Amazon/Whole Foods planning store pickup service from third-party retailers

Discussion
Photo: RetailWire
Mar 16, 2018
George Anderson

Amazon.com wants to negate one advantage that rivals such as Walmart, Target, Kroger and others have — store pickup. The e-tailing giant is looking to offer a pickup service at Whole Foods’ stores that will not only include orders from the organic grocery chain, but also from a host of other retailers.

According to the reports, Amazon is seeking a finance manager that will help build a pickup business from the ground up. The job posting, which was first reported on by the Puget Sound Business Journal, said the person hired would be behind “the Whole Foods delivery and pick-up service on the ultra-fast Prime Now app and enable our Prime customers to shop from a set of marquee third-party retailers.”

What potentially makes the described service different from those offered by Walmart and others is that it would appear to offer pickup from online orders placed with Whole Foods, Amazon and perhaps others, as well.

What’s not clear is if the third-party retailers described will all be drawn from Amazon’s marketplace or from outside sources. Third-parties selling on Amazon run the gamut from individuals to major brick and mortar chains such as The Children’s Place.

An expanded in-store pickup option would serve a number of purposes for Amazon including cutting shipping costs related to home delivery while providing added flexibility for consumers, some whom have difficulty receiving packages at home.

The offering also provides an opportunity for Whole Foods to increase sales as the experiences of other retailers has shown that offering in-store pickup drives incremental revenues. Roughly 40 percent of consumers, according to a JDA survey, report they “sometimes” buy additional items when they go to a store to collect orders placed online.

DISCUSSION QUESTIONS: What advantages do you imagine Amazon’s prospective pickup service will give the company and Whole Foods vs. their rivals? Do you see potential problems arising from providing pickup for third-party retailers?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"The more successful an initiative like this becomes, the more disruptive it can be."
"...this next step in the evolving Amazon-Whole Foods pickup strategy can further deepen and widen the company’s strategic moat."
"They are surrounding the customer, folks. That’s the real play here."

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21 Comments on "Amazon/Whole Foods planning store pickup service from third-party retailers"


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Keith Anderson
BrainTrust

Like Amazon’s existing marketplace for third-party merchants, this service would allow them to offer larger selection without inventory risk or the overhead of managing an expanded assortment. It would drive incremental trips to Whole Foods stores, create yet another revenue stream and might give Amazon visibility into demand for products they don’t already carry.

It does risk increasing congestion in and around Whole Foods stores, however. Physical assets like stores are most productive when optimized for a single use case (e.g. either as customer-facing stores or dark stores optimized for click and collect or online fulfillment). The more successful an initiative like this becomes, the more disruptive it can be.

Bob Amster
BrainTrust

The key advantage is an increase in the foot traffic at Whole Foods locations. The second advantage is to increase the number of pickup locations for those consumers that have difficulty receiving packages at home. (I don’t think that is a large number so I think that advantage is limited.) Amazon will pilot it, measure it, determine how much the program is worth, and then determine if it should continue or not.

Chris Petersen, PhD.
BrainTrust
The advantages to Amazon are clear. They get more physical points of distribution. Moving product closer to customers is more cost efficient, especially if you can consolidate shipments in the very last miles. This strategy enables Amazon to rapidly scale Whole Foods and fresh food volume. If they can deliver other brands and products to these collection points it is a huge win in lowering shipping costs which have been continually rising at Amazon. But wow … what a challenge to find the right partners for click and collect lockers! While those retailers would potentially benefit from increased store traffic, would customers even stop to shop? Or would they simply move on to their next Amazon phone order? If Amazon will potentially deliver retailer products other than Whole Foods to these retailer points, that would seem to be a significant competitive threat to the retailers housing the pickup lockers. The challenges of finding the right balance with retailers hosting Amazon pickup sounds like pulling a rabbit out of the hat. But if there is a… Read more »
Mohamed Amer
BrainTrust
Mohamed Amer
Independent Board Member, Investor and Startup Advisor
1 year 7 months ago

It’s very difficult to define and pigeonhole Amazon using traditional industry boundaries and associated logic. The company crosses (nearly) all industry lines, changes rules by which they participate and not only elevates but defines consumer expectations (and businesses via AWS) on trust, value and convenience.

As Amazon combines trust, value and convenience across an ever wider industry landscape and does so at unprecedented scale, the company is creating unprecedented growth opportunities. At the risk of sounding like a broken record, this next step in the evolving Amazon-Whole Foods pickup strategy can further deepen and widen the company’s strategic moat. Like anything new, there will be operational problems; however, if history is an indicator, none will be insurmountable.

