As we predicted in our 8 tech in Grocery predictions for 2016, Amazon is going brick and plans to break into grocery in a new way. The online retail giant presented just its first and revolutionary supermarket without cashier, which is baptized Amazon Go.
• This convenient store has no cashier and checkout lines
• Connected store with RFID and mobile friendly
• Amazon might opens 2000 stores across the U.S
• Proximity Groceries need to focus on digital if they don’t want to lose market share[/mks_pullquote]
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The store is located in Seattle and is characterized primarily by the absence of cashier employees. Indeed, Amazon wants to offer shoppers the option “just grab and go!” with a quick purchase, selecting the product and paying automatically thanks to RFID sensors that can identify when a product is added to your cart, so you don’t have to do it yourself. When you leave the store, Amazon automatically charges your smartphone with you Amazon account.
A convenient store with no checkout lines
The grocery store will sell ready-made food, snacking, staples like bread, milk, chocolates, beverages and other grocery products including their own private labels (Yes Amazon got their own products now). Amazon grocery stores are about 1,800 square feet, so they are relatively small compared with big supermarkets.
Amazon had already started working with a physical store with its bookstore in Seattle. Now, Amazon Go complements these initiatives. It is a new generation of grocery store where cashier no longer exist. There is also no need to scan a product. The eCommerce giant has equipped its store with artificial sensors, cameras, and intelligences to detect when a product movement from the shelf. So it’s very convenient for the shopper but also for the supply chain.
For the moment, this first beta grocery store can only be used by company employees. If the experiment works, it could be used by any consumer from 2017 and with the idea of opening more similar stores in other cities. In fact, Amazon internal plans show it could build 2,000 grocery stores across the US in the next decade.
A vision of what the future of physical retail can be.
RFID is used in retail, but its presence is all but invisible to the customer, and most stores today still have a traditional checkout. We’ll see in 2017 if the new technologies that power Amazon Go can finally bring Techingrocery’s vision of a “smart store” to reality.
Finally, if we could say that Uber had uberized the taxis by disrupting the market, today we can replace uberization for amazonation in grocery.
Drive thru stores are expected to expand in rural areas
Competition in retailer market is constantly increasing. On one side big solid players fear agile smaller ones, on the other side brick and mortar are getting slowly disrupted by online ones. Keeping market share is difficult and improving it is even more than a challenge. In a world where customer loyalty is becoming price loyalty, grocery retailers are starting to adopt diversification strategies in order keep a growing customer basis.
We have talked already about Click & Collect, Direct to Consumer and Virtual Reality. Drive thru stores is another successful strategy adopted in the grocery market. Started firstly by Fast Food companies to target specifically a customer range with very little time available to shop, now drive thru is being launched by several pioneer retailers. This practice offers great convenience both for consumers who get what they want in few minutes and for retailers who can drive down costs.
How does it work?
Consumers drive to their closest drive thru store. There are usually two ways to order grocery items. the first option is to do it directly once arrived, ordering in a drive thru window of the store. The second option is doing it online before arriving in the store and then selecting the point of delivery.
Once the order is placed, a grocery worker collect all items desired through a sophisticated belt system. In few minutes the grocery is collected and the driver pay & collect it in a second drive thru window. This process is fast. Indeed it is estimated to be completed in only about 10-15 minutes, compared to the fastest 1 hour Amazon delivery option.
The main players
Walmart was the first retailers who launched this concept. For 70% of the US population there is a Walmart store every 5 kilometers. Leveraging this strategy, they have decided to launch drive thru stores in smaller markets where online grocery competition is not present. Indeed, due to the lower economies of scales of cities with a low population density fast online delivery cannot be present. For example, Amazon has 1 hour delivery only in denser urban markets. Drive thru grocery then is a big opportunity for brick & mortar players to counterbalance the aggressive strategy that online delivery businesses are playing.
Amazon itself has sensed the big opportunity drive thru stores can bring to its business. Business Insider recently reported an opening of an Amazon Brick & Mortar drive thru stores. Consumers place usual orders online and then can pick up them at the closest drive thru window. Why a traditional online company want to enter a non core area of his business? The answer relies partly in Amazon culture principles “customers first”. Market researches show that consumers shopping with Amazon are missing an important in-store experience. Mainly for ordinary fresh grocery products where it is essential to evaluate their quality before putting them in the basket. At the same time, it is shown a big winning area if put together Amazon online convenience with in-store experience.
