WHY IT MATTERS: Digital Transformation

WHY THIS IS IMPORTANT

Amazon GO is pushing the boundaries of retail store technology by bringing together multiple innovations to reduce time it takes to shop by removing cash register and checkout counters. This is very useful in certain industry but it is good to remember the reality of grocery shopping: you do this every week and allocate a large portion of your budget to food. Thus price is very important, especially when you have families and limited budget. It does not mean Amazon GO will fail but that it may not be appropriate in every segment of the retail industry.

Chart by Statista and BI: http://www.businessinsider.com/amazon-go-consumer-doubt-survey-chart-2016-12 

Also read more on Amazon GO: http://fmcs.digital/?s=amazon+go 

Below are some articles that describe AmazonGO technology in more detail, including a video animation. As you can see, we know very little and everyone is guessing at this time based on patent filing and an article from a consultant now hired by Amazon.

• 2013 detailed report by Brittain Ladd, ex-consultant now Amazon employee, that may be the source of some of the concepts behind Amazon GO: https://www.linkedin.com/pulse/beautiful-way-save-woolworths-brittain-ladd 
• Amazon 2015 patents that supports the GO store technology: http://appft.uspto.gov/netacgi/nph-Parser?Sect1=PTO2&Sect2=HITOFF&u=%2Fnetahtml%2FPTO%2Fsearch-adv.html&r=1&p=1&f=G&l=50&d=PG01&S1=(Steven.IN.+AND+Kessel.IN.)&OS=IN/Steven+and+IN/Kessel&RS=(IN/Steven+AND+IN/Kessel) and older one http://appft.uspto.gov/netacgi/nph-Parser?Sect1=PTO2&Sect2=HITOFF&p=1&u=%2Fnetahtml%2FPTO%2Fsearch-bool.html&r=1&f=G&l=50&co1=AND&d=PG01&s1=%22DETECTING+ITEM+INTERACTION+AND+MOVEMENT%22&OS=%22DETECTING+ITEM+INTERACTION+AND+MOVEMENT%22&RS=%22DETECTING+ITEM+INTERACTION+AND+MOVEMENT%22 
• Very good analysis - in french - of what we know and some interesting tidbits about how Amazon may use it in the future: http://www.le-furet-du-retail.com/2016/12/amazon-go-comment-cela-marche-technologiquement-ce-que-l-on-sait-du-systeme-just-walk-out.html 
• Amazon GO website announcement and video: https://www.amazon.com/go 
• 2015 recode article that unveiled the concept a year ago - but went under my radar: http://www.recode.net/2015/3/30/11560904/we-may-have-just-uncovered-amazons-vision-for-a-new-kind-of-retail 

Various other articles:

• http://www.theverge.com/2016/12/6/13856158/how-amazon-go-stores-work-patent
• http://www.pocket-lint.com/news/139650-what-is-amazon-go-and-how-does-it-work
• http://www.usatoday.com/videos/tech/2016/12/07/how-amazon-go-work/95111660/

Take a minute to watch the video. This is the future of retailing.

WHY THIS IS IMPORTANT

Amazon has disrupted many industries with its online business. Recently, as other digital leaders have done, Amazon is trying to bring digital revolution in the world to blend our physical and digital experiences - think Google self driving cars, Starbuck mobile phone payment and geofencing app, Apple stores that are more showrooms and help centres than stores because eCommerce is there to fulfill orders to your door, etc.

Amazon has been focussed on grocery for the past 10 years to use this weekly recurring, low cost, high volume shopping trip to the supermarket as its pathway to bring digital into the real world and blend it with online e-commerce.

With Amazon Fresh for examples they have been busy putting trucks on the road to deliver groceries to your door overnight with minimal costs. Why grocery? Because its high volume guarantees that trucks will be on the road everyday in all areas. And once trucks are running around carrying groceries they can also bring other items - books, TVs, etc. - at little or no cost, effectively making FedEx irrelevant or at least giving Amazon huge negotiation power.

I wrote about this in many blog posts, just see here: http://www.scoop.it/t/digital-transformation-of-businesses?q=amazon 

Here with Amazon GO, it addresses some of the major pain points of customers in grocery stores: waiting in line at the cash register. As they've done online, Amazon focusses on its customer issues to smash them or make them so irrelevant that they are not issues anymore. See "amazon secret sauce" for insights on this: http://sco.lt/979c4P

Take Amazon Prime for example. It addresses the delivery fee issue: we do not want to have to pay for delivery. So they make it a non issue, providing 2-day delivery for free for an annual fee. Side effect: if you've paid for prime, then you spend up to 5x more at Amazon (300$ annually for average client, 1500$ for prime member), basically becoming a loyal shopper. Wow.

