business news in context, analysis with attitude

by Kevin Coupe

The Wall Street Journal is reporting that Amazon plans to push "deeper into the grocery business" with a chain of convenience-style stores and pickup depots that would allow it to more effectively occupy the so-called last mile between retailer and consumer.

The initiative reportedly is known internally as Project Como. Amazon is not commenting on the report for the record.

According to the story, sources tell the Journal that Amazon "aims to build small brick-and-mortar stores that would sell produce, milk, meats and other perishable items that customers can take home, these people say. Primarily using their mobile phones or, possibly, touch screens around the store, customers could also order peanut butter, cereal and other goods with longer shelf lives for same-day delivery. For customers seeking a quicker checkout, Amazon will soon begin rolling out designated drive-in locations where online grocery orders will be brought to the car, the people said. The company is developing license-plate reading technology to speed wait times."

At least in the short term, the stores would be exclusively for Amazon Prime Fresh subscribers.

The Journal writes that the bricks-and-mortar effort is designed to allow Amazon to capture the business of food shoppers who are not necessarily ready - yet - to order food, especially fresh food, online. Plus, there is a clear economic incentive...

The average supermarket shopper spends $5500 a year in the store, while average Amazon Prime shoppers - by definition, the retailer's best and most loyal customers - spend roughly half that. Amazon, to put it simply, wants a bigger piece of the action.
KC's View:
It does not sound like hundreds of these will suddenly populate the landscape virtually overnight. It actually sounds more like Amazon will begin testing the format in select markets sometime next year, and that a national rollout will depend on the degree to which it works.

There have been reports that Amazon plans to open a test grocery store in Seattle as soon as the end of the year, which may provide some hint of where it is headed. And Tom Furphy and I will do a deep dive on this in our next "Innovation Conversation."

I've long been ambivalent about the idea of Amazon opening so many bricks-and-mortar stores, simply because it could mean that it has decided to play the same game as so many traditional retailers, which I'm not sure is the smartest way to go. But a couple of things seem to have changed.

First of all, you've got Walmart making a major investment in e-commerce, and Amazon may feel that it cannot allow the Bentonville Behemoth to have so much of the so-called "last mile" to itself.

And, it may be that Amazon has looked at the success of its Amazon Books store in Seattle and come to the conclusion that the template can be adapted to other categories, and that is what is driving this decision. I know that one of the smartest retailers I know looked at Amazon Books and said it was the most impressive and potentially threatening formats he'd ever seen, mostly because it was so adaptable. (I came to much the same conclusion here.)

I'm not sure that competing retailers need to be afraid, but they certainly need to be aware. Very aware. Because the competitive wars are likely to become even more intense, and retailers have to be totally engaged.

Compete is a verb. You have to get busy. Now.