This is the second fictional model describing efforts of major digital companies to move into traditional, physical grocer turf. It is meant as a discussion piece. For the complete , free case study send a request to firstname.lastname@example.org. If you wish to engage in a meaningful dialogue about the implications for traditional grocery or possible defensive actions contact Bill Bishop at email@example.com .
Much has been said about Amazons rapid warehouse expansion, their 1 day delivery efforts, their toying with delivery lockers in bricks and mortar stores, and their fresh grocery escapades in Seattle. The real model might well emerge to look like this:
What is it?:
Amazon leverages its warehouses, its buying power, its systems and interface expertise, its big data handling and mostly its command over the consumer in the following manner:
- It collaborates with Walgreens, WaWa, Sheetz, and a number of other high quality C-store operators to provide consumers 20,000 convenient, around the corner, consumer friendly pickup Depot Partners.
- Amazon ships the bulk of the shopper grocery order from its closest warehouse to the Depot Partners warehouse where the Depot Partner trucks move it to the appropriate stores.
- Amazon offers its entire long-tail product inventory from online books to TV sets to be delivered to the home or with the rest of the groceries to the Depot.
- Fill in grocery items (meat, fresh, bakery, meal solutions) are provided much like The Fresh Market today through local or regional suppliers. Many of those are items available through the Depot Partner (milk from Walgreens, sandwiches and other meal solutions via WaWa.)
- Each site is faced with an Amazon order site touting all products, sourced from whatever is appropriate for that local site. For instance: the Walgreens store at Rand and Miller Road in Lake Zurich supplies the milk, bread and some agreed upon set of other items to the Amazon customer. Most of the customers order has been assembled by Amazon in totes and shipped to the Walgreens distribution center where the Walgreens portion is added and then the order is topped off with those last few store based items at the store. For overlap items (available via both Amazon and the local retail Depot Partner) a decision on supplier will be made, a price point agreed upon and a reference fee paid to the partner who does not supply.
- The roll-out of the service can be a localized or regional offering, allowing Amazon and its Depot Partners to use profitable areas to fund new markets.
- As network volume grows, the players would have the opportunity to consolidate purchasing power for products, promotions and advertising dollars from manufacturers and service providers.
What it would look like to the Customer:
- All current Amazon customers would be assigned to a Depot Partner location depending on their address. If there are two or more Depot possibilities, the customer would be contacted to choose the one easiest for that customer to access.
- The initial Amazon communications will provide base level benefits which include:
o (more in the case study)
- Subsequent communications will explain the additional benefits of the Depot deliver, specifically
- Full online grocery shopping, all products including fresh
- Thousands upon thousands of choices (more in case study)
- More and more focused communications from Amazon as it uses the growing treasure-trove of individual consumer likes and dislikes to make product targeting and pricing more efficient for you.
- XXXX(retailer)-Amazon Depot signage at the retail location. In store signage support.
- If you are a loyalty member or have given your email address to the retailer you will be introduced to the concept by that retailer (Walgreens, Wawa, or) with follow-on communications coming from Amazon..
- Amazon Flow comparison shopping expanded to FMCG items. Price compare at Walmart or Kroger or Hy-Vee and simply order for delivery to your home or for pickup at the local Depot.
What it would look like for the Players :
Amazon gains from its direct sale of frozen and shelf stable foods, pet foods, cleaning products, HBA items and of course from its immense offerings in books, music, kitchen goods, clothing and consumer electronics. Its contact frequency increases to Every Week and its reach increases to potentially Every Household within the logical reach of a Depot.
Walgreens is just starting its loyalty program. Many of the better C Store operators also run loyalty programs. Those loyalty programs will be joined together into Amazons PRIME loyalty program. (more in case study)
Amazon will gain efficiency by reducing the number of delivery points while increasing reach. The average items per order picked will also increase significantly making investments in picking and packing technology pay our sooner and more robustly.
Amazon will gain substantial knowledge about current and additional customers. Amazon Depot Partners will supply Amazon information about local competitors so that additional pressure can be generated on attracting customers in markets where the competitor appears to be weakening.
For Amazon Depot Partners:
The Depot Partner initial investments are small, but scale with business growth. Parking space, pickup call technology and labor are the biggest expansion challenges. However, partners are richly rewarded with additional traffic and all of, or a share of the profits from fresh produce, meats, meal solutions, and products that are best served from local transportation (soda, beer, cigarettes, water) as well as fuel (WaWa or Sheetz) and or pharmacy (Walgreens) sales of course.
(more in case study)
- Much more focused access to a growing body of consumers who will either put your product on their regular list or want access to non FMCG products through the Prime network.
- Potential opportunities to help Amazon up-sell, cross cell and participate in first-sell penetration strategies.
- More information about consumers and their deliberations on your brands and competitors.
- Opportunity to concentrate product trial, promotions and advertising dollars.
- Most favored nation status on pricing, advertising and promotion dollars will be expected. The volume from the network will rival and perhaps surpass the largest customer you have at the moment.
- Efforts to influence customers will be more direct, but less in your control.
- Traditional retailers will be very aggressive in pricing and advertising demands to combat the Amazon Depot Network.
This concept bleeds traditional grocers one customer/trip/item at a time. (more in case study)
Could anyone else do this:
Combinations of collaborators such as ShopRunner and eBay might be able to pull this off. The most productive combinations would be current bricks and mortar retailer combinations like Walmart and Walgreens, but the overlap in current physical business-geographies is quite a hurdle to overcome. Amazon has quite a lead in capitalizing on this model, but will need to become much more collaborative to pull it off.