The bottom line is that the future of retail has completely shifted from inside the proverbial four walls to the digital realm which in turn has created new economic models that blur industry lines, pushed for novel collaboration models and realized new real-world processes that are changing what counts as consumer value.

Gene Detroyer
BrainTrust

This is a triple-“thumbs up” comment. Nothing more to add!

Mohamed Amer
BrainTrust
Mohamed Amer
Independent Board Member, Investor and Startup Advisor
1 year 7 months ago

Thanks Gene. We are living in interesting times.

What we’re witnessing with Amazon is beyond what anyone could have imagined 20 years ago (even by the now legendary Mr. Bezos). I mean it’s one thing to reinvent an industry but a whole set of them? Facilitate a new cloud computing paradigm? Turn technology into tangible value levers for both consumers and businesses?

There have been many visionaries, inventors, and leaders with significant business impact. Jeff Bezos is certainly earning a spot alongside Steve Jobs and Bill Gates in actively creating what we’re taking for granted in our lives in the second decade of the 21st century.

For the next decade, I foresee the biggest changes coming from applying blockchain technology to reinvent many current industries (and once more redefine value). Who will be the next Amazon that takes that courageous leap and survives the pundits’ scoffs and scorns?

Michael Dudley
Guest
1 year 4 months ago
I concur with Gene. Your Amazon worldview is astute and intuitive. I’m among the largest 3rd party sellers on Amazon in terms of GMV. I interact with brands, manufacturers and entrepreneurs on the platform. I see way more fail than succeed. At a rate of 10-1. It’s difficult when I speak with seemingly smart people who just can’t get it. It’s an entirely new paradigm. In astronomical terms, it’s a universe where normal laws of physics cease to exist. As a consultant, I have recorded many billable hours simply listening to key decision makers resist. I no longer take clients like that. I’ve reached the conclusion that people that don’t get it are never going to get it. Amazon is not a wolf in sheep’s clothing, they are a wolf in wolf’s clothing. What Amazon does is arbitrary, unilateral, unwarranted and unjustified and never explained. They compete savagely and enforce brutally. If you understand that while the above is true, you have to collaborate and navigate into that, and if you do, you can sell… Read more »
Lyle Bunn (Ph.D. Hon)
Guest

The final step of getting goods in hand comes with the advantage of generating more traffic depending on where the lock box is located. So that pickup service can be a profit center both directly and indirectly. Nobody wants to have to undertake effort to receive a package not first delivered. Travel and a line-up for that signature-required item can be alleviated and many more organizations that have locations to offer and staffing can be part of this delivery process.

Ken Lonyai
BrainTrust

I don’t see this concept benefiting Amazon or anyone very much.

Except in urban areas or places with high front porch package theft, the logistics of moving third-party packages to Amazon Lockers is probably almost as effort intensive as delivering them to homes. Eventually, consumers that not only have to lug groceries home but boxes too will see the shine wear off of this idea.

Bottom line: this mostly sounds like another “let’s see what sticks” experiment that is far from the company’s core strategy.

Ryan Mathews
BrainTrust

My fellow commentators all make good points so rather than gilding the lilly I’ll just return to my standard mantra. The advantage to Amazon is that, if this works, fewer and fewer consumers will have reason to deal with anyone else. They are surrounding the customer, folks. That’s the real play here.

Gene Detroyer
BrainTrust

I gave Mohamed kudos for his excellent comment. I must do the same here. Ryan nails the entire Amazon strategy.

Is this what Bezos was thinking on Day One!?

Ryan Mathews
BrainTrust

Thanks Gene and, my guess is the answer to your question is, “Yes, that is exactly what he was thinking.”

Steve Montgomery
BrainTrust

The number of advantages for Amazon/Whole Foods has been discussed, but what’s in it for the other retailers? I cannot imagine any retailer who offers a pickup service being willing to give up their service to participate in Amazon’s for all the reason outlined regarding pickup.

What’s in it for the consumer? That would appear to depend on which retailers are part of the service. If Amazon fails to attract a sufficient number of retailers, then the concept offers little incentive to the consumer to use. I can see this potentially being attractive to existing Whole Foods customers but far less so for the rest of population.

Doug Garnett
BrainTrust

The worm has turned. After 20 years of Amazon driving the rest of the retail industry, they just announced a service that follows others rather than leading.

Perhaps now retailers can begin to settle back into business and quit obsessing about every time Amazon hiccups.

