Amazon Go opening delayed (AMZN)

BI Intelligence
Why US Consumers Shop

BI Intelligence


This story was delivered to BI Intelligence "E-Commerce Briefing" subscribers. To learn more and subscribe, please click here.

Amazon is postponing the opening of its Amazon Go convenience store because of technical issues, according to The Wall Street Journal.

The cashier-less convenience store was scheduled to launch in Seattle at the end of March, but the payments technology needed to replace employees at checkout is not working properly. This is an unwelcome snag in Amazon's wider plans to tackle the grocery space — both online and offline.

  • The technology uses cameras, sensors, and algorithms to track what customers pick up for purchase. However, it reportedly malfunctions when more than 20 people are in the store. In order to make this a worthwhile investment for Amazon, the technology will need to be able to support large crowds.
  • The convenience store is just one of the brick-and-mortar formats Amazon has been planning to boost its grocery sales. The e-commerce giant is reportedly opening a click-and-collect grocery store, AmazonFresh Pickup, also in Seattle. In addition, Amazon may have a third, larger store format in the works. This format could employ robots to pick up staples and household goods on an upper level, while allowing shoppers to pick out produce, dairy, and meat on the first floor.

Online grocery is still only a small fraction of the wider market in the US, so if Amazon wants a successful grocery arm, it will need to open brick-and-mortar stores. The portion of US households that bought food online was about 23% in 2016, according to the Digitally Engaged Food Shopper Study by Nielsen and the Food Marketing Institute. Additionally, consumers still want to see and feel products they are buying — a particularly important factor in purchasing groceries. This means that for Amazon to gain a foothold in the grocery segment, a physical presence will be crucial.

Digital is dismantling the retail industry brick by brick. The most successful retailers are the ones with thriving digital businesses, while physical stores are becoming more liabilities than assets. 

However, e-commerce isn't without its challenges. In contrast to waning demand for in-store retail, rising demand for online retail has created a bottleneck at the fulfillment stage, whereby carriers and retailers are struggling to manage the increasing volume of online orders. This is presenting an opportunity for legacy retailers to leverage their gluttony of physical retail space to help fulfill these sales.

Ship-from-store — a fulfillment process where retailers use stock from their store's estate to fulfill orders — can help brick-and-mortars evolve and avoid stagnation. This method is an essential strategy for legacy retailers because it can help them survive digital disruption and remain competitive with e-commerce giants like Amazon. 

BI Intelligence, Business Insider's premium research service, has compiled a detailed Ship From Store report that explains how retail stores have become a liability and assesses the opportunity to use stores as distribution points for online orders. It also breaks down how the ship-from-store method works, and examines its benefits, the steps needed to implement it, the retailers best positioned to use it, and the implications it presents for the industry at large. 

Here are some key takeaways from the report:

  • E-commerce is cruising with no indication of slowing down. BI Intelligence forecasts that digital retail sales will reach $632 billion by 2020. This means online sales will continue to eat into in-store purchasing, placing pressure on brick-and-mortars to remain profitable. 
  • Digital is moving to the core of retailers' strategies, and existing real estate can be leveraged to support a digital business. Large retailers' stores are densely distributed, providing an opportunity for them to serve multiple purposes.
  • Ship-from-store has proven to be beneficial for retailers that have tested it. The results retailers have seen include higher sales, faster delivery times, easier inventory forecasting, improved margins, and lower costs.
  • Large retailers with densely distributed stores and low-turnover inventory are in the best position to test the ship-from-store model. Retailers need ample square footage to turn existing aisles or backrooms into storage for online orders, and slower turnover in order to convert excess inventory to online orders. 

In full, the report:

  • Explains how legacy retailers can leverage their physical space to support distribution for e-commerce channels. 
  • Details the steps that retailers have to take in order to implement a successful ship-from-store model.
  • Discusses the characteristics that make a retailer well positioned to benefit from turning its stores into distribution centers. 
  • Provides insight on how the ship-from-store model can augment the retail industry at large.

 Interested in getting the full report? Here are two ways to access it:

  1. Subscribe to an All-Access pass to BI Intelligence and gain immediate access to this report and over 100 other expertly researched reports. As an added bonus, you'll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> START A MEMBERSHIP
  2. Purchase & download the full report from our research store. >> BUY THE REPORT

See Also:

By using Yahoo you agree that Yahoo and partners may use Cookies for personalisation and other purposes