In the competition known as immediate-consumption fulfillment, c-stores have a new, game-changing opponent. It comes in the form of a seemingly innocuous plastic button found in the kitchens and laundry rooms of your customers.
It’s the Amazon Dash Button, and it has the potential to redefine impulse shopping.
Launched in March 2015, Dash Buttons are small, Wi-Fi-enabled tags emblazoned with brand logos that complete reorder fulfillment of a single SKU with the push of a button. A green indicator light lets consumers know an order has been completed.
As people increasingly adopt e-commerce shopping, dynamic technology such as the Dash Button is meeting them at the path to purchase. And in doing so, it’s challenging brick-and-mortar retailers for share of wallet.
“While traditional retailers are proficient at what they do, there are segments of consumers, starting with millennials, that need to transact differently,” says Bill Bishop, chief architect for Brick Meets Click, a Barrington, Ill.-based e-commerce consulting firm.
And it’s not just Amazon Dash Buttons: Disruptors are firing shots in all sectors.
In the restaurant world, third-party players are offering a middleman solution for delivery, while local supermarkets are upping their stake in online ordering. Touting itself as “convenience on wheels,” Philadelphia-based startup GoBrands Inc. delivers beer, wine, energy drinks, e-cigarettes and more through its goPuff 24-hour on-demand delivery service. With a recent venture capital infusion of $8.25 million, goPuff is only becoming more of a viable threat to c-stores. The service is available in Boston, Philadelphia, Washington, D.C., New York, Denver, Phoenix, Seattle, Chicago and Austin, Texas.
Bishop believes consumers will continue to migrate to product fulfillment models such as Amazon Dash Buttons that put goods and services into their hands swiftly and—increasingly—automatically.
How much of an effect, though, does the Dash Button have on traditional retail businesses? While pushing a button executes a purchase, delivery could take a day or two, whereas folks can run to their local c-store to pick up a snack in minutes.
“The headline is that there’s a proliferation of sites knocking you off,” says Bishop, “and Amazon Dash Button is just one of them.”
At Their Fingertips
Available to Amazon Prime members, the Dash Button can be habit-forming: With each Dash Button costing $4.99, all folks need to do is push and an order is processed. The upfront fee that members incur is refunded after the first order, essentially making it free.
And Amazon is not stopping with the simple plastic tag. The next generation of the basic Dash Button service, Dash Replenishment Service (DRS) directly gauges use of an item. A homeowner need not push a button to reorder; instead, the dash replenishment technology identifies the “low stock” of a particular item and automatically processes the reorder.
“The fulfillment cycle is permanently programmed, and that’s a compelling advantage,” Bishop says.
CPG companies see the upside of e-commerce in general, with Dash the latest investment opportunity. With snacks, candy and packaged beverages aligning well with e-commerce, it’s not surprising that of the more than 150 Amazon Dash Buttons now available, participating brands include Hershey’s, Mondelez, Wrigley (Orbit gum), Clif Bar, Frito-Lay (Doritos) and Perfetti Van Melle, which sells Mentos.
“Today more than ever before, consumers are shifting their media consumption and purchasing to the digital space, and Mentos wants to be at the forefront of this movement,” said Sylvia Buxton, vice president of marketing for Erlanger, Ky.-based Perfetti, in a recent statement about the brand’s participation in Amazon Dash.
Hershey’s e-commerce team worked with Amazon in 2015 to launch an Ice Breakers Dash Button. The concept was so new that “no one could predict how it was going to perform, but we wanted to be at the ground fl oor of a potentially groundbreaking technology,” says Bridget Binning, senior manager of insights driven performance for Hershey, Pa.- based Hershey’s.
Sales of Ice Breakers on Amazon (all niche portals included) are up 70% year over year—twice as fast as the U.S. candy, mint and gum category, says Binning. Since 2015, Hershey has rolled out two more Dash Buttons for Hershey’s Variety Pack and Brookside bars.
“The technology in the Amazon Dash Button provides an exciting runway for in-home goods replenishment,” Binning says.
As the company’s largest gum brand, Orbit is the only Wrigley brand participating in the pilot. “By getting involved early on, we’ve been able to gather initial learnings for how consumers engage with our products in this space,” says Chuck Van Hyning, e-commerce director for Wm. Wrigley Jr. Co., Chicago.
“A change we’re witnessing in the e-commerce space with this program is accelerated growth in retail stores with ‘click-and-collect,’ where shoppers ordering products online—mainly from websites of corporate supermarkets—then pick them up in the physical retail store,” says Van Hyning.
Gum “is typically considered an unplanned incremental purchase, and we know that half of gum chewers are out of stock on a daily basis,” he says; thus, the Dash Button is a solution to that issue.
