Amazon Locks Up Customers with In-Store Pickups
When retail industry watchers point to where brick & click retailers may have an advantage over Amazon.com, they often talk about the option of ordering products online and picking up in stores. Amazon management, clearly aware of this point of difference, has launched its "Lockers" program, placing metal cabinets in retail stores as a countermeasure. It’s one step, according to The Wall Street Journal headline, that has become "Amazon’s New Secret Weapon."
Opinions on Amazon Lockers was divided in a September 2011 RetailWire discussion when it became public that the e-tailer was planning to test the concept at 7-Eleven stores in select markets across the country.
Herb Sorensen, Ph.D., scientific advisor TNS Global Retail & Shopper and adjunct senior fellow at Ehrenberg-Bass Institute, was among those who saw the program as a positive.
"This represents a significant advance in the convergence of online, mobile and bricks retailing," said Dr. Sorensen. "Amazon is moving further to become physically close to the shopper. … Let me point out that 7-Eleven is probably the preeminent ‘close to the customer’ retailer, given that they probably have more single store units than anyone else in the world. I don’t say that this is going to be a resounding success, but it has all the earmarks."
According to the Journal article, Amazon has placed lockers in four states where it already collects sales tax. The program already has a history of success in Japan (with 7-Eleven) and the U.K.
Ryan Mathews, founder and ceo of Black Monk Consulting, pointed out in the RetailWire discussion that Amazon Lockers is likely to be more attractive to consumers "in dense urban areas like Manhattan where congested streets and (in some neighborhoods) the lack of a secure postal or drop box for customers makes delivery and customer service more challenging than it is in suburban or rural areas."
Discussion Questions
Discussion Questions: What is your assessment of the Amazon Lockers program? What would your response be if you operated stores in the same market where the lockers were available?
I liked the locker program in 2011 and I feel stronger about it now. With eBay’s announcement of a same day delivery test in San Francisco, the race for quicker delivery is on. eBay is providing this service for selected retailers. Amazon is doing this for its ecostructure.
With a willingness to collect sales tax, Amazon no longer needs to fear having a physical nexus in states.
With its strong customer service, rare out-of-stocks, and huge product assortment, Amazon can take on brick & click retailers without leasing real estate and building stores. When combined with Amazon’s test of same day delivery to homes, they offer a powerful incentive for consumers to shop with clicks, rather than visiting brick and mortar stores.
The locker program is a part of a larger strategy to remove “delivery” as a barrier to purchase online. Amazon clearly intends to make that barrier go away. This is but a small salvo in the battle to come, as brick and mortar retailers begin to wish for “the good old days” when no sales tax was seen as Amazon’s principle advantage.
As noted by Herb and Ryan, this has tremendous upside potential and provides one more delivery option to Amazon’s customers. Other convenience stores, drug stores and even traditional food retailers should consider such a partnership as the pick up option will drive traffic into the store, resulting in an opportunity to sell something during a normally unplanned visit.
In addition, other non-commercial venues: libraries, schools, gyms, etc. make for potential locations for “time starved” Americans who love to multitask.
In essence, the “virtual doorman” concept makes great sense to the leading virtual retailer.
Anything that reduces friction in the shopping process will certainly help. It’s easy to imagine the delivery option appealing to shoppers who can’t securely receive package at another location, but could also be a boon for those who want to order a surprise gift for a spouse/roommate. It’s an easy reason to choose Amazon over another retailer who will only ship to my credit card billing address.
The Amazon Lockers program is a brand new initiative, the results/value are yet to be determined. The exact incarnation may be new(?) but the general principle of lockers for e-commerce delivery dates back to the ’90s when front porch lockers were being sold to secure all the (anticipated) packages from the new e-commerce phenomenon.
Herb is very bullish on anything Amazon and far and away their biggest cheerleader here. I do not believe that everything they touch turns to gold (one of many examples is their failed search engine). I think Ryan Mathews really nailed it — for us suburbanites many of whom never set foot in 7-Eleven (even when traveling) lockers are unnecessary and a burden.
Ultimately, as Ryan intimated, I doubt this will have much impact except in urban areas where consumers may be hesitant to receive packages that might disappear while they’re away from home. Area businesses might feel a pinch where they’ve been the solution to that problem, but likely not that significantly, so little or no response is needed from them.
The Lockers program has potential for people who are not home to accept deliveries or those who live in condo or apartment complexes where delivery of packages is difficult. If I am a retailer in the area, I would not be happy. Amazon is a strong competitor and should be considered as such. Retailers need to understand their consumers well and provide a great shopping experience for those consumers.
I think this is a great idea. This provides another vehicle to generate sales beyond Amazon’s current business model, especially with consumers that might otherwise skip ordering from Amazon due to delivery concerns/security. And it creates a new point of differentiation.