Is this a good move? It sounds very confused to me — and not at all Amazon-like … Unless the real truth of the job posting is “we need to hire someone to figure something out — just ignore the specifics here.”

Ken Cassar
BrainTrust
Ken Cassar
Vice President, Research, Shoptalk
1 year 7 months ago

Amazon has clearly recognized that its biggest (only?) competitive disadvantage is a lack of stores. Allowing in-store pickup of online Whole Foods orders is a no-brainer. Using these pickup spots as locations at which shoppers can get orders from other retailers is classic Amazon (see Keith Anderson’s comments). Layer onto that the likelihood that Amazon will strike deals with other brick-and-mortar retailers, like Kohl’s, to turn their stores into pickup locations for Amazon or retailers that Amazon is partnered with and you’ve got an Amazonian trifecta.

Camille P. Schuster, PhD.
BrainTrust

Not everyone wants to see the service that allows delivery people to drop off packages inside their house. Not everyone wants their packages left outside (even if they can see when, where and who delivers the package). These people might well like to have their packages delivered to a locker at a retail location. The popularity of this option may well depend upon how close they live to the store or how convenient it is to get to Whole Foods near them. Having consumers pick things up at lockers in Whole Foods solves some problems but not all of them. It is definitely another option to consider. Other third-party retailers may have the same convenience issues as well the issue of sending consumers to a specific retailer.

Bob Nosher
Guest
1 year 7 months ago

Hmmmmm … Lets see. I’m a big box retailer and I want more traffic in my store. Call me crazy, but how does letting the fox into the henhouse benefit me? It doesn’t. Amazon has a problem. Delivery is expensive. Fulfillment costs are growing faster than revenues, and that’s after adding in Whole Foods revenue. The fact that Amazon is suddenly interested in physical locations, whether it be grocery stores or book stores, should make everyone here raise an eyebrow. Retailers are learning how to combat “showrooming,” the very concept that put Jeff on the map in the first place when he sold books out of his garage.

Matt Sebek
BrainTrust

The intuitive advantages to Whole Foods (and Amazon) are apparent, but relatively soft. Sure, there will be an increase in foot traffic and basket size at Whole Foods; for instance, a customer picking up a power drill also needs a bunch of bananas.

However, as is the case with Amazon, this is all about the long play. They’re surrounding the customer outside the four walls of retail by creating a one-stop digital and physical shop for their products as well as other brands. In doing so, they continue to commoditize other brick-and-mortar businesses and gain leverage over brands whom customers are already demanding same day delivery and/or pickup options. There are major brands that will have no option, but to participate in this partner program.

Bob Nosher
Guest
1 year 7 months ago

Again, I feel like the attitude toward Amazon harkens back to the Pharaohs of Egypt who said “so let it be written, so let it be done.” If Jeff says it, it must be so. Why would I let Amazon use my establishment as a pickup point for goods bought elsewhere? It makes no sense. When Amazon completed its acquisition of Whole Foods in August, Jeff and his band of merry salesmen thought it would be cool to put Amazon lockers at every Whole Foods location. Lo and behold, they learned that the oft portrayed “clueless and bungling” brick and mortar guys had clauses in their leases that prevented them from doing that. Look, the more fronts that Amazon chooses to wage war on, the thinner its defenses are going to get.

William Hogben
BrainTrust

Broadly speaking, Amazon’s experience with their online grocery business convinced them that many shoppers will be going to physical grocery stores for a long time to come. Since they can’t bring grocery shoppers to online ordering, they’re going to bring online ordering to grocery shopped. The stores will be distribution hubs and cut down on shipping costs, as people pick up their non-grocery purchases in the same trip they pick out their lettuce.

Cate Trotter
BrainTrust

This is what I always expected from Amazon since hearing they’d bought Whole Foods. It’s not just about that business, it’s about gaining a network of physical stores quickly. Putting pick-up points for Amazon/Whole Foods orders in those stores seems like an obvious move. The idea of extending it to third-party retailers is an interesting one, and I assume will be targeted at those Amazon already has a relationship with. I think impact may also depend on the specific store and demographic. If customers are driving to the store, then they may find it convenient to pick-up bulky items (that they find it hard to have delivered during the day when not at home) at the same time, but those using public transport will be focused on portability.

wpDiscuz
Braintrust
"The more successful an initiative like this becomes, the more disruptive it can be."
"...this next step in the evolving Amazon-Whole Foods pickup strategy can further deepen and widen the company’s strategic moat."
"They are surrounding the customer, folks. That’s the real play here."