The Amazon Dash Button, including Dash Replenishment, is seen as a threat to retailers if for no other reason than it targets some of its core c-store product categories, such as gum and mints. In fact, Bishop has a moniker for it: “basket bandits.” In a recent Brick Meets Click survey, basket bandits captured a whopping 84% of all online grocery trips. (See p. 97 for a closer look at basket bandits.)
“Since 2013, the percentage of shoppers that have bought groceries from Amazon in the past 30 days has gone up 25%; it now captures nearly half of all trips,” he says.
Other basket bandits include Blue Apron, ThriveMarket.com, Drugstore.com, Chewy.com and online “stores” of mass and club retailers, says Bishop. Based on Brick Meets Click surveys with 12,000 “digitally connected” grocery shoppers in three U.S. metropolitan areas, basket bandits “siphoned off sales (from traditional retailers), generating a steady stream of sales leakage,” Bishop says.
But traditional retailers do have a chance for a counterstrike, according to the surveys: In markets where supermarkets have established well-developed online grocery initiatives, those players won a significant share of online business, says Bishop.
“Supermarket delivery is the one model c-stores should be watching and imitating because [supermarkets] already have a far greater number of items to select from and carry sizes and order quantities similar to that of c-stores,” says Steve Montgomery, president of retail consulting firm b2b Solutions, Lake Forest, Ill.
Montgomery isn’t too worried about Amazon Dash Button for one reason: pack size. The package sizes received using Dash Button are typically larger than the single-serving impulse purchase at a c-store.
“I think that Dash Button will have little impact on c-store sales, because beverage items like Red Bull are being sold in cases of 12 or 24 units, and the same is true for confections—where M&M’s come in a 60-pack of mini packets. That’s not your typical purchase quantity in a c-store,” he says.
The Gathering Storm
Taking the temperature of retailers on adoption of e-commerce, many are not yet biting. Even though it’s a larger chain with sizable scale, “the only thing we sell online today is gift cards,” says Paul Servais, retail foodservice director for La Crosse, Wis.-based Kwik Trip Inc. “We are not currently one step ahead of the game, but are discussing everything while no clear direction has emerged.”
There are a number of developments that might get retailers to mobilize. Within the Amazon DRS, the provider partnered with Brita on a Wi-Fi-enabled Brita Infinity pitcher with a built-in counter that keeps track of use.
When it senses the filter is at the end of its life, the pitcher orders a new one through DRS. If a growing number of CPG companies scale up with e-commerce, what might this spell for future brick-and-mortar-oriented relationships? Binning couldn’t shed light on how Hershey’s relationship with Amazon would affect relationships with other retailer partners down the road. It was also unclear whether sales of Hershey’s own Dash Button are considered incremental or ones that eat into c-store business.
Industry experts advise retailers to establish some type of e-commerce vision sooner than later. As a pre-emptive strike against the button and e-commerce in general, it’s not a bad idea to “look at the items [Amazon] is featuring and determine if they even fit your strategy,” says Montgomery. “If any items fit your positioning, make sure you don’t encourage people to look elsewhere by price gouging and/or being out of stock.”
In the meantime, e-commerce will have its own ebbs and flow, Bishop says.
“One thing about e-commerce and the historical narrative to date is that it resembles a bell curve,” he says. “With the exception of millennials, it’s a slow process to get people not inclined to be power shoppers online to become [so] inclined.”
Can C-Stores Get in on It?
Jeremy Neren smiles at the recollection of establishing an online hub that was about to become a game changer in robust college town Madison, Wis.
Neren understands the mindset behind building an online shopping platform on a shoestring—and with a c-store-centric focus. And he knows that c-store retailers can do it too as Amazon encroaches upon their existence.
Adding to the threat, Amazon appears poised to flip the script and become more of a brick-and-mortar presence. It has already opened three bookstores in the United States, with another due to open in Chicago. It has announced plans to get into c-stores. And according to curbed.com, Amazon in August filed a permit to build a 9,759-square-foot retail space in suburban Seattle where customers can pick up groceries ordered online. The permits refer to it as “a new model of grocery shopping,” per Curbed.
These threats were nonissues in 2006 when Neren created Madtown Munchies, a “basket bandit” in its own right that encroached upon the impulse fortunes of local Madison c-stores’ sweet spot: immediately consumable, impulse items such as ice cream, frozen pizza, chips, snacks and energy drinks.
“We had a warehouse that resembled a c-store, with orders driven by a grid system,” says Neren, who sold out of that venture to start up GrocerKey, a comprehensive full-service online hub that counts Woodman’s Markets as the centerpiece of its retailer clientele. “I think c-stores can flip the switch and have a 20-minute fulfillment in place.”
And they don’t have to mull large capital outlays to get into the game, he says. “If I’m a c-store within 2 miles of my consumer, I can think about partnering with a third-party logistics company, establish a solid pick-and-pack strategy and deliver products to customers in 20 minutes or less within 2 miles of a store,” says Neren.
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