Sainsbury is the second largest chain of supermarkets in the United Kingdom. They first started opening an online shop, establishing a delivery system. Their strategy is to focus on customer satisfaction in order to win market shares. However, the initial results were not so good as expected. The first main reason is that customers doesn’t like to wait too long for their grocery to be delivered. Secondly the delivery could happen at an inconvenient time for the consumers. For all those argumentations they are the first chain in UK who have opened drive thru stores, as the DailyMail reported. In this way they are hoping to leverage online convenience together with consumer delivery flexibility
Farm Stores is a US drive thru stores chain. They focus only on drive thru concepts in order to reach high economies of scales. Structured as a franchise offers a high rural growth potential. With more than 60 years of experience they now are planning to become a global company, exporting this concept oversea.
We’ve noticed recently that Lidl, is updating its technology capabilities to further strengthen its European presence and enter new key markets like the US. In fact Lidl is becoming more shopper-focus and want to appeal to a broader base of customers. Digitally engaging with shoppers is on the radar of the discounter and will permit to further achieve this objective.
First steps in E-commerce and Direct to consumer
To illustrate its new interest in Direct to consumer and e-commerce, Lidl acquired Kochzauber, a grocery delivery service, in Germany. Lidl intends to keep Kochzauber as a standalone brand and expand the concept of sending out recipe boxes. The operation is likely to provide Lidl with crucial knowledge in terms of delivery of fresh grocery items and it could also gain inspiration from the attitude and values of a start-up company in the online business.
As a second big step, in March 2016, Lidl’s online store in Belgium opened. The initial offer provided 350 non-food items, such as cookware, home & garden and clothing, with orders home-delivered in two days. The offering and portfolio contains lot of premium products such as 300 euros Drones and high technology cooking and cleaning products, which will contribute to increase their perceived value and change of positioning.
Deeper engagement with shoppers digitally
The discounter giant seem ready to engage and connect with shoppers digitally – a significant move away from their traditional positioning. In August, Lidl launched a large-scale Big Data initiative. The aim is to improve speed and depth of data analysis. It will also enable the retailer to carry out predictive analytics and business simulations, using data from its web store, mobile apps and social networks to be fully informed in real time. Combined with the potential introduction of a customer loyalty programme, this will allow Lidl to engage with shoppers in a far more personalized way than it has been able before.
Lidl surprised the sector last month when the discounter’s Italian teams introduced a smartphone app dedicated to its Cien private label beauty range. This application permit thanks to specific questions to build a full Cien beauty routine tailored to the customer, this approach is usually used by the premium brands and will further strengthen the attractiveness, expertise and reliability of this private label.
2016 is promising a huge change for the virtual reality and will totally modify the market. According to the Super Data Research, the benefit from VR will reach more than 860 million of dollars during the year. Possibilities for the brands are multiples and some of these have already begun to benefiting from it.
Carrefour – Using the virtual reality to enhance the experience in-store
Carrefour is running an immersive experience across 228 hypermarkets in France, from 6 September until 3 October, making virtual reality widely accessible to its customers.
For the price of EUR3, customers can buy a cardboard virtual reality viewer. Using Carrefour’s virtual reality smartphone app, they will be taken on a journey through Russian mountains aboard a shopping trolley. The ride passes through five worlds filled with products. It includes an ice cave of fresh produce, an enchanted forest full of grocery and a futuristic world of high-tech. This is a fun initiative which should encourage positive interaction with shoppers, at an affordable price.
Oreo – Using Creativity and Imagination
Engage readers through integrating imagination and fiction into your VR experience. For example, Oreo created a 360-degree video that welcomes viewers inside the “Oreo Wonder Vault.” Once inside the vault, the video explains the magical origins of the company’s cupcake-flavored Oreo cookies. In the B2B marketplace, you may not be able to welcome viewers into “imaginary vaults”. Yet, you can use some fictional elements (and even humorous themes) to keep viewers engaged and entertained by your brand.
Merrell Shoes — Launching a New Product
When launching a new product, whether it’s shoes or new software, spreading awareness and getting the word out is key. Potential customers must know not only that your offering exists, but also how it solves their largest problems. Merrell Shoes leveraged VR when launching its new hiking boot, the Capra.
The company’s agency designed a VR experience called “Trailscape,” that took viewers on a challenging, dangerous hike in the Dolomites, in Italy, complete with an avalanche. The audience (virtually) travels to a set that is specifically mapped to the virtual experience. Finally, the campaign was successful in spreading awareness, capturing 12,396 YouTube views.