Back to Amazon GO and why it is important. The grocery industry has not seen a major disruption since Costco started top sell grocery in bulk format years ago - grocers ost 10% market share with that new player in the field. But today, grocery stores are the same, the layout is the same, the process is the same than it was 50 years ago. There has been little or no innovation in stores recently (last one may be the barcode in 1970s) but GO shows that there may be a perfect storm of technologies that combine to make physical stores transformation a reality:

1- mobile phones are on every customer back pocket;

2- electronic payment is everywhere, making cash almost irrelevant;

3- loyalty programs and big data allows retailers unprecedented customer knowledge and forecasting trends;

4- artificial intelligence enables real-time image analysis, feature detection, and robotic improvements.

From the concept store video and the Amazon description, all that GO is doing is applying these new technologies on a new problem set: adding and removing items to shopping basket and speeding the checkout process.

Of course, at the end of the day, the winner will not be the grocer with the best technology. It will be the one with the lowest prices and the best selection (best marketing and customer service won't hurt either). On those fronts (price & selection) Amazon GO faces huge headwinds from established grocers that have long standing relationships with suppliers and way more volume than Amazon. But it does not mean Amazon cannot provide customers with a more enjoyable, easy, fast experience - especially to millennials - which may give GO 5% or 10% of the market (the "good" 5% by the way, those that spend more and spend on higher margin items) from established retailers. And this will hurt established grocers like hell.

Also see the analysis from business insider here: http://www.businessinsider.com/amazon-go-grocery-store-future-photos-video-2016-12/ 

and the plans for Amazon to open up to 2000 store in the future if GO concept works: http://www.businessinsider.com/amazon-2000-grocery-stores-10-years-2016-10

Not sure what to read if you want to improve your ecommerce skills. Here is a starter list.

Study demonstrates direct link between omni-channel maturity and corporate profits. Also provides an index to measure the omni-channel maturity.

WHY THIS IS IMPORTANT

Companies ask why invest and transform into omni channel. It appears that those with the most advanced omni-channel implementation are able to translate this into profits. Thus, omni channel becomes something you do to improve bottom line more than something you do to improve customer satisfaction, as is often thought to be the case.

Amazon announces it will open 100 popup stores.

WHY THIS IS IMPORTANT

This is one piece in the vision for the future of retail. Here are the components:

1. great online store where you can find anything you want under one roof with a single payment and account profile - amazon.com
2. 2-day free delivery - Amazon prime
3. low cost delivery network based on grocery delivery - Amazon fresh
4. small friendly stores where you can browse products, try them out, get help - Amazon popup stores (same principle as apple stores)

All retailers should copy this recipe. For example grocery supermarkets should shrink in size, provide customers with tasting stations and chefs and mini-restaurants (think Eataly) and cooking classes, along with butcher and other fresh produce. The rest (all packaged food that has a barcode) is delivered from a warehouse on a schedule right to your door at no cost if you are a member.

Also see Amazon's dedicated site for its popup stores: https://www.amazon.com/b?node=14303222011&tag=bisafetynet-20

Google research on the topic of eCommerce includes so many topics that I use it as guidance on the different aspects I need to cover when building an eCommerce strategy: just look at the table of content below.

You should too.

If you don't have a Gartner account or would like a free resource, start with their primer https://www.gartner.com/binaries/content/assets/gml/ki-pages/research-primers/94142c1d-730d-4251-97c7-938ce27b304c_gartner_for_marketers_digital_commerce_primer.pdf 

or go to one of the major solutions such as Hybris to get access to analyst reports that favor them positively (!): https://hybris.com/en/downloads?q=:prioritySort:type:Analyst+Report 

Table of Contents

• Analysis
• Digital Commerce Market: Definition, Growth and Trends
• Definition
• Growth
• Trends
• Digital Commerce
• Digital Commerce Platforms
• On-Premises (or Hosted) Software
• SaaS
• Digital Commerce for Midsize Businesses
• Digital Commerce for B2C Organizations
• Digital Commerce for B2B Organizations
• Open Source
• Marketplace Commerce Sites
• Digital Commerce Services
• Digital Commerce Service Providers
• Hosting Services and Managed Services
• Digital Commerce Ecosystem
• Distributed Order Management
• Payment Solutions
• Commerce Search
• Web Content Management
• Personalization Engines
• Digital Analytics
• Customer Journey Analytics
• Digital Customer Acquisition for Service Industries
• Marketplace/Channel Integration Platforms
• Social Commerce
• Subscription Management
• Configure/Price/Quote
• Master Data Management
• Warehousing, Logistics and Fulfillment Service Providers
• Marketing Automation
• Assisted Selling
• A/B and Multivariate Testing
• Cool Vendors in 2014 and 2015

A great blog on different elements regarding eCommerce, from strategies to solutions and statistics. Here, one post that identifies the issues that prevent ecommerce deployment.

