceries is not necessarily about getting you fresh produce, but about learning how to do delivery, how to run a shipping fleet. Amazon has made investments by acquiring companies like Kiva to better run their warehouses. Now they can focus on how to most efficiently get material from the warehouse to your front door. If they can learn how to efficiently run the last mile logistics…look out world a new supply chain powerhouse.