Is Amazon going to open a grocery drive-thru?
Amazon may be getting ready to get into the click and collect business. According to a report by the Silicon Valley Business Journal, the giant e-tailer is planning to open a drive-up grocery concept in Sunnyvale, CA that will give locals the option of picking up their online orders a short while later at the facility.
In recent years, Amazon has tinkered with various forms of delivery including the use of order collection and return sites in New York City and elsewhere.
"Amazon’s entire value proposition is based on this idea of immediacy, and getting items to the shopper as quickly as possible," Nicole Santosuosso, an analyst at Kantar Retail, told the Silicon Valley Business Journal. "I could see something like this being tied into that overall value proposition."
If the rumored Amazon drive-up grocery concept comes into being, it won’t be the first of its kind. Walmart began testing its Walmart Pickup – Grocery service last year in Bentonville, AR.
Walmart gives its customers about 10,000 grocery items — including dairy, meat and produce as well as HBC and household items — to choose from online. Customers can drive to the grocery warehouse to collect their purchases without having to get out of their vehicles.
Zoomin Market is another online order and drive-through service that began operating in Olathe, KS in April 2014.
Amazon Locker, NYC – Photo: RetailWire
Discussion Questions
How consequential would an Amazon drive-up service be for the company and its competitors in the grocery category? Is drive-up grocery a concept that you expect many others to pursue in the years ahead?
Poll
BrainTrust
Kelly Tackett
Principal, 3E Insights
Keith Anderson
Founder, Decarbonizing Commerce
Time and again, Amazon shows the ability to innovate and change the playing field. Grocery drive-up pick up is primed for growth, and it is interesting to see how Amazon sees this as a seamless customer-centric service.
However, Walmart is also in the game with early tests. Given the thousands of store locations, one would have to think that Walmart has the competitive advantage. The two keys are speed and quality of service. The big IF for Walmart is consistent execution.
The retailers that will be most impacted will be the traditional grocery store chains. Drive-up pick up for groceries will be a strategic differentiator in the near future and the two “Whales of Retail” are already out front.
This would be huge for Amazon. So much of the cost in online grocery is tied up in home delivery. It’s why you are seeing retailers in the U.K. trying to incentivize click-and-collect. Amazon already has an advantage in terms of the sophisticated picking facilities. A collection point alleviates the last mile pain points. I hope it pans out.
Tesco started this quite a while back and it’s been wildly successful. With Instacart and others now gaining traction, the competition for convenience is ramping up.
The question is why aren’t any grocery retailers testing this? It’s great to see Walmart try it, that sure checks a huge box. But Tesco has proven the model and I’ve seen little to no state-side brands give it a try. Hopefully Amazon “going here” will do what it usually does to the more conventional brands: light a fire!
If it’s true, this will actually be the second pick-up point Amazon Fresh has experimented with. (The first was in Seattle years ago and was highly under-publicized.)
As with Amazon’s many other experiments, this one is unlikely to scale overnight. But it does reinforce Amazon’s commitment to groceries and eagerness to offer shoppers a variety of options.
The key implication is that Amazon Fresh could have viability on the periphery of major urban centers.
If Amazon used the drive-up grocery concept as the delivery agent and a local grocery chain as the provider of services (much as they do with other products), they could effectively make this work on a larger scale around the country.
The Walmart pick-up station in Bentonville has at least five Walmart stores, not to mention warehouses, within five miles of this location on Sam Walton Drive.
Grocery is a low-margin business which takes some of the best professional retailers in the country to run. Amazon will have to address themselves (not certain that Bezos is ready to address to his shareholders) about what they hope to capture out of this space. Is it tied into an “overall value proposition?” Or is there an added strategy, such as making a profit, or placing other items such as HBA, books, or electronics in the cart, in the equation?
Based on the July, 2015 Prosper Monthly Consumer Survey, only 6.4 percent of adults, 18 and older indicate that they have looked for groceries via a computer or digital device in the last 30 days. The insights point to a higher figure for Millennials: 10.2 percent. This is a category in which consumers continue to and are willing to go to the marketplace.
I hope they go for it. Nice to see them run over in their own drive-thru. Food drive-thrus are great for basics — milk, eggs, bread, etc. But it makes no sense for many of the items people need to shop for based on their lifestyles. Also, with the obesity issue our country has, the walk in the store is probably a good idea for many people. OK, rude but true — see Sunday’s New York Times for proof.
Amazon is in everything due to the fact that they are lead by their PR department. So if it looks good as PR positioning then Amazon can do it. PR at Amazon also does not allow their CFO to talk, so they make no profit — market cap is up but value to Wall Street is in the crapper.
Somebody is going to get this right — soon.
To be clear, I have been a proponent of drive-thru grocery for years. The two biggest obstacles have always been the wait time and the margins. Click-and-collect substantially reduces the wait time by getting all of the order selection and picking (and now potentially payment) chores out of the way in advance. Now it is essentially drive-thru pickup. The key to success will be location. The “stores” have to be on regular travel routes, just like gas stations, c-stores, QSR and Walgreens.
Margin is the other sticky wicket. Drive-thru concepts that have made it have featured a limited selection of high-demand, high-margin items like booze and tobacco. (I still miss the drive-thru margaritas from the early ’80s in Texas.) But how to make this work with grocery at reasonable prices? Amazon’s buying clout, automated picking (robotics) and the smoothing of the order preparation cycle that will come with pre-order will do much to handle this problem. Online payment will help even more, reducing the need to handle and secure cash.
Somebody is going to get this right — soon.
