NATIONAL REPORT — Debuting its cashierless store concept in December 2016, Amazon entered the convenience space with Amazon Go. Now, with 10 locations open in Seattle, Chicago and San Francisco, the e-commerce giant is looking to possibly open as many as 3,000 Amazon Go locations over the next few years, with as many as 50 locations in major metropolitan areas by the end of 2019, according to recent news reports.
What does this mean for convenience stores? Should c-store operators be concerned about this affecting their own stores and sales?
The short answer is “yes.”
“Right now, it’s not an immediate problem, but if they can accomplish opening 3,000 stores in the next couple of years, that is definitely something to worry about,” Kimberly Otocki, c-store content marketing specialist at Paytronix, a provider of loyalty and customer engagement solutions for restaurants, retail chains and convenience stores, based in Newton, Mass., told Convenience Store News.
Since the Amazon Go concept is going after foot traffic in urban areas, highway and local neighborhood stores won’t necessarily be in direct competition — but those with locations in urban, walk-up neighborhoods could find one opening in their area down the line.
“The stores are in densely populated, urban markets and the traffic drawn into the stores is foot traffic from pedestrians walking by or in close proximity on their way to work,” said David Bishop, partner at consultancy Brick Meets Click, based in Barrington, Ill. He believes the Amazon Go stores are “absolutely a threat” to the c-store industry.
“For c-stores, it targets the on-the-go shopper and if you look at most of the assortment they offer, it’s grab-and-go and prepackaged items,” he noted.
Even those not in direct competition with Amazon Go in terms of location should be paying attention to what the company is doing in the space and understand it will still have an effect on them and their stores. Amazon is already offering two-hour delivery in big cities for e-commerce orders and free delivery to customer vehicles in 37 cities.
“Change is coming, and it’s coming fast,” said Kevin Struthers, senior consultant at W. Capra Consulting Group, based in Chicago. “When you look at what Amazon is accomplishing, it doesn’t paint a pretty picture for the c-store industry. Don’t mock this. Study this and become a student of it. To defend yourself, you have to learn. You can’t defend yourself until you know what they are doing.”
HOW TO COMPETE
Despite its deep pockets and innovative technology, there are things Amazon and Amazon Go can’t offer that c-stores can — and these advantages should be highlighted and celebrated. They include community, unique loyalty and rewards programs, and the employee/customer connection.
“C-stores are part of the local community and connect more with the local customers than Amazon Go,” Otocki of Paytronix pointed out. “They can partner with local businesses to provide more offerings, which is a great way for them to remain a big part of their communities.”
Additionally, Amazon Go offers prepacked, commissary-delivered and pre-portioned food products, which is their way of delivering fresh food. Conversely, c-stores with robust foodservice programs can stand out by focusing on the quality and freshness of their made-to-order items and other unique foodservice offerings, said Bishop. This also includes hot and cold dispensed beverages, which Amazon Go stores don’t currently offer.
While c-stores should definitely find ways to differentiate themselves from Amazon Go, there are some aspects of both Amazon as a company and Amazon Go that should be studied and applied throughout the convenience channel.
One of these is Amazon’s use of data, which is an advantage it gained from starting online and growing its Amazon Prime loyalty program. The company knows who is buying what and where they are located, and can tailor assortments and testing of products accordingly.
“Loyalty programs are a great way to get customers identified, but this can also be done through mobile payment and tokenization of credit cards, as well as phone SMS and email programs,” Otocki said. “If you can get the data on your customers like Amazon does and then harness it through relevant offers and more, a c-store will be in a better place to compete.”
Technology is another area where Amazon and Amazon Go excels, using cameras and shelf sensors, along with an app, to offer a frictionless shopping experience with no need to checkout with a cashier. While some c-stores are offering self-checkout options, there are other ways they can utilize technology to create “an experience” in their stores.
“C-stores have to get their mind around digitally interacting with customers. Amazon is already there because they started off in e-commerce,” Struthers said. “Look at how to digitally engage because this is where the sticky relationship comes from — to draw them in and engage them to visit the store.”