Amazon – the online shopping behemoth, the #1 e-commerce platform in the world – recently announced plans to open a completely new chain of traditional brick-and-mortar grocery stores in 2020. This new chain of grocery stores will operate independently from Whole Foods, and it won’t even use the “Just Walk Out” technology of Amazon Go stores. Traditional, indeed! According to industry analysists at USA Today, Amazon’s new chain of grocery stores will allow the company to “carry products such as Coca-Cola that are banned at Whole Foods because of its ingredient standards,” while also competing with other grocery giants like Walmart and Costco.
Amazon has always been an innovative company – a company that breaks boundaries and brings to life ideas that 20 years ago seemed impossible. Given its reputation as a digital-first operation, it might seem unexpected that Amazon is seemingly turning away from e-commerce to open a new chain of brick-and-mortar stores. However, there are a number of practical reasons for the surprising switch to more traditional methods of grocery shopping. As it turns out, Amazon’s decision is actually a smart move in an industry that has struggled to grow in the digital space.
Here, we’ll explore the top 6 benefits of Amazon’s decision to open a new chain of grocery stores in 2020, and what that decision means for the rest of the retail industry as a whole.
Top 6 Reasons Benefits Of Brick-And-Mortar Grocery Stores:
1. Grocery Shopping Is More Profitable In-Person
According to
Forbes, consumers don’t like to pay for shipping and service costs. Shocker, right? If you need proof, just look at how Amazon has normalized free 2-day shipping. U.S. consumers have come to expect free, fast shipping, and they get turned off by any type of added fee. In traditional brick-and-mortar grocery stores, the customer visits the store, picks out their food, pays for it at the cash register, and then brings it home. If you add paid labor in the form of grocery selection and delivery services into the mix – like what happens if people opt to purchase groceries online – the window of money-making opportunities for grocery stores narrows considerably.Despite the U.S. grocery industry being worth an estimated $847 billion, the profit margins it produces are very thin. In order to compete with brick-and-mortar grocery stores, many online grocers must eat the cost of paying employees to do the additional work of selecting and delivering groceries, unless they’re willing to risk customers by charging extra. And that doesn’t even include the added hassle of returns, exchanges, and quality issues. For those reasons, online shopping has been slow to catch on in an industry that’s otherwise booming. According to
Forbes, “if online grocers could avoid the extra labor cost involved in picking, it would make a substantial dent in their costs.” However, until that technology exists, shopping in-store will continue to be the more profitable choice.
2. The Ability To See, Touch, And Personally Pick Products
The reasoning behind consumers’ preference for shopping in brick-and-mortar grocery stores reflects a wider trend towards shopping in-store. According to
Internet Retailing, “the majority (82%) of shoppers want to ‘view-and-touch’ products before committing to buying them online.” When it comes to buying products that you and your family will consume, that ability to hand-pick produce becomes even more important. As
The Atlantic reported, “twenty-two percent of apparel sales and 30 percent of computer and electronics sales happen online today, but the same can be said for only 3 percent of grocery sales, according to a
report from Deutsche Bank Securities.”Think of the last time you bought an avocado. Maybe you were craving some avocado toast, or maybe you had plans to throw an epic guacamole party. Either way, chances are you picked up, squeezed, and evaluated each avocado before you deemed it worthy for purchase. And that’s just an avocado. Now think about a glossy fillet of salmon, or a vibrant bunch of broccolini. Modern consumers love the ability to see, touch, and personally pick their grocery products before they purchase them, which makes online shopping for groceries a major gamble. After all, how can a perfect stranger know your preferred avocado ripeness?
3. Take Full Advantage Of In-Store Sales And Promos
Many people who enjoy grocery shopping for the hunt of the sale will be vastly disappointed to learn that a number of online grocers do not accept paper coupons or price matching, according to the
Washington Post. That, combined with potential grocery selection and delivery fees, makes shopping online for food-related items a poor financial choice, especially if you’re an avid couponer. Since online prices are usually comparable to in-store prices, there is no competitive advantage to shopping solely online. Sure – maybe it’s more convenient – but the hypothetical costs you’d pay to shop online add up over time, which makes the “convenience” factor seem a little less so.On the flip side, shopping online allows you to keep better track of the total you’re going to spend, since digital shopping carts automatically tally up your total cost as you virtually add items to your list. While you can technically do that while you’re checking out in a brick-and-mortar store, it would probably cause a scene at the register. That said, many grocery stores invest time, money, and resources to promote their sales in-store, which makes it very obvious for the average shopper to easily see each week’s promotions. From in-store displays to end caps and exclusive mark downs, shopping for groceries in-store provides many money-saving opportunities. Online, it’s often harder to take full advantage of in-store sales and promotions, which gives brick-and-mortar shopping the upper hand.
4. Speak With And Consult In-Store Grocery Experts
Many people who work at grocery stores are professionally trained to assist shoppers in making the perfect culinary creation. Think of the butcher behind the counter who provides step-by-step directions for roasting a perfect chicken, or the in-store wine expert who can provide cheese recommendations to complement your crisp bottle of Chardonnay. By shopping in-store, customers can take advantage of the human experience and consult other people who are experts in the industry. By shopping for groceries online, you are inevitably limiting your access to information, which makes the entire process less fulfilling.For that reason, it’s essential for grocery stores to employ and train people in the right way so they can provide helpful recommendations to in-store shoppers. As
Vend HQ puts it: “It’s good to have the in-store technology and other bells and whistles, but don’t lose sight of the fact that your front-line employees are the biggest and most important creators of the in-store experience.” Grocery stores that put more emphasis on the importance of in-store grocery shopping consultants will be in a better position to further differentiate themselves from the online competition, and make the
entire shopping experience more rewarding from beginning to end.
