Amazon’s purchase of Whole Foods Market was a brilliant move. But the company shouldn’t stop there. Its next big acquisition should be a large convenience store chain. Here’s why…
90% of Sales are still made offline
Amazon may be able to claim half of all online sales, but 90% of sales are still made offline. Online sales will continue to grow, but will they grow at the same skyward rate they have in the past? Some are already predicting that the disruption from e-commerce has already run its course. Bottom line – if Amazon wants to continue to grow market share it will need to grow its physical presence.
Amazon is running out of new customers
64% of US households are Amazon prime members. If Amazon has saturated the online marketplace, where will it turn next to find customers? C-stores could give Amazon exposure to an offline customer base.
C Stores are stocked with inventory Amazon likes – CPGs (Consumer Packaged Goods)
Imagine your last trip to Whole Foods…or any grocery store for that matter. Now, think about that store loosing power. How much of the inventory would go bad within days, or even hours? Compare that to your last trip to a convenience store. Big difference, right?
While I have no doubt that Amazon will eventually master the supply chain for all types of groceries, the inventory stocked by C-stores is a sweet spot for the online behemoth. Recently, Amazon has had success in growing its snack food business too.
Promote its house brands
Think about the last time you used a vending machine. What brand(s) did you see? Can you guess who owns that vending machine? Here’s my point – if you own the store (or vending machine) you get to decide what products you sell – and just as important you decide where they are placed on the shelves.
Amazon has quietly been growing its house brands for years. These house brands now extend into food and beverage categories.
Promote unlikely items
One of the biggest advantages Amazon has over other retailers is its bottomless pit of consumer data. Amazon may be able to tease out random correlations like customers that buy energy drinks also buy GoPro cameras. Or they may be able use regional sales data from online sales to stock stores along the coast with bestsellers like swimwear, BBQ grills, and waterproof speakers. C-stores have gotten very creative with their in-store offerings over the years, but Amazon could take this trend to the next level (think Echo and Fire TV).
Build out its last mile network
The last mile is a very real logistical issue for Amazon (I briefly touched on a far fetched, but not unthinkable solution in a previous article). Amazon has used lockers for years, many located in C-Stores. An entire chain of stores would allow Amazon to expand its pickup sites. These stores can operate as mini-warehouses for last mile delivery.
Physical Sites for Returns
Amazon entered a partnership with Kohls to process its returns. The advantage Amazon would have if it owned its own stores and trucks is that it could backhaul returns to regional DCs for processing and save on freight.
Conclusion
I know that many readers may be “put-off” by this article. Some may even feel threatened. The reality of the situation is that if Amazon (or Wal-Mart for that matter) were to unlock the potential of a C-Store network, the market at large would quickly realize what many of us have known all along – there is tremendous value in these retail sites.
Also, now that you know how Amazon might “eat your lunch”, do something about it while there is still time. All of these tactics could also be employed by the big (and even small) names in the business. Some companies have already started to amass their own customer data through loyalty programs. I continue to be surprised by the diversity of inventory available in the larger stores. And while I haven’t seen widespread use of private brands, I see no reason why there shouldn’t be. I often buy grocery store brand items – why not buy C-Store brand items?
Convenience stores by their very nature are designed to be, well, convenient. Which is to say that customer service is at the very heart of their business model. Sounds like a good fit for a company whose stated mission is, “To be the most customer centric company in the world.”
Customers will go where they are served best. And there will always be a place in the market for a company that puts the customer first. Long live the C-store!