What he thought would happen two decades ago is happening now. It has big implications.
I was in college in the late 1990s during the dot.com boom. I was enthralled by the promise of the internet when it comes to commerce. One of my job offers upon graduation was with Amazon.com.
Back then, internet evangelists swore there would be a quick demise to bricks-and-mortar retailers. WebVan would destroy the grocery store. Amazon would destroy Wal-Mart.
The bubble burst and this talk dissipated. Sure, Amazon and other online retailers put a dent in offline retailer’s sales, but it was limited to certain categories. Certainly, pet food and consumer staples would always be the domain of bricks-and-mortar stores.
Now, nearly 20 years later, the move from offline to online commerce is quickly escalating.
A few weeks ago, Target announced lackluster sales. I’m not surprised.
I’m a Target fan. For many years, my wife and I would venture over to Target every couple weeks when we ran out of paper towels and soap. We’d enter the store for these low-margin “hardlines” but end up spending lots of money on high-margin “softlines” like t-shirts.
We rarely visit Target anymore, and ecommerce has a lot do with it.
Amazon Prime lets us order most of the items we used to buy at Target and get them within a day or two with no shipping charge. Amazon Pantry makes it easy to get things like soap.
And if we need it today? Amazon now has same day shipping, or we can use Amazon Prime Now to get items delivered within an hour.
Now Wal-Mart is making this easy, too, with free two-day shipping on orders over $35. Why drive to Target to pick up toilet paper and paper towels when you can get them delivered in a couple days for the same price?
There’s also a shift happening offline that is hurting stores like Wal-Mart and Target: Grocery stores are learning to adapt to a changing reality.
Our local grocery store HEB is now offering most of the sundry items that Target offers for less money. We used to drive to Target for paper towels because grocery stores treated them as a convenience item and charged and arm and a leg. Now they are less expensive for key items.
Grocery stores are under attack at the same time but are doing a good job fighting back. They are under attack by Amazon Pantry and various food-in-a-box services like BlueApron and Freshly.
Our local Randalls grocery store offers cardboard box recycling. It’s a bit ironic when I drop off packaging from these food services in their recycling bin.
But HEB is adapting. They now offer lots of pre-packaged meals. Services like Freshly, which deliver prepared meals similar to Snap Kitchen, don’t stand much of a chance next to our grocery store’s offerings. The grocery store has cheaper prepared meals without all of the shipping waste.
Don’t have time to pick them up at the grocery store? Instacart will do it for you. Or open up Uber Restaurants to get Snap Kitchen delivered.
Having a hub in the local area is key to the future of online retail as customers expect goods now. Two days used to be considered fast. Now that seems like an eternity.
The next decade will be filled with the carnage of certain types of bricks-and-mortar stores. What we expected 20 years ago is now becoming reality.
Of course, this can mean good things for domain names. As goes internet growth, so goes the need for more domain names. Except when I order goods on my Amazon Echo.
Paul Nicks says
As with anything, it’s adapt or die off. My local grocery store now offers online ordering and free delivery, saving our family time and money in the process. It doesn’t take a .com to innovate, but it does take innovation to thrive.
Ammar Kubba says
Great insights, Andrew… I just heard from one of my investment advisers that Amazon was looking at Whole Foods. Makes perfect sense, especially given the “local presence” push by the largest online retailers. I can foresee a time when online-only retailers “partner” with local shops to fulfill orders.
Josh says
I agree Andrew, online grocery is back in a big way.
However I always felt that there are a lot of items people like to select themselves from certain departments, like meat, fish etc. So while I believe it will take a huge bit out of brick and mortar I also feel some segments will survive in store.
Also speaking of Amazon, I read about a year ago Amazon was testing drive through grocery stores.
Because after all sometimes you need to pick up stuff on the way home not when you get home.
Salamander Joe says
Yeah, I was off by 20 years also. I thought it would have happened by at least 2002 if not sooner. I was way off.
Wes Martin says
The Supermarket concept itself was a satisfaction of the same concerns which now threaten their own livelihoods.
Supermarkets consolidated the local butcher, baker, milkman and more and more over time and the local store owners cried out before shutting down.
Now this “convenience” they once offered can not beat the swiftness and agility of the online retailer.
Perhaps one day even the e-tailor will be outdone by a new form of convenience down the line but the entire reason Amazon even exists is because a vacuum of potential thast went unaddressed for years. The offline retailers didn’t move into this empty space and fight hard enough to invest in this market opportunity so Amazon came in and scooped up all the free money.
Offline retailers that didn’t carve out an online presence will go the same way as the Neanderthal or the Dodo, eclipsed by the light of progress and something we evolved past and grew out of.
has2hands says
I always tell my wife we are reading Amazon books; watching Amazon content; listening to Amazon music and using Amazon for our main items and sundry items.
Why?
Because they make it so easy and convenient ….and at good price points.
I even have 30 lbs of dog food delivered right to my front door.
bladel says
Reminds me of this recent article:
The Great Retail Apocalypse of 2017: https://www.theatlantic.com/business/archive/2017/04/retail-meltdown-of-2017/522384/
The per-capita square footage for retail space in the US, compared to other countries, is astonishing.
M. Menius says
Interesting. We have been watching this unfold, i.e. the recent increase in online ordering and grocery delivery. Whole Foods was the first here in Greensboro, NC to offer grocery delivery within 2-3 hours, but within the past week Harris Teeter began offering same day delivery. This is a game changer. I expect huge numbers of people will begin ordering from home and save themselves the trip to the grocery store.
John says
Seriously…
You really want to trust some strangers to choose produce for you? Things like apples, potatoes, bananas, etc. Even packages of beef and steak.
Is it just me?
Andrew Allemann says
Since you rate your picker they have an incentive to only pick the best produce.
John says
Thanks. Never knew that. I hope they all have that.
M. Menius says
“You really want to trust some strangers to choose produce for you?”
Haha, I think I’d be willing. Hopefully they would not pick any rotten bananas. 🙂
Robert says
Incredible…Amazon and Prime have truly changed my life. Household items I need get delivered next day. We aren’t in vicinity for same day delivery but will be soon. Time saved looking for a good brand name item – tremendously. It’s time back Amazon gives us that makes it worth while