Disruptive Thoughts?

Letting Fox In The Hen House

Several news agencies have reported that Amazon is planning to open up convenience stores to help them with cost-effective distribution of orders to local customers.  Whether they are thinking “grocery order pickup depots” or “convenience stores with add convenience”, their intentions are threatening considering their past willingness to innovate, explore, and test “big concepts and big expenses” to disrupt traditional businesses.

Grocery players are fighting to offer more convenience including “click and collect”, “delivery within one hour”, and the trend of millennials to “order on-line”.  Large retail footprints require foot traffic and one can’t help but wonder if “treasure hunting” (which makes visits to Costco so attractive each week) will be the next norm found in these large superstores.  The battle for share of customer’s wallet is intensifying as Walmart plans to offer curbside pickup of groceries in more than 600 locations later this year.

When you consider the costs to run these large supercenters and the cost of idle staff waiting for the next customer, these significant expenses allow companies like Amazon to disrupt how groceries will be bought in the future – both in terms of price, freshness, and convenience.  When you add loyalty points and other benefits, it reminds me of the days when Costco offered many products found at convenience stores including tobacco – at very very very low margins – and offered points as well as 30-day credit through the use of their American Express program.  Retailers who bought many of their store needs there boasted about the free trips they earned each year through point collection despite the inconvenience!  The thought which reminds me – convenience to me – is not necessarily the same definition of convenience to you!

Some retailers including convenience store retailers that have put Amazon pick-up lockers in their locations are flirting with the notion of letting the fox in the hen house.  Only time will tell if this is the right decision in the name of attracting and keeping customers, or a disastrous consequence to Amazon’s bigger intentions.