New Brick And Mortar Stores – The company’s strategy extends beyond Whole Foods into cash registers and pop-up stores that intentionally disrupt the traditional retail model.
A quick look at Amazon’s latest financial results might raise eyebrows for natural products executives who have learned to fear the world’s most ruthless and innovative e-commerce business. In its fourth quarter ended Dec. 31, 2018, Amazon reported a more than 3% year-over-year decline in “brick-and-mortar” sales, a category the company now dominates in its entire grocery market. Brick-and-mortar sales of $4.4 billion fell compared with online sales of $40 billion in the same quarter, but the division’s 3% increase could be a blow to Wall Street and the retail strategies that Amazon March Looking at brick-and-mortar mortars. A key driver of the company’s continued success.
New Brick And Mortar Stores
However, the march continues unstoppably. After reconciling Whole Foods’ accounting calendar with parentage and adjusting for occasional sales reporting between Prime Now and Whole Foods, that 3 percent falls to a 6 percent increase. Growth, not decline; And that growth comes despite most major retailers investing $28 billion in 2018 (according to e-commerce startup Common Sense Research) to try to compete with Amazon on all fronts, including delivery and clicks. From pickup to cashless and free samples. It’s like Amazon started cracking the grocery store code and everyone’s trying to play.
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What started as a simple strategy to cut prices and cross-sell eco-friendly smart speakers at Whole Foods now looks like much more. Over the past year, Amazon has pulled more cards up its sleeve to develop an omnichannel strategy with a range of physical touchpoints. Amazon’s “Physical Stores” unit now includes 476 Whole Foods Markets, nine Amazon Go stores, 18 Amazon Books Stores, three Amazon 4-star outlets and 87 Amazon Pop-up sites. In 60 metropolitan markets nationwide, the company offers two-hour grocery delivery through Prime Now and pickup by 20. But that’s just the beginning.
In early 2019, news broke of a major Whole Foods brand expansion, with Amazon lighting up new locations in new states and suburbs. Rumors persist that “second-generation space” from the abandoned Kmart and Sears department stores may serve as opportunities to co-locate warehouses and storefronts in another mix of Amazon and Whole Foods brands. With the overall shift in culture toward e-commerce, retail experts have been warning for years about an oversupply in physical retail spaces — the space is no longer fit for purpose — and Amazon seems to have an idea of how to redress the imbalance.
In addition to increasing the number of stores and store concepts in the emerging market, Amazon also revamped the Whole Foods brand by eliminating the 365-store format. Rob Prinsep, online channel director at Blue Dog Bakery and former Internet account director at MegaFood, agrees with the shift, calling 365 stores a terrible idea. “They built these concept stores to compete with Trader Joe’s and Sprats, with the same product selection and reduced shopping experience. Go a different route, eat more whole, be more extravagant. Offer valet parking, salon services, food services.” People can’t wait for such a retail experience Who opens a store and there are lines outside the door… for groceries?
Accordingly, Principe sees more core stores as a great idea, but is quick to point out that Whole Foods is just one weapon in Amazon’s brick-and-mortar arsenal. Analysts expect 3,000 cashless Amazon Go stores by 2021. It’s all happening at once, which is ultimately disrupting the grocery business, and only a player like Amazon can do it at scale. “Amazon proves that brick and mortar is not dead, but you have to change your game,” says Principi. “Publix now puts my stuff in a trunk. Amazon will make everyone step up their game.
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If you want to approach business like Bezos, start with the premise that customer satisfaction equals lowest cost and highest convenience. Amazon was one of the first to challenge the either/or proposition that a retailer can provide price or convenience and experience, but not both. “What we have to remember about Amazon is that they are deeply unhappy with the status quo,” says Natalie Berg, founder of retail consultancy NBC Retail and co-author of the new book.
. “So when they look at the in-store experience, they immediately see the contradictions – shoppers waiting in line at checkout, shoppers struggling to find products on the shelf, flat discounts, etc. Like Amazon.”
For a glimpse of what this disruption might look like, take over your world. Berg believes Amazon will never crack the grocery sector without stores, and that’s the company’s brick-and-mortar experience. “They’ll take their time and toss around different ideas until they find a viable concept that they can export around the world.” Just look at what Alibaba and JD are doing in China to see how Amazon plans to disrupt grocery retail.
This means taking all the work out of grocery shopping. Chinese e-shops are building automated brick-and-mortar stores that double as invoicing mini-warehouses with same-day delivery. As a bonus, the brick-and-mortar store can serve as an additional center for picking up and returning goods. “Online returns are a ticking time bomb,” says Berg. “Amazon will try to address that with a more physical presence.”
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“Grocery is attractive to Amazon because of the frequency factor,” says Berg. Especially if the company can claim a Prime membership for online grocery shopping. “We all need to eat, we buy groceries every week. If Amazon can reach customers on a weekly basis, then those customers are more likely to wear premium blinders and make Amazon the first place to call for everything. That’s why Amazon’s move to grocery should apply to all retailers, not just supermarkets.
But not everyone is worried. “Amazon has the luxury of trying and failing in endless ways,” says Alan Lewis, director of special projects for natural foods at Vitamin Cottage. “Losing millions of dollars in lost costs on a failed startup doesn’t matter to Bezos. In the end, he’ll benefit from what he’s learned and not have to reveal what the full costs were. He seems to be the only one.” Time tests everything, to see what holds.
A seasoned food expert, Lewis sees the competitive landscape as one where every competitor is now aggressively innovating according to their strategy, and Bezos is just the new kid on the block. “Bezos is an underdog,” he says. “Amazon may move away from food. His model is not compatible with an industry trying to achieve 1% net profit. After acquiring Whole Foods, it has several hundred more brick-and-mortar distribution locations, but it’s unlikely to be able to turn that grocery infrastructure into key logistics hubs for e-commerce without seriously undermining the grocery core. You cannot convert a press into a tractor.
Hungry young brands are also working on their own innovation projects that create a luxury Amazon experience. Functional beverage brand Dirty Lemon got its start on Instagram by fulfilling orders primarily via text message and is now building a store as well. “We’re learning how powerful offline relationships are in building and strengthening brand loyalty,” says Zach Normandon, founder and CEO of Iris Nova, Dirty Lemon and a new cashless retail concept called The Drug. It’s called Store. “Dr. Store’s strategy is about long-term community building and the natural social sharing that comes out of those experiences, and that’s why the stores are sustainable,” he says. “We’re also building a full-fledged cocktail bar behind each cashier-less store, which we’re using as a place to experiment and test drink concepts before launching them nationally.”
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Without this kind of innovation, opportunities can be lost – and the premium end of the nutritional supplement market has already suffered its fair share from Amazon. “I’ve seen prices drop, I’ve seen supplement brands drop out of Whole Foods,” says Prinsep. “Premium brands seem to go too far in promotion, and that often comes from MQM margins. It’s hard to sell a $50 multi on the shelf when the retailer is so focused on price. Compression is the name of the game here, as Amazon has transformed the Whole Foods to a larger model, less dependent on relationships, longevity in the industry or even quality.
Going the Amazon route to supplements could be tricky for Whole Foods. “Amazon doesn’t seem to have any labor standards for the products it sells, other than ‘don’t get caught’ and user-submitted sketches and reviews,” says Lewis. “It can seriously damage the reputation of dietary supplements by selling brands and SKUs that are adulterated, contain unsafe ingredients, are contaminated with pathogens, or do not contain the ingredients they claim to contain on the label.”
Over the next 12 months, Berg expects more
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