SEATTLE -- Ubiquitous electronic-commerce juggernaut Amazon.com Inc., not content to remain a mere online service, is increasingly find ways to extend its dominance into the brick-and-mortar retail world, throwing down the gauntlet to challenge traditional channels, including convenience stores.
The Seattle-based company has already begun rolling out physical bookstores. Now it has announced that it will open brick-and-mortar grocery stores and convenience stores.
Click through the slideshow for details on the threat Amazon poses to the convenience-store channel …
1. C-stores and grocery stores
In July 2015, reports surfaced that Amazon was developing a new distribution strategy, a drive-up grocery store “click and collect” concept that would allow consumers to order groceries and others items online and then schedule a pickup at a dedicated facility.
Earlier this month, new reports indicated that Amazon is planning to introduce brick-and-mortar convenience stores, as well as grocery pickup stores. These Amazon c-stores will sell produce, milk, meats and other perishable items in-store that customers can take home. Using their mobile phones or touchscreens around the store, customers could also order other goods with longer shelf lives for same-day delivery.
The drive-in grocery concept, known internally as Project Como, is intended exclusively for customers of Amazon's Fresh subscription service, which promises same-day food delivery at set times, the sources said. Amazon has dropped its $299 annual price for Fresh and instituted a $15 monthly fee, available to members of its $99 Prime delivery service.
The company designed the new convenience stores and grocery stores to capture the share of people who prefer to pick out their produce themselves or bring home their own groceries on the way home from work.
2. Online grocery delivery
Amazon has offered online grocery ordering since 2006, providing customers with a selection of more than 14,000 products, with free shipping. Categories, many of which tread on the convenience-store channel's territory, include baking supplies; beverages (sports and energy drinks); breakfast foods; boxed meals and side dishes; coffee and tea; condiments; other grocery items; household supplies; and snacks, cookies and candy, featuring many name brands.
Upping the ante on convenience, Amazon announced in May 2015 that its Prime Now service would offer one-hour delivery from local stores in addition to the tens of thousands of items offered by the online marketplace. In Manhattan, customers could purchase groceries, prepared meals and baked goods from D’Agostino, Gourmet Garage and Billy’s Bakery through the Prime Now app.
In 2013, Amazon announced that it would begin testing drone delivery of consumer products. Although 7-Eleven has taken the lead on drone delivery with the first fully autonomous drone delivery to a customer’s residence, Amazon is not far behind. In 2016, it forged a partnership with the U.K. government to explore the steps needed to make the delivery of parcels by small drones a reality.
Irving, Texas-based 7-Eleven Inc. is working with Flirtey, an independent drone delivery service, and plans to expand drone tests. But watch for Amazon to go higher profile on drone delivery.
4. Dash button
In early 2016, Amazon began rolling out Dash Buttons, small Wi-Fi-connected devices that allow Amazon Prime members to reorder products via a physical button. The devices make reordering more convenient, and they are now available for hundreds of candy, snack, beverage, grocery and household items regularly found in convenience stores.
5. Private label
In May, Amazon announced plans to roll out its own line of food under its existing Elements private label. Amazon said it would expand its lineup of proprietary brands to include grocery items such as milk, cereal and baby food, as well as household cleaners. It sought trademark protection for more than two-dozen categories under its Elements brand, including coffee, soup, pasta, water, vitamins, dog food and household items such as razors and cleaning products, many common staples in convenience stores.
Amazon began its first push into perishable private-label foods in June, rolling out whole-bean, ground coffee and snack nuts under its new Happy Belly label and baby food under the Mama Bear name.
6. Product exclusives
Amazon’s exclusive deals create a demand for products that convenience stores don’t carry or are not the first to carry.
After a 12-year hiatus, The Coca-Cola Co. brought back Surge, a citrus-flavored sparkling beverage, in September 2014. Surge was available first through Amazon.com in 12-packs of 16-ounce cans featuring the brand's original retro design.
In October 2014, PepsiCo Inc. launched Pepsi True, a carbonated soft drink sweetened with real sugar and stevia, exclusively on Amazon.com. The e-commerce site sold the new beverage, which contains 30% less sugar than regular Pepsi, in a 24-count case of 7.5-ounce mini cans.
Distributing Surge and Pepsi True through Amazon gave the beverage companies a chance to raise consumer awareness for the product and gauge consumer response before putting the soda on shelves at convenience stores, supermarkets and other retail outlets.
6 1/2. Lockers
One area where Amazon has been working with c-stores rather than against them is in-store lockers. Retailers including 7-Eleven and Beaverton, Ore.-based Plaid Pantries have added lockers where customers can pick up products that they ordered online. But Amazon could limit or curtail that initiative if it continues to shift its strategy toward directly embracing the convenience channel with its own stores and services.