How Amazon and 7-Eleven are disrupting your dinner
Decades of corporate competition have transformed both our urban spaces and our consumption habits. Ambitious and aggressive, distributors now face the threat of increasing innovation. Convenience stores, on the other hand, have always been one step ahead of the rest. Neighborhood stores are guardians of social bonds, providers of everyday services, and a beacon of light and snacks in the dead of night — and, by definition, close to the hearts of their customers. Over the past few years, convenience stores have taken the world by storm. Now, they face the fight of their lives against Amazon and Whole Foods.
Walmart versus your local greengrocer
Thanks to increased accessibility to personal cars and a strong household affinity for consumption, massive Walmart-style hypermarkets realised their golden era after the Second World War in the United States and Europe. To maintain Walmart’s unbeatable low prices, the customer experience was standardised and homogenised to optimise sales margins. Longer aisles and a constant flow of new and improved products were installed on gargantuan sales floors. Locations were built just outside major city centers, which soon became emblematic landmarks of suburbia.
But convenience stores, with their extended hours and practical street corner locations, have never really disappeared from city centers. In Europe, following the first wave of supermarket competition, traditional greengrocers were replaced with new arrivals: oftentimes immigrants from North Africa or Pakistan. These shopkeepers on every street corner inspired new concepts such as Causses, a Parisian quality grocery store opened in 2012 by Alexis Roux de Bézieux. The entrepreneur is also author of the book L’Arabe du coin, published in 2008. ‘Corner stores of all that is essential’ are highlighted in the publication as guardians of social bonds in local neighborhoods. Meanwhile, those involved in distribution have also sensed the commercial potential that lies in these local markets. Monoprix was the first to introduce its smaller ‘Monop’daily’ and ‘Monop’’ offerings into small neighborhoods. Other corporations have not stayed idle, however: Carrefour has taken over Shopi, 8 à Huit, and Marché Plus locations and converted them into Carrefour City, Système U and U Express stores.
“What the customers want, when and where they want it”
On an international scale, 7-Eleven, open 24/7 since 1963, is leading the charge with more than 56,000 locations around the world. The convenience store’s mantra echoes back to its founder, Joe C. Thompson Jr., and his declaration to ‘give the customers what they want, when and where they want it.’ The American corner store chain has been establishing itself as an international presence since the 70s, and it has enjoyed considerable success in Asia, particularly in Japan. Indeed, the multifunctional convenience store, known in Japanese as konbini, is an irreplaceable part of the urban Japanese landscape. The archipelago, similar in size to the Italian peninsula and comprised of eighty percent mountainous zones, reports nearly 55,000 convenience stores across its islands.
The konbini (Japanese abbreviation of ‘convenience store’) is much more impressive than the typical English interpretation. Open 24/7, 365 days a year, konbini have not only a wide range of food, drinks, and ready-to-eat selections, but also an assortment of essential staples varying from toilet paper, to stamps, to stationery, and to magazines. You’ll also find cigarettes, clothing, and services such as dry cleaning or ticket distributors. The aging population of Japan is also giving rise to a ‘senior economy’ — a new commercial opportunity to capitalise upon. Several stores offer free home delivery, particularly for older consumers who can even order a meal from a special dietary menu (low sodium content, low protein, easy-to-chew dishes, etc.) at an affordable price without ever stepping foot into a store.
Intensifying their efforts to personalise the customer experience and taking advantage of any and all technological advantages, the konbini have invested in data science in order to become a vital need of any urban resident. At the point of purchase, every item’s respective barcode is transmitted directly to the headquarters of the franchise, who will then restock the aisles in near-real time. And to go even further? Demographic measures, like age and gender, complete the data collection to further adapt the products offered.
The system continues to bear fruit: in 2008, the total sales revenue of konbini surpassed that of supermarkets in Japan. It thus comes as no surprise that 7-Eleven’s parent corporation, under the drive of investor Dan Loeb, has announced their intent to reconquer the American market with the objective of reaching 10,000 convenience stores by 2019.
The end of the hypermarket
The rise of the convenience store begs the question of how long Walmart and other hypermarkets will last. The American giant has not yet been able to successfully expand beyond its borders — a phenomenon that is not helped by the downward spiral of mass consumption in Europe. It is expected that by 2025, market share currently held by supermarkets and hypermarkets could drop to as low as 50% (as compared to 70% in 2014) in Western and Southern Europe. According to consulting firm Bain & Company, this market share will be picked up by discount stores, online shopping, and convenience stores.
So what are consumers really looking for? While convenience stores are focusing their attention on service proximity and experience personalisation in order to win customer loyalty, Amazon is investing their time and resources into new technology such as click&collect, drone delivery services, and its planned acquisition of Whole Foods.
Amazon eats up Whole Foods
Jeff Bezos, founder of Amazon, is moving forward with his projects by offering free next-day delivery and acquiring Whole Foods to establish a brick-and-mortar presence. The American online retailer is running full speed ahead on an international scale.
Amazon had already dipped its toes in the water with AmazonFresh, their grocery delivery service. Evidently, they decided it was time to take on the food industry in full force. The stock market erupted into a frenzy when Jeff Bezos announced his plan to buy Whole Foods Market in the US, for the pretty price of $13.7 billion. Share prices of hypermarkets fell as confidence in the traditional model of grocery shopping plummeted. Supermarkets were already competing against the familiarity and convenience of the corner store. Amazon’s planned purchase means Whole Foods has been injected with a powerful dose of technology. This has the potential to revolutionize the way we shop.
Who knows how Whole Food’s future will unfold. Perhaps Amazon will experiment with their cashier-less Amazon Go model of stores, or maybe their data analysis prowess will improve Whole Foods efficiency. One thing is sure: technology will be at the forefront of grocery shopping.
In a package-obsessed country, the delivery man is king
In France, Amazon is the leading retailer for goods excluding food, far ahead of Carrefour, Leclerc, and Monoprix. In Germany and the United Kingdom, sales on Amazon currently represent a third of total distribution growth.
The success of these internet delivery giants have incited real concern in classic distribution channels. Walmart, Monoprix, and even Carrefour have recently launched delivery services to avoid losing this critical sector of the market. The number of packages delivered is now colossal. In 2015, nearly 450 million packages were delivered in metropolitan France alone. In 2016, 52% of these deliveries were made to personal residences, according to the Federation of E-commerce and Distance Selling (Fédération du e-commerce et de la vente à distance, FEVAD).
Another challenge faced by traditional stores is the ‘last mile’ logistic challenge. Despite all the efforts made by transporters in a delivery services company, they still struggle with poorly parked trucks, and dodgy access permits. The final test is this: you can make purchases whenever and wherever you want, but in Europe, when the delivery man rings the doorbell, you must be around to open the door unless you cede reception to a delivery point. One of the greatest ironies: among the 15,000 partnerships made to offer a maximum of delivery points, a majority are found in small businesses — including your local convenience store right around the corner.