Everything is possible with the virtual reality and the future will be incredible! Innovation is everywhere and VR will help the brands to highly develop the experiential marketing in to the stores.
E-grocery is growing, but pure players don’t seem ready to completely replace brick and mortar stores.
Have you ever thought to purchase groceries online? If yes why? These are some of the main questions that retailers and manufacturers are trying to understand, by submitting various surveys and by spending a lot of money in market research.
Digital natives make E-Grocery growing
On one hand the e-grocery is growing because digital natives (Generation Z and Millennials) increased their willingness to buy groceries online. Millennials are starting to form their families while Generation Z is facing to the job market with a higher purchase power. Both generations are more willing to adopt and use new technologies where both retailers and manufacturers are increasingly investing. For example, Walmart decided to invest most of the $1.1 billion forecast in the coming year for digital initiatives in order to develop and improve its e-grocery initiative and Amazon just launched its private label.
Specifically Asia-Pacific is leading the online grocery sales development worldwide for many reasons. Firstly because most countries of the region showed a growing urbanization and a high density with countries (as India) where Millennials and Generation Z represent most part of the total population. Secondly because most of the leading mobile devices producers are based in Asia Pacific and, as a result, consumers show a higher willingness to use mobile devices to search and to buy grocery online.
Millenials are willing to buy more online
Money can’t buy experiences
However, there are also studies that are questioning the e-grocery growth, by revealing how its growth has been overestimated in recent times. A HSBC study (Business Insider 2016) conducted in UK (the main e-grocery market in Europe) by David McCarthy and his team revealed that retailers are growing the most are discounters (Aldi and Lidl in UK that are not currently selling anything online) which are increasing their growth rate twice compared to e-grocery players, showing how consumers seem preferring lower prices in the physical store than the convenience of the home delivery.
Nowadays there are no existing apps or devices that are able to replace the powerful sensory experiences (this is especially true for fresh food) and the human interaction that physical stores can provide.
Indeed for many consumers visiting a physical store generates positive feelings.
Indeed they can spend some time with the family or with friends and have fun by doing shopping. That’s why retailers are increasingly investing in digital innovations to improve the in-store experience as virtual reality or beacons and that’s why click and mortar stores (as Tesco in UK or Carrefour in France) are offering different options (as the click and collect) to consumers in order to limit the impossibility of the sensory experience by doing everything online. With the click and collect option consumers can order online and then inspect the items when they pick them up at the store.
5 Direct To Consumer Key Players: Selling beyond retail
Nowadays the online world has become a space in which brands can directly engage and sell to consumers eliminating the need for physical stores or online retailers. The shoppers are keen to discover those new options and more brands or software’s that sell directly to consumer are emerging – creating simplicity and efficiency in marketing and supply chain.
Here is a selection of 5 key DTC players that are disruptive in their concepts or service:
1) Amazon Dash
Shoppers purchase a product-specific Amazon Dash Button and use the Amazon app to connect Dash to WiFi and set the product to be reordered with the button. When consumers run out of that product, pressing Amazon Dash automatically purchases and ships the product to their house.
2) Amazon Echo Alexa
Hands-free speaker shoppers can control with their voices. Echo connects to the Alexa Voice Service to play music, provide information, news, sports scores, weather, and more—instantly. In addition, consumers can speak to Alexa to easily order products via Amazon.
It eliminates the need for shoppers to visit app or website, they simply uses voice commands to make purchases. All you have to do is ask.
3) Blue Apron
Shoppers subscribe to the service and receive a box each week with the right amount of ingredients to prepare two-three recipes.
Blue Apron makes it easy for busy consumers to prepare tasty meals at home that fit their dietary needs –no finding recipes, going to the grocery store for ingredients, having leftovers that go to waste.
Shoppers subscribe to a monthly sample box of beauty products for men or women, Helps consumers easily and efficiently try, learn about, and purchase beauty products online. Brands use Birchbox to launch, sample, and test new products.
5) Dollar Shave Club
Dollar Shave Club couldn’t be simpler. The shopper has to select the kind of blade he wants for shaving (from 1 to 5 blades) and then pay a monthly subscription to receive the right quantity needed for a proper shaving. Cost are from 1$ to 9$ according to the type of blade chosen and there is no minimum commitment. Their funny commercials are the most viral on DTC market, explaining their outstanding growth.