Maintaining Perspective in the Age of Amazon
This past June, at the NACS Insight Convenience Summit in London, I gave a presentation about the reality of retail disruption. It included quite a bit of speculation about the growing impact of Amazon on brick-and-mortar retail, including convenience stores. A couple of days later, Amazon announced its blockbuster plans to buy Whole Foods Market for $13.7 billion.
For me, the announcement underscored a couple of things: No. 1, convenience retailers really do need to learn how to operate at an Amazon-like “fast clock speed,” as the Norwegian retailing expert Jacob Schram puts it in his new book “Business Essentials;” No. 2, it’s equally essential for convenience retailers to stay grounded in the face of all this disruption so that they don’t ever lose sight of their core business.
Let’s tackle the second point first. When it comes to “keeping it real” in the face of disruption, I like to meditate on what has not changed. The truth of the matter is that the fundamentals of retail have stayed consistent going all the way back to the Roman Forum of 800 B.C.E., if not earlier than that.
It’s easy to imagine a Roman shopper striding up to a row of stalls and seeking out the freshest wheat or highest-quality silks — all sold at the most competitive prices by merchants with the best reputational “brands.” Even 2,000 years ago, a clean and beautifully merchandised stall would have enjoyed a competitive advantage over one that offered zero novelty or visual appeal, right? The same would have been true of location, visibility and ease of access — convenience, in other words.
None of this is to suggest that retail is somehow static. From one era to the next, different facets of retail rise and fall in importance. In recent history, for example, Starbucks clearly changed the dynamic by upping the ante on experience and making its stores true destinations. You can draw a straight line from Starbucks to the relatively sumptuous experiences at next-generation c-stores now being designed and built all over the world.
Cantina, an authentic Mexican street food experience now being rolled out at Topaz Re.Store locations across Ireland, is a case in point. With its edgy Day of the Dead-inspired graphics, Cantina could easily compete as a fast-casual restaurant all on its own. Originally launched in Galway, Cantina serves up the likes of soft-shelled tacos filled with chorizo con carne, Irish beef barbacoa, chicken asada, and other tasty offerings. Here, the heavy use of chilies, limes, fresh sauces, and Mexican herbs and spices is a far cry from the proverbial shriveled hot dog on a roller grill. This is destination retail, done right.
In Switzerland, the Zürich-based conglomerate Migros is opening beautifully designed Migrolino stores around the country. Colorful merchandising, quality finishes and big, bold imagery create a pleasing atmosphere. The net effect is to highlight the freshness of the food.
Historically, consumers have associated c-stores with gas, potato chips, beer and cigarettes. But in Gran Canaria, Spain, SPAR Natural throws all of that on its head. The store, named the NACS Insight 2017 International Convenience Retailer of the Year, sells healthy options with icons representing eight categories: Vegan (V+), Vegetarian (V), Organic (O), Gluten Free (GF), Wheat Free (WF), Dairy Free (DF), Lactose Free (LF) and Sugar Free (SF). This is a beautifully designed natural foods store, with wood floors and warm accent lighting.
In addition to the above examples, one could name many others, from the aromatic bakeries of Lekkerland’s c-stores in Germany, to the higher-tier finishes and deli-format food offerings being rolled out by Shell. These changes are all about using design to better deliver on the unchanging fundamentals of retail.
But back to point No. 1 — the reality of disruption in today’s fast-paced retailing environment, so clearly typified by the Amazon-Whole Foods deal. It is absolutely true that the industry does need to reckon with some potentially paradigm-shifting trends. Consider the following:
The likes of Fuel Me and Booster are now bringing gasoline to the people. In precisely the same way as you might use your phone to get a ride with Uber or Lyft, users of the Fuel Me or Booster apps order gasoline for their cars. They leave the doors to their gas caps open; the fuel truck then comes to their office parking lots and fills their tanks while they work.
Automated retail is knocking at the door. The Amazon Go test store in Seattle features “grab and go” technology borrowed in part from the development of driverless cars. Walk in, grab whatever you want, and walk out. No cash register required. The system processes the payment automatically on your phone. Likewise, the fully automated restaurant Eatsa now has seven locations in the United States. You can order your food on your smartphone. Eatsa’s motto: “No lines. No cashier. No nonsense. We’re engineered to get you in and out fast.”
Driverless cars really are coming. Ford’s new CEO, Jim Hackett, used to be head of the company’s Smart Mobility division. Hackett recently told USA Today that Ford is making “great progress” in hitting the roads with a fully self-driving car by 2021. Ford already has about 90 partially autonomous vehicles rolling on U.S. roads and is sinking about $1 billion over the next five years into the likes of artificial intelligence software. Tesla, Nvidia, Waymo and Alphabet (Google), to name just a few, are all pushing ahead on autonomous vehicles, even as Congress begins more serious work on how to regulate it all.
Omnichannel retailing is coming to food retailing. This can be seen from the emphasis on click-and-collect at the likes of Walmart and Kroger, to Amazon’s aforementioned purchase of 460 Whole Foods stores.
The bottom line with respect to all of the above disruptions is that consumers have more options for how they receive goods. Thankfully, the fundamentals of retail — why we shop — will stay the same. That’s why I’m skeptical about extreme predictions — say, that Amazon will be the only retailer left in a decade or so, serving stay-at-home customers under a sky filled with delivery drones.
Still, with big changes in the path to purchase clearly occurring on multiple fronts, c-stores will need to reinvent themselves. Making a better version of the lackluster stores of the 1970s and ’80s simply won’t do.
The industry must continue to be open to new possibilities. The way companies use sites, for example, is likely to change in some major ways. Instead of being out front, for example, gas pumps could eventually be moved to less prominent areas as in-store experiences take center stage. Thanks to rapid urbanization and the rise of Uber, Lyft and the millennial generation, which is famously averse to car ownership, companies might eventually set aside more space for ridesharing vehicles or even leased parking spaces for out-of-service driverless cars.
Ecommerce pickup points — whether for Amazon, the c-store chain itself, or some other retailer — could become a part of the mix, too. Lastly, if the likes of Eatsa and Amazon Go make inroads in the years to come, we could very well see fully automated c-stores — 21st-century, smartphone-enabled “automats” of a sort — within our lifetimes.
But remember, shoppers flocked to the Roman Forum continuously for about 1,400 years. As I see it, that means brands like Topaz, Spar and Migrolino are on the right track by offering high-quality food and creating more appealing stores. These experience-oriented changes overcome the gas penalty and transcend humdrum approaches to convenience retailing.
Are there safe bets in the world of retailing? Not really, but focusing on the fundamentals comes pretty darn close.
Editor’s note: The opinions expressed in this article are the author’s and do not necessarily reflect the views of Convenience Store News.