There Are Some Things That Money Can’t Buy, For Everything Else There’s Amazon
The shopping of tomorrow is all about skipping that checkout line
A hearty welcome to the fourth edition of The Logistics Rundown, a weekly digest that aims to put some perspective on what’s brewing within the logistics industry. This is a space where we religiously dissect market trends, chat with industry thought leaders, highlight supply chain innovation, celebrate startups, and share news nuggets.
We’ve all queued and been frustrated—rushing to a convenience store on a Friday evening for quick weekend groceries, only to line up at the checkout. Checkout queuing times average around three minutes across supermarkets. While this might not sound much, more than average waiting times can prove costly to the store. Research shows that people made to stand for more than five minutes in a queue would perceive it to be twice as long. And roughly 80-90% of customers who experience longer waiting times switch to a competitor.
Lesson 101 for supermarkets: impatient customers disappear, and checkout queues can kill the business faster than empty shelves can. While comparisons between e-commerce and physical retail would not make sense here as they are fundamentally different business models, physical retail has a lot of room to improve.
Lesson 101 for supermarkets: impatient customers disappear, and checkout queues can kill the business faster than empty shelves can.
Trust Amazon to know this. The company first launched its flagship Amazon Go store within its Seattle headquarters in late 2016, keeping it open only for its employees for a little over a year. The public had access to it from 2018, with the company opening 28 more stores across the US. What is phenomenal about an Amazon Go store is the simplicity packaged into the buying experience—scan your phone as you enter, grab what you want from the aisles, put them in your bag or cart, and ‘just walk out.’
Behind the scenes, Go stores are armed to the teeth with technology. Cameras and sensors line the store’s ceiling and product shelves, with everything that is put in a cart or taken off the shelf being recorded. These images are fed in real-time to AI-based computer vision algorithms that process visual data to bring about a seamless cashier-less buying experience.
Amazon calls this Just Walk Out Shopping. While this might sound nitpicky, I believe it is essential to draw a line between ‘shopping’ and ‘buying.’ Although Just Walk Out is the perfect place for you to do your grocery buying, it might never end up being a place that customers would pick for their merchandise shopping.
But that does not matter; Amazon Go stores were possibly always meant to be places for people to buy rather than shop. Go stores look to fit perfectly in Amazon’s grand scheme of things—while they can fulfill most’ daily needs’ of customers, Amazon’s e-commerce sprawling business can appeal to shoppers looking for something very specific, like shoes or travel bags.
Amazon Go stores were possibly always meant to be places for people to buy rather than shop.
This all gets down to how people consume. For instance, people usually think of buying groceries only when they run out or are about to run out. No one looks to stock up on Romaine lettuce or strawberries for a month. In the absence of drones airdropping groceries into houses, it’s safe to assume people would be more interested in dashing to their neighborhood supermarket than await an e-commerce purchase.
That said, other retail B2C interaction models are cropping up. Several physical retail outlets have introduced a concept called ‘buy online, pick up in-store’ (BOPIS)—an omnichannel option that can directly rival the sophistication of an Amazon Go store, albeit more mellow.
Users go online to check the store they would like to pick up groceries from, select items, pay for them, and get to the store to pick them up. Following popular demand, Amazon has also introduced BOPIS across its Whole Foods stores. While such solutions are easy to integrate within any tech-forward retailer, a solution like Just Walk Out has a technology moat around it that stops competitors from aping the offering.
But clearly, Amazon does not look to keep Just Walk Out to itself. It has partnered with other retailers to bring its cashier-less convenience store technology to similar stores, even if they are market rivals. While this might be surprising, Amazon is merely repeating what it did with Web Services before. Amazon Web Services (AWS) was born out of a personal need for Amazon. AWS later spun off into a separate entity and is now—unironically—the most profitable business within Amazon’s massive roster.
By strengthening its market presence across all aspects of ‘shopping’ and ‘buying,’ Amazon is steadily building a retail bastion that might rival Standard Oil’s hegemony in US oil production in the early 20th century. As is visible from Amazon’s practices, it is inevitable that the company’s rise would be the death knell for hundreds of thousands of retail businesses. Whether Amazon would come under the regulatory hammer as Standard Oil did remains to be seen, but what’s clear is that retail checkout queues are slowly becoming the thing of the past—thanks to Amazon.
The Weekly Roundup
🚚 General Motors has set ambitions that go beyond automaking, as its CEO Mary Barra looks to refashion the company into a diversified purveyor of mobility services. The intent is to bring in recurring revenue via SaaS-based solutions that kick in after the initial product is sold. This is in line with the larger trend of automakers choosing to make their vehicles ‘smarter’ and keep inching closer to their goal of full autonomy.
🚢 South Carolina Ports announced that it had the best throughput in history this March, on the back of import volumes that have remained consistently high throughout this year. The port of Charleston saw volumes that were 34% higher year-over-year. The port has also got a new state-of-the-art terminal that adds 700,000 TEUs in annual throughput capacity, which will help the port continue registering high cargo handling performances.
🚗 While the entire auto industry is suffering from semiconductor chip shortages, Japanese auto major Toyota seems to be the salmon swimming upstream. Toyota has largely evaded the chip crisis, in part due to high visibility into even its Tier 3 and Tier 4 suppliers. The company has also learned from a previous crisis—the 2011 tsunami—to understand the need to hold sizeable inventories on critical parts for increasing flexibility.
💲 The US trade deficit is expected to widen by 4.8% to $71.1 billion, its largest on record yet. That said, the overall value of imports declined by 0.7% to $258.3 billion, as demand for food and automotive purchases cooled down. Trade experts believe the US trade deficit will remain high as its economy will be one of the fastest-growing in the world this year, boosting import volumes.
🛤️ The Suez Canal incident has caused a spike in demand for China-Europe intercontinental rail service, as frustrated shippers shifted from maritime to the railroad for pushing their cargo from China to Europe. Space availability on these trains was already tight due to prevailing high maritime freight costs and container capacity constraints. China-Europe rail volumes had seen huge gains last year and through this year, with volumes up 96% year-on-year in the first two months of 2021.
...said who?
“Today is the Suez Canal, yesterday was the pandemic and tomorrow is hurricanes.”
- Shehrina Kamal, product director at supply chain risk consultancy Everstream Analytics, while commenting on the need for supply chains to be prepared to tackle black swan events.
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