Amazon continues to experiment with every form of delivery that will enhance its position as convenient, fast and customer-centric. I don’t believe Amazon will get into brick-and-mortar stores any more than as pickup points for customers who want products now and find this method more convenient than delivery to their door. This is not an area of competence for them. However, for the traditional retailers this is another incursion into their markets. With this effort, Walmart’s plans and Jet.com’s entry into the marketplace, I believe there are real and potentially negative impacts on players that fail to seriously consider and defend against these technology-focused competitors.
I have been a firm supporter of click-and-collect. If traditional supermarkets executed it properly it would begin to lead them into an omnichannel approach to their customers. Plus, research has shown that retailers offering click-and-collect, combined with an exciting retail environment (probably something that Amazon can’t and won’t do), generate more sales/shopper than either online or in-store shopping only.
Everything that Amazon does has consequences for competitors. Let’s keep in mind, however, that this is just a test and the concept has been tried more times than I care to remember. Amazon’s cash flow and growth are healthier than others who have faded away. Bottom line, this is a tough service to figure out. Maybe it will appeal to enough Millennials to fuel it this time around.
I think the key point here is NOT the fact that Amazon is testing click-and-collect. Rather they are continuing testing and learning from a myriad of “last mile” solutions: two-day, same-day, two-hour, one-hour, lockers and now click-and-collect at an Amazon physical location.
The data (and analytics) from these various tests over time will keep Amazon in the leadership position of solving what would inevitably be an “optimized” delivery model that varies by geo-location, with the consumer ultimately deciding which option makes more sense for them at any given point in time. And unlike the crowd/outsourcing providers (Instacart, Uber), Amazon maintains 100 percent control of the customer experience.
Key lesson — if you are not testing new concepts, you’re not learning. If you’re not learning, you WILL be disrupted.
This may work for people who heat things up — the Stouffer’s crowd — but for real home cooks who draw inspiration from seeing fresh ingredients, this will be completely unappealing. It might be a hit with Millennial men.
The one downside to online shopping is the receipt of delivery if no one is home. It is not a problem for me, I have a doorman. But without that it is a challenge. To offer an alternative where customers can pick up their online purchases at their convenience as they go to/return from work, or stop by during errands or taking children from one place to another, offers the convenience and time savings all are looking for.
The problem is that the traditional retailers do not want to offer a service that does not FORCE the shopper into the store, even if the shopper does not want to go there.
Very consequential and would likely spur quicker development and roll out by Walmart as well as others. This service is coming—now simply more of when and in what form rather than if.
Hmmm…Sears tried this with Kmart and MyGofer and the experiment failed miserably. Millions in capex dumped into a strategy designed to leverage existing assets. Much of that could be driven by poor real estate, so perhaps Amazon’s strategy is as much about location/location/location as it is about convenience. It’s a marathon, not a sprint, and time is certainly on Bezos’ side in this regard—not Eddie Lampert’s.
Sounds like deja vu all over again! Been there, done that. It will work in some densely populated cities, but it will not have significant impact in the long run.
Amazon has little choice but to pursue this brick and mortar option as a countermeasure versus Walmart’s experimentation with pick-up stations. While both concepts lead with grocery, they also have the potential to co-mingle other products from their long-tail assortments.
I believe Amazon is playing catch-up in this instance. Then again, so are many supermarket operators. Believe me, this click-and-collect drama will watched closely by counterparts across the Atlantic. Take Ocado, for example, the U.K.’s strongest online grocery operator, which is now marketing its commerce platform as a turnkey solution to U.S. grocers. France’s Carrefour or Casino could do the same, if either has the will.
Let’s once and for all let go of the nonsense of using online ordering to drive shoppers into the stores. That always was a slim premise. Shoppers will still visit stores on the occasions when it suits them, but blending the two is rare. Half-shopping is no more convenient than whole shopping.
Let’s repeat the mantra again: Sell them groceries any and every way they want to buy them. Managing the complexity of that is a burden we must accept.
This is something Amazon absolutely must do as Walmart is already way ahead of them at the grocery BOPIS game. Walmart has the ability to open thousands of grocery pickup units within a year and most likely will, which Amazon cannot match. So the very least they can do is test them to see what the issues are and use that data against Walmart when the onslaught comes.
Aside from that, this could also just be another Amazon PR effort. Which, if you noticed, come out about every other week or so: drones, dash, trucks, stores…on and on. It’s hard to tell, other than their core business, what they’re serious about.
I think it’s worth a try for Amazon. I was just reading another article on this topic and the author brought up a good point that grocery delivery might be difficult logistically in the suburbs, but a drive-up service just might work. Amazon always has something up its sleeve to make purchasing easier than ever. This is just the latest example and I think it’s an interesting way to disrupt the status quo of the grocery industry. If Amazon is successful with this, I’m sure that popular grocers will give it a try as well.
The important thing here is that Amazon is moving into bricks retail, even if it is requiring a click to get there. But Amazon ultimately needs to move into bricks retailing with small stores. There is really no reason to not expand on sales at the point of pickup. No salesman in their right mind is going to let a customer physical contact to pass with just a delivery function, and Jeff Bezos is clearly both a salesman, and in his right mind.
But do note that Amazon can plug along experimenting with this, and experimenting with that, while the mice crouch in their corners, wondering what the cat will do. The key to the answer is, what would a REAL salesman do in this situation? But SELF-service retailing for 100+ years has not spawned retailers with ANY natural salesman abilities.
So now Walmart is only 5X the sales of Amazon, however Amazon has PASSED Walmart in capital value. And those who do not understand that personal selling skills lie at the heart of the winning bricks retail today can continue to doubt and criticize Amazon while bricks retailer after bricks retailer bites the dust, or sells untold share of their stores. It’s only a disaster to most traditional bricks retailers, and there is an incredible amount of whistling in the dark going on. Including the idea that smart phone apps are some kind of real world panacea—NOT. Check the whistling in the dark from Walmart!