A recent survey and study confirms that shoppers want to receive notifications on their mobile phones when they are in store.

related article: http://www.the-cma.org/resource/leadership/enhance-customer-experience

study: https://www.the-cma.org/Media/Default/Core/Library/Publications/Using_Digital_Solutions.pdf 

1Atelier leverages a fully digital customer experience and strong back office systems to provide one-of-a-kind luxury handbags in 21 days instead of many months for traditional firms such as Hermes or Louis Vuitton.

WHY THIS IS IMPORTANT

Niche retailers and small handmade manufacturers should look into this new disrupting company for clues into how best to transform traditional industries that are based on hand-made, custom, high quality solutions and products. Going digital does not mean sacrificing customer interactions or hand-made manufacturing: it can revamp, improve and recharge the back office support systems and processes.

Amazon has invested heavily in warehouse automation to reduce costs and improve quality. It holds an event every year to select the best robots to accomplish warehousing tasks, this year to pick different items from store shelves.

WHY THIS IS IMPORTANT

Looking at the video it is clear that the technology remains primitive. That being said, with large investments made by Amazon in Kiva autonomous warehouse robots in the past, it is clear they are serious about warehouse automation.

It is clear that order fulfillment and delivery remain the 2 bottlenecks of eCommerce providers, adding costs and delays to the process compared to brick and mortar retailers. If Amazon could develop fully autonomous warehouses and have low cost delivery by leveraging Amazon Fresh grocery delivery trucks, it could have a profound impact on the viability of online pure plays and mark the decline in store-based commerce, which still account for 95% of all sales in the USA today.

Gartner research provides 3 recommendations of digital merchandising.

WHY THIS IS IMPORTANT

Merchandising is the least considered element of the digital eCommerce pillars (others are strategy, marketing, selling, fulfillment and support). This paper reminds us that eCommerce relies on detailed, accurate, and timely information about products because it is what consumers rely on mostly when making buying decisions. It is thus important to include merchandising activities as part of a balanced digital transformation roadmap.

Gartner survey of marketing leaders provides insight into where marketing organizations spend their budget. Their analysis shows that having an impact on sales has become more and more important for marketing departments to demonstrate the value of their spending.

WHY IS THIS IMPORTANT

No longer can marketing be just about drawing customers to the store doors. This survey shows that data and analytics now provides the means to measure the impact on sales that marketing activities provide and that leaders are asking their marketing department to demonstrate the return that their activities have on sales.

Jeff Bezos said during Code conference that Amazon will not get into the delivery business to replace partners - but will supplement it heavily.

I wrote before that amazon will get into the grocery food delivery business because it is the only way they can reduce their delivery costs - costs they have to give to fedex, purolator, USPS and others. So basically they will go into grocery business to break even and get free local delivery in certain key market areas. 

Recently, Walmart has begun pilot tests to deliver groceries using UBER (http://www.reuters.com/article/us-wal-mart-groceries-idUSKCN0YP0H6?il=0). This sounds like a great idea, focussing on each other's strength (walmart = products & logistics, uber = delivery) with no investment to access huge volume. This option may not be as efficient as the Amazon model however but be a great solution in periods of high volume.

To see what I wrote about this, see http://www.scoop.it/t/digital-transformation-of-businesses?q=amazon+fresh 

WHY THIS IS IMPORTANT

Delivery remains the biggest cost for online retailers. Between 10% to 20% of retailer costs are sunk into delivery. This remains a huge hurdle for both retailers and consumers compared to physical stores. I expect online retailer to be more and more creative on the delivery front to reduce costs and deliver faster.

Established eCommerce retailers should look for opportunities to improve delivery and newbies to never underestimate delivery as it is the CORE to make or break their online retail business. Mark my words... 

This is not an article about grocery retailing but rather a demonstration of what the future holds for retailers and the stores they have.

With eCommerce, no longer do stores need to be mini warehouses with racks and shelves full of products. Today, eCommerce and automated picking can replace this more economically - remember Amazon mantra "your margin is my opportunity". 

What retail stores will become is more like an Apple store than a costco:

1- a showroom for your products

2- a learning center on how to best use your products

3- a help center to get you out of trouble if that should occur

Exactly the layout of an Apple store. What would this look like in a grocery store? Well something like the picture in this paper

1- showroom for perishable products like meat, deli, seafood, produce, etc.

2- areas for cooking recipes, sampling, promotions, tastings, etc.

3- areas to prepare cooked meals to get you on your way without having to prepare a meal

The rest - grocery products in boxes and cans - will be prepared automatically in a fully automated warehouse in the distance by robots who know what you've bought in the past and what you are missing in your fridge or need to prepare that recipe you just tasted. Delivered to your car's trunk in the parking lot.

Give it a few years and this should become reality....