Published on: March 6, 2019
Content Guy's Note: The goal of "The Innovation Conversation" is to explore some facet of the fast-changing, technology-driven retail landscape and how it affects businesses and consumers.
This week’s Innovation Conversation is a little different. Last week, Tom and I found ourselves in the same place at the same time - the National Grocers Association (NGA) Show in San Diego - which doesn’t happen all that often. So, we decided to have a “real” conversation, on camera, instead of the email conversations that we we usually have for this column.
The subject: Are reports of Amazon’s decline, especially as competitors make strides with their e-commerce offerings, exaggerated? Do they need to be put in context?
You can see that video at left.
But after we recorded it, something happened. The Wall Street Journal broke the story that Amazon “is planning to open dozens of grocery stores in several major U.S. cities … as the retail giant looks to broaden its reach in the food business and touch more aspects of consumers’ lives.” These stores could be ground-up, could be stores closed by traditional bricks-and-mortar chains, or could be acquisitions. We don’t really know … and Amazon, at least to this point, isn’t talking.
So, Tom and I engaged in a brief email conversation to follow up on this development…
KC: So, what do you make of these reports? Do they seem accurate to you, or like some analyst is making things up to get column inches in the Journal?
Tom Furphy: I don't think anyone should be surprised to hear that Amazon is opening new store formats. We have always said that Amazon will experiment with a variety of formats as they work to solve the totality of their customer's needs. This likely means developing physical experiences that don't conform to traditional paradigms. Formats evolve. They have forever and the will continue to do so forever.
We say that Amazon is setting the innovation agenda for the industry in five key areas: Shopping as a Utility (replenishment), Routes to Market (delivery), New Formats (Go and others), Health Care (on the platform and their alliance with Berkshire Hathaway and Chase) and Advertising (now number three digital platform after Google and Facebook). We should expect continual innovation along these themes for years to come.
KC: The way that the news stories characterized this new Amazon “chain” made it sound like it would be opening stores (or buying stores) that are fairly traditional - like Whole Foods, but more mainstream, with lower prices.
But I tend to think that the only way this makes a ton of sense is if Amazon uses these stores to offer some sort of game changing insight, whether it be about data (with selection highly targeted based on local shopper online activity?), loyalty (maybe the stores only are open to Prime members?), checkout-free technology, manufacturer needs (maybe holding product on consignment and not actually buying anything, which sharpens the economics), or some sort of play based on its growing proprietary delivery systems.
Would you agree?
TF: I can't imagine that Amazon would open plain vanilla grocery stores just for the sake of being in the business. They are all about innovating and redefining shopping experiences. I would think the any new format would be designed to provide what Amazon feels is a unique and important value to the shopper. It wouldn't surprise me if that included a combination of any or all of the elements you outline.
The Conversation will continue…
Tom Furphy is a former Amazon executive, the originator of Amazon Fresh, and currently the CEO and Managing Director of Consumer Equity Partners (CEP), a venture capital and venture development firm in Seattle, WA, that works with many top retailers and manufacturers to develop a range of initiatives and businesses that can compete in 2019 and beyond.
- KC's View: