NEW YORK — Recent reports indicate that “The Amazonization of Retailing” that I wrote about in CSP Daily News back in July 2017 is happening before our eyes. In my column, I postulated that Amazon’s goal in the retail space was not just to dominate online retailing but also to be the most convenient and economical way to get retail merchandise into the hands of consumers regardless of channel.
I now realize that I completely failed to consider one of the most important aspects of how Amazon plans to achieve its goal.
More about that in a minute. First, let’s look at some of the ways the Amazonization of retail is happening …
Expanding on ‘Go’
Amazon is planning a new chain of supermarkets, under a new banner, that will use the just-walk-out technology employed in Amazon Go stores for a similar frictionless experience. The retailer is developing technology that will read the palms of people’s hands, enabling customers to enter the stores without the need for a smartphone. It also is developing “Go” technology for use in other retail formats, including large stores and sports stadiums.
As anticipated, major brick-and-mortar chains are looking at taking the same “all channel” approach as Amazon, trying to develop strong online sales as well as maintaining competing brick-and-mortar sites that incorporate technology. Primary examples include Ahold Delhaize’s piloting of a small store using Lunchbox, its own just-walk-out system that allows customers to scan into the store, shop the store and walk out without visiting a checkout counter. To enable smaller retailers to compete, Amazon is reportedly planning to license its Go technology to other retailers.
It also appears as though Amazon’s Whole Foods acquisition was, indeed, more of a laboratory for developing and testing new approaches—and to provide more buying clout in the food merchandise category—than as the platform for the company’s brick-and-mortar growth.
The missing piece
Because my article was written well before the first Amazon Go opened to the public in January 2018, here is what I missed: The main thing that struck me, when shopping Amazon Go, was not the amazing technology, which is hidden in the background, but the terrific retail offer:
- Great quality
- Attractively packaged and presented
- Tailored to the local market
- Fully stocked
The offer, not the technology, is the key to the future success of these stores, and that is the real lesson to learn.
Whether you shop at a store where you check in or one where you check out, retailing success still comes down to the offer. Technology enhances it and sometimes enables it, but the best technology, without a strong offer, is bound to fail.
In fact, Amazon’s current domination of online retailing emanates from the way CEO Jeff Bezos figured out how to get a great book offer to masses of people using the then-emerging online technology. The company’s current dominance of online retailing is because it has figured out how to apply that same thinking to everything Amazon sells, creating offers based on quality, price, breadth, simplicity and speed of service. Thus, it should not be a surprise that Amazon is demonstrating that it knows how to make a compelling offer with brick-and-mortar retailing, too.
Same as it ever was
Amazon was by no means the first to figure out how to use technology to create a unique offer. Marks and Spencer did it 60 years ago in England with a “cold-chain” distribution process, enabling fresh prepared foods to be sold in all its stores. Walmart achieved dominance by using logistical technology to get merchandise into its stores at 2% lower cost than its competitors, giving the chain a huge price advantage.
The march of technology has led to enhancement of the c-store offer too. Pay-at-the-pump required stores to develop more compelling reasons to come inside the store. Touchscreen ordering made prepared-to-order food more accessible. Scanning and self-checkout make convenience stores more convenient.
So let me leave you with a final thought: The most read piece I ever wrote was based on a speech I gave in London 24 years ago. It was titled, “It’s the offer, stupid!” Some things never change.
Gerald Lewis is a semiretired consultant who has served more than 300 convenience-store and oil companies at board level on five continents for more than 40 years. He can be reached at firstname.lastname@example.org