As a New Yorker, I can see the Amazon Lockers program working well for consumers. Picking up shipments and packages at the US Post Office can be a hassle — long lines and short hours; walking into a convenient retail location on your own schedule and picking up a purchase sounds like an ideal situation for Amazon, the retail location, and the consumer. I am not sure how this would play out in more suburban and rural areas. I believe store operators offering in-store pick-up may have to worry about offering lowering prices to compete with Amazon Lockers.
This appeals to a very small percentage of consumers. For some with less than safe or convenient delivery, who do order online, a post office box is the method of choice. Getting into partnership with 7-Eleven is a no brainer. Why not offer the floor space, get a license/use fee out of Amazon and at the same time pull in some incremental traffic. This will not be a huge contributor to Amazon’s sales performance, but it does show that the company will stop at nothing to tap into potential sales conversion plus address a negative with a positive service enhancement.
In tight urban areas with residential highrises, the locker makes sense, especially when it comes to near-term perishables which can’t do next day delivery. I can see downtown San Francisco, New York, etc. I wonder if I can try that while I am visiting NRF 2013 in NYC? 🙂
Fifteen years ago, petroleum companies discussed leveraging their gas station real estate for other purposes — movie rental returns, dropping off dry cleaning, etc. — and now Amazon has the Lockers program. The concept has legs.
Amazon’s locker program is one of the rare win, win, win scenarios. Amazon wins because it gets the lower costs associated with delivery to a commercial location and one drop instead of many. The retailers win because they get some rental income and foot traffic in the stores. The consumer wins because they don’t have to worry about being home for a delivery, and that it will be left out in the weather or stolen.
Combine lockers with large, highly automated, DCs near population centers (also an announced initiative) and you have same day acquisition (without stores and with multiple orders per delivery point). I am not convinced 7-Eleven is the answer for the locker distribution point (can Amazon create enough sales/square foot compensation in this small space) but that more is about tuning the concept than a deal breaker.
Once again, Amazon is leading with innovation.
This is a truly great idea. It solves the problem of delivery when working folks are not at home, and it addresses the problem of security, thus appealing to potential customers in suspect neighborhoods. A gold star for Amazon.
It might be great in Detroit, DC, Compton and other high crime areas. Being a Prime member and being able to extend the Prime benefit to 4 other family members, we almost never pay for shipping and never pay sales tax. I can’t see how a locker in my area is going to benefit me. Furthermore, “Ship to Store” is often a bogus program. I recently ordered a large item from Walmart.com. Two items with combined weight in excess of 50 lbs and over 4 feet long and 5 feet high. Shipping was free to my local Walmart but delivery estimate was 10 to 14 days. For giggles, I checked freight cost and found that Walmart would deliver it to my house for $2.98 — I paid the freight and had the item in 3 days! Yeah I paid Walmart the sales tax but it was still cheaper than Amazon or anywhere else by $30 +.
We have a large country and most of it is still relatively safe. I don’t think the lockers program applies well to 95% of the USA. In the other 5% it could be a great idea. If I were a retailer in these markets, I would redouble my efforts to run a clean orderly store with great service and the very best prices I could manage. I would be involved with my community and make it a point to get to know as many of the residents in the area as possible. I would use email to advertise any specials or services to customers in my geography. It’s work, but putting up a sign and opening a door won’t make you a living today!
Just to review, I put this initiative into the context of the three major components of retailing: 1. The “meeting of the minds,” the actual selling that occurs when the person buying accepts the offer being made by the seller. 2. The delivery of the goods or services. 3. Payment.
I consider the first issue to be the heart and soul of retailing, and the other two are simply house-keeping, clerical and grunt work. Objectively, Amazon IS the world’s premier SALESMAN in the self-service world. However, they are not slouches at the other two, and by moving their delivery into partnership with other bricks retailers, they are teeing up the ball for deeper embedment into the bricks world.
After all, Amazon is already partnering with other bricks retailers on the selling component of retailing: Amazon Marketplace, where nearly any small legitimate bricks retailer can “sell” their stuff on Amazon.
These are NOT trends that are going away. Selling FOR other bricks retailers, and delivering IN other bricks retailers is embedding Amazon further in bricks retailing. Bear in mind that the third component, payment is already handled by Amazon for everything they sell, whether on their own account, or for another retailer.
The electronic wallet is a HUGE issue that Amazon MUST be involved in to expect to retain and protect their retailing turf from Apple and Google — more on that in another discussion at RetailWire today.
BTW, I agree completely with the urban/suburban issue that Ryan Mathews raised. It has played a huge role in the success of Walmart, and will play out here as well.
I would not be terribly concerned. The Lockers concept appears to appeal primarily to consumers who do not have a secure pickup address, more than to consumers who are seeking to purchase and pickup on the same day. To move to same day delivery, Amazon needs to extend their supply chain into multiple markets, which will increase the complexity of their business and add additional inventory management and investment risks.