We seem to be in the midst of an accelerated Darwinian moment. Many retailers of non-essentials with weak balance sheets are not going to survive COVID-19. When we come out of our quarantines in a month or so, though, we will see unprecedented levels of consumer demand, I believe. Those retailers that were able to hold on are going to be in great shape, with significant pent-up consumer demand and less competition than before.
This was a good move on Costco's part. Led by Amazon, we are seeing many other retailers bring delivery in-house via acquisition (Target/Shipt, H.E.B./Favor). Many others, I believe, will build out their own delivery networks rather than acquire. This is undoubtedly driven by a desire for control and differentiation.
This is similar to another initiative on behalf of independent booksellers from 20 or so years ago. Booksellers shouldn't expect that it is going to make a material impact, but I can't think of a reason to not participate. If nothing else, it offers an opportunity to make some money on books that they don't have in stock. Today and forever, though, the key to successful independent bookselling is the store experience. I'm blessed to live near one of the best in Madison, Connecticut - RJ Julia, which is always a pleasure to shop. Awareness of price flies out the window as its comfortable environment and passionate, friendly, knowledgeable staff entice one to stay longer and buy more.
This is exactly the same issue that regulators are wrestling with on the media side: Are tech platforms responsible for what happens on their platforms? Media companies have protection from Section 230 of the 1996 Communications Decency Act - at least for now, but we have generally presumed that this concept extends to commerce as well. Clearly, on both fronts, the government needs to play a more active role regulating these media and commerce platforms. Is Congress equipped to do this properly, though, with a membership that can be charitably characterized as tech non-savvy? Will the fix (and its unintended consequences) be more damaging than the problem? I'm not optimistic.
Scaling local experiences seems to me to be an oxymoronic concept. A more constructive way to think about this opportunity, which is scalable, is to empower local store management. Hire strong, creative managers that are from their local markets, listen to what they suggest, give them money to spend against the opportunity, let them share in the rewards when it works, and tolerate some mistakes in the spirit of learning.
The "meh" holiday performance of Walmart, Target and other brick-and-mortar retailers, I believe, is attributable to the short holiday season. With so many fewer days to shop, online became the best shopping platform, stealing store shopping trips. I'd not read this as a negative indicator for 2020.
This is a smart move for 7-Eleven. Profits from this store will undoubtedly not cover the tech development costs, but it allows them to hone important AI/Machine Learning/Computer Vision skills, observe consumer response, and create an informed strategy for what's next. And I do believe that cashierless checkout is the future in the convenience sector.
There are brands that need to remain politically neutral, but which can absolutely brag about doing good. Walmart is the poster child for this, generally avoiding politics but touting moves that are unambiguously good (like reducing electricity usage, paying employees well, etc...). There are other brands, those that aspire to connect with consumers emotionally, that absolutely can wade into political territory to cement their relationships with consumers. Like it or not, our political views are increasingly coming to define us in important ways, and the role of a brand is to connect with us in meaningful ways.
Sure online provides far better quantitative tracking of consumer behavior, but having tracked retail clickstream behavior for years, I can tell you that understanding attitudes and motivations behind those behaviors is a huge gap for online. A brick-and-mortar retailer that is well staffed with good employees that listen to customers, and that funnel their collected feedback up the organization, can have a richer understanding of their shoppers' behaviors, intents, complaints and compliments than online retailers.
Governments across the globe need to force manufacturers of disposable (and non-recyclable) packaging to bear the downstream environmental costs of that packaging. This will force manufacturers of non-recyclable/non-reusable packaging to increase prices, making recyclable/reusable options more appealing. Then the free market will do the rest.
BOPIS represents the single biggest advantage that brick-and-mortar retailers have over Amazon. Target says that a BOPIS order costs 90 percent less to fulfill than one from a traditional fulfillment center. Offering BOPIS is officially a no brainer for a retailer (although many still don't offer it). The next big choice that retailers have to make is whether to force consumers to come into the store to pick up their order (with the hope that she adds an item or two to the basket) or whether they give her the option of curbside pickup (which is far more convenient for parents with kids in the car). Smart retailers will offer both, but provide incentives to lure the consumer into the store.
The U.S. e-commerce market is really a set of markets that are highly diverse in terms of population density and traffic flows, with widely varied consumer profiles in each. Thus there is not a one-size-fits-all grocery delivery solution in the U.S. The Ocado model will be right in some markets, microfulfillment solutions will be right in others. And others will be able to get away with old-fashioned employee picking. And of course, this will evolve over time as online grocery penetration grows in the U.S. from today's levels, which are low by global standards.
Interesting question! An acquisition is probably the only sensible way for any of these grocers to get into meal delivery for the following reasons: 1.) Given that this is a three-sided business (consumer/delivery person/restaurant) it would be extremely difficult for anyone to enter this relatively mature market now with a brand new offering without losing tons of money. 2.) Meal delivery is certainly cannibalizing grocery sales, especially among younger shoppers. 3.) And there is the possibility that a meal delivery force could be used to deliver groceries.
It wouldn't be without risks, though, with a price point at, or above, Grubhub's current $5 billion market cap because 1.) This space is becoming more competitive across all three dimensions (consumer/delivery people/restaurants) and 2.) California's AB5 brings significant risks that delivery people ultimately have to become employees.
If I were in strategic planning at any of these companies I'd look closely, but would probably ultimately decide against it.
Those opposed to this deal are, I think, assuming that this adds significant incremental cost or effort for Old Navy. It does not. Old Navy already fulfills online orders from stores through click and collect and they are charging $8.99 for deliveries that Old Navy employees are not delivering. This is a safe, tactical move. I don't believe, though, that the upside will be significant because I suspect that people are willing to wait a few days for apparel. But none of us know for sure in this environment where consumer expectations are changing so rapidly, fueled mostly by Amazon. I'd have done this deal were I in Old Navy's shoes.
I love the dark kitchen concept. Almost no one actually eats in the restaurants that I pick up lunch from in midtown Manhattan but those restaurants are paying very expensive midtown Manhattan street level retail rents. I see this as a metaphor for the broader retail sector, which continues to carry all the costs of legacy brick-and-mortar businesses in addition to the incremental costs that e-commerce adds.