A cautionary tale for traditional retailers in the age of big tech

February 6, 2020

Nowadays, it seems every move of Amazon sends a panic signal to its competitors. And where there is panic, there are knee-jerk reactions.  Because the online tech giant saw success in online shopping and home delivery service, many brick and mortar retailers are playing “catch-up” and investing in the same offerings.​Therein lies the troubling question: is this  strategy a “Trojan Horse”?

After acquiring the brick-and-mortar grocery chain, Amazon started to integrate Whole Foods into its delivery machine. Just look at some Whole Foods Market stores that started to look like a warehouse for delivery pick-ups with regular customers being pushed away.

Most grocery stores are originally designed for shoppers, not delivery pickers. This means small inventory storage areas. That also means employees who pick products for online orders would need to grab most items from the same shelves as shoppers. They would roam aisles with scanners in their hand, asking their colleagues on the floor when they can’t find something. All this time could be better spent elsewhere, namely helping other shoppers.

The same scene would happen at the customer service counter, or even in the parking lot. Within the limited space for both regular and online shoppers, order pickers and delivery personnel will start driving your foot traffic away. These are the customers who come to buy one thing and end up buying a few more.

Amazon has something else on its agenda. Not only do they offer free delivery for online order fulfilled in Whole Foods, they recently announced free delivery for Prime members shopping on Amazon Fresh too.

So what are the other big grocery retailers doing about this?

While Walmart, Kroger and other chains offer home delivery for a fee, they have been promoting ways for customers to order online and pick up groceries in their stores (perhaps as an attempt to recoup some store traffic). Customers have responded well to this partly because it is free.

But, as the New York Times put it: “With its new announcement, Amazon is showing it is willing to spend heavily on delivery where its competitors have not, and make up the costs through other purchases made by Prime members, to undercut the value traditional grocers have been offering.”

Kroger is fighting to stay relevant, despite the increased investment behind online and other initiatives pressuring the bottom line. “It said it has expanded grocery pick-up to 1,780 locations and delivery to 2,225 to cover about 95% of its target households. It’s also working with European online grocery retailer Ocado to build automated warehouses to fulfill e-commerce orders.”

That is a lot of investment to be on par with Amazon’s “get-in-and-out-quick” scheme. Before anyone forgets, the tech giant has been trying to “Amazonify” everything with its Prime membership program. Fast delivery, convenience, limited human interaction represent the long-term bet in changing consumer behavior - not only in the grocery space. Once that loyalty is built for Prime customers, they will buy more, and more frequently.

Meanwhile, brick-and-mortar stores’ sale per customer transaction starts to come down. New food products will not sell because online shoppers mostly replenish the supplies they usually put on their virtual shopping lists. As they can’t discover and taste a new flavor online, there are no impulse purchases, only chores that need to be ticked off.

Next thing you know, who needs a supermarket, when you can have a pick-up center? The same narrative is happening to the restaurant industry, where “ghost kitchens” are rising. Who needs to go to restaurants to eat, when you can order online? Who needs to open a restaurant and weather high operating costs, when you can rent space in these delivery-only kitchens?

There are no brick-and-mortar stores without customer traffic.

Traditional supermarkets are a dying breed, at least the statistics and predictions say so. But is there a way to turn it around? The answer might be hidden in plain sight, something that is already in physical stores’ DNA.

For large players, the much-larger brick-and-mortar store fleets are proving to be key weapons against Amazon. They are playing to their strengths:

“Target has been remodeling stores and is doubling down on its own line of stores brands to differentiate its merchandise and lure customer traffic.”

“Kroger has engaged with DDB creative ad agency to come up with a “refreshed, stronger brand” to drive visits.”

What about smaller supermarkets? Have they got a chance of survival?

Yes if they don’t fall prey to inertia. Yes if they don’t jump on the home delivery bandwagon without proper consideration. Yes if they find a way to bring people together over the mouth-watering appeal of prize ingredients, exotic treats and thirst quenchers.

It’s a very basic human need. Shoppers appreciate the chance to indulge their taste buds through free samples, elevated by an energetic brand ambassador in-store. And supermarkets have every right to make it about the food, connecting people and delighting senses through food.

It’s the combination of behavioral psychology and spatial design to make people care about supermarkets again. It means making grocery shopping more like going to the movies, or a theme park. You are not going to sell convenience or efficiency, but “experience.”

One of the most effective ways to generate customer buzz is offering product sampling.

When shoppers “experiment” and derive pleasure from the process of sampling, engaging, interacting, and evaluating various options, they tend to take more time shopping. And you know how the story goes if you increase the all-important “dwell time” metric in this industry.

The bottom line

Instead of helping delivery companies destroy your business, partner with new product vendors to create continuous experience of new flavors discovery. So your customers feel welcomed at your stores rather than being obstacles to the rushing product pickers.

While Amazon and others are betting on the future of grocery shopping as “getting in and out quickly without interacting with another human being”, focus on creating customer experience that makes shoppers come to your store not because they have to, but because they want to.

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