5. You Can Pop In To Buy 2-3 Items More Easily
We all do it – it’s 4:30pm at work, and we automatically start to think about what we’re going to whip up for dinner that night. Maybe it’s a quick veggie soup, or a hearty bowl of spaghetti bolognaise. The problem is, what if you’re out of broth or parmesan cheese? If you’re like the majority of Americans, you would simply swing by the grocery store on your way home from work and pick up the specific item that you need. However, with online-only shopping, it’s not very convenient to have to go online, order one item, and then go home and wait for that product to arrive. You’d probably end up paying more in delivery fees than the actual item is worth, plus you wouldn’t be able to start on dinner until 8pm – if you’re lucky!It’s for that reason that in-store brick-and-mortar grocery shopping continues to rein supreme. No matter how organized of a shopper you are, and even if you meal plan weeks in advance, there will always be an occasional ingredient you realize you need right now, which makes in-store grocery shopping a very useful thing to keep around. Can you imagine waiting around for toilet paper to arrive if you have weekend guests arriving in the next hour? Life is unpredictable and having a grocery store that you can pop into at a moment’s notice will always allow shoppers to get exactly what they need exactly when they need it.
6. Consumers Spend More Money In-Store Than Online
Regardless of all the consumer-friendly benefits of brick-and-mortar grocery shopping, there is one solid business fact that perhaps is the #1 driving reason for Amazon’s decision to open a new chain of traditional brick-and-mortar grocery stores, and it’s this: consumers spend more money in-store than online. In fact, a recent report by
First Insight found that “71 percent of all shoppers surveyed spent $50 or more when shopping in-store. This compares to only 54 percent of respondents spending more than $50 when shopping online.” Amazon didn’t become the online shopping giant it is today by not caring about money, so the idea of making more of it by opening brick-and-mortar grocery stores must be a very exciting idea.For many people – especially people who love to cook – grocery shopping is part of the full culinary experience, a chance to shop around, see what’s in season, and find new recipe inspiration. Additionally, that benefit also bleeds into the inevitable “impulse buy” we’re all guilty of. You go to the grocery store with your list in hand, but then you see a cool new product that makes you think, “huh – that looks good. I need to try that!” Impulse buys contribute to more in-store revenue that you would think. In fact, according to some
buying statistics, “over 90% of people who shop today make occasional impulse purchases that they didn’t intend to buy initially.”
Conclusion: Brick-And-Mortar Grocery Stores Have Major Advantages Over Online Grocers
Although Amazon seems to be doing just fine financially – after all, they did report $70 billion in Q3 2019 revenue – the decision to open a non-Whole Foods, non-Amazon Go chain of grocery stores in 2020 points to a bigger, more exciting industry trend: contrary to popular belief, retail lives on. For the reasons listen above, and many others, brick-and-mortar shopping has major advantages over online-only commerce, which makes 2020 an exciting decade for retail all around.
That said, it’s no secret that retail has evolved greatly in the past 20 years, and it will continue to do so in the decade to come. To get ahead, retailers – much like grocery stores – need to take advantage of the obvious differentiators that set their businesses apart from their online counterparts and create exciting in-store experiences that will keep shoppers coming back for more.
If you’re looking to develop a new retail strategy that will bring your business into the third decade of the 2000’s, SRS can help. We have been creating custom retail strategies for big-box companies for the past 15 years, and we will continue to do so in the many more to come. Whether you’re a brick-and-mortar grocery store, or another retailer struggling to turn a profit, we can help you adjust to the ever-changing retail environment and develop tried-and-true solutions to turn your luck around.
Ready to begin? Call us at (513) 272-3439 or email us at sales@srsmerchandising.com to get started.
Sources:
Perez, Sarah. "Amazon to open its first non-Whole Foods grocery store in 2020" TechCrunch, November 11, 2019.
Kestenbaum, Richard. " Why Online Grocers Are So Unsuccessful And What Amazon Is Doing About It" Forbes, January 16, 2017.
Semuels, Alana. "Why People Still Don’t Buy Groceries Online" The Atlantic, February 5, 2020.
Pomranz, Mike. "Why Online Grocery Shopping Isn't Booming (Yet" Food And Wine, March 1, 2019.
Thomas, Lauren. "Most shoppers are still leery of buying their groceries online. But delivery in the US is set to ‘explode’" CNBC, February 5, 2019.
Peters, Jay. "Amazon is opening its own grocery store in 2020" The Verge, November 11, 2019.
Brandon, Gaille. "19 Dramatic Impulse Buying Statistics" BRANDONGAILLE.COM, May 22, 2017.
Petro, Greg. "Consumers Are Spending More Per Visit In-Store than Online. What Does This Mean for Retailers?" Forbes, March 29, 2019.
Bowman, Jeremy. "Amazon is opening its own grocery store. Here's the biggest problem with it" USA Today, November 16, 2019.
Nicasio, Francesca. "7 Ways to Create In-Store Experiences That Drive Traffic and Sales" Vend HQ, July 10, 2018.
Protalinski, Emil. "Amazon reports $70.0 billion in Q3 2019 revenue: AWS up 35%, subscriptions up 34%, and ‘other’ up 44%" Venture Beat, October 24, 2019.
