by Smoke | Jul 17, 2015 | Blog, Brand Management, Distributors, Supply Chain
I have to admit, when I first read about the same day delivery service I was a bit skeptical.  How would it work? Why would I really want it? Could anyone really do it at scale on a sustained basis?
Experience:
Well, early this morning I was reading the news on my iPhone and received a message from Amazon that all Prime members now had access to same day delivery (1-2 hours from order) through its new service called Prime Now.  #PRIMENOW  It piqued my interest. Is this real? Can they really pull it off? So I downloaded the Amazon Prime Now app and started browsing. I was amazed at the breadth of offerings from grocery to sports to electronics and more. I’ve been in the market for a luggage rack for my truck and found exactly the type I wanted. I knew we were out of eggs and browsing the groceries made me think about breakfast so I added some free range organic eggs and all natural sausages. Click click click and my order was in process.
They gave me a delivery window of 8-10am (my order was placed around 5:45am). I received my order exactly as expected at 9am and was able to make breakfast before the rest of my day unfolded. The driver told me I was among the first 10 orders in Indy. This was a profoundly positive experience.
Amazon Prime Now is currently available in Atlanta, Baltimore, Chicago, Dallas, Indianapolis, Manhattan and Miami. The service will continue rolling out to additional cities in 2015
What does this mean?
It is a game changer. Not immediately, but with a sustained effort, I believe this could drastically change how consumers (and businesses) think about behave with their purchasing.  Home delivery is great and has been around for a long time (think the milkman of old, bottle water delivery etc). We get deliveries from Amazon and tons of other companies all the time. Some of these are next day or 2nd day which is super convenient.  We get a weekly grocery delivery of organic and locally grown produce from Green Bean Delivery which is FANTASTIC! We have to plan our order by Monday at noon and receive our delivery of groceries on Wednesday of each week.
All that said, the idea that one can simply run out of something or decide one “needs” (wants) something, almost anything, and make it so two hours later is different. This is what 90% of running errands ends up being. Going to the store for this and that and picking up a few things in between larger shopping trips happens to all of us (or our families) every day. What if we could cut most of that out? What if you need something you simply think it (a couple of swipes is not much work) and it arrives in about the same time it would take you to go out and shop, pick your items, load your car, drive home, unload your car. This requires a different kind of thinking around what is possible, but I don’t think its a that big of a leap for most of us.
Implications:
For Consumers
- Time – For no extra cost (driver tip cancels out gas you would have used perhaps), it frees up time. How much time in a week do we spend running to the store, shopping and returning? 4 hours? 8 hours? More? What more productive things or fun things can one do with that time. It is big.
- Convenience – No need to plan very far ahead, need something, make it appear with no effort. Wow.
For Small Business
- Time – Same as above, many small businesses buy things by shopping. Eliminate that need and do you eliminate a need for headcount manning the store while someone is out buying supplies?
- Service – out of something? – now you can replenish immediately and provide your customers whatever you were missing in a short time.
- Investment savings – reduce safety stock/inventory on certain items and replenish each day as needed. For many small businesses (and large) space to store inventory is a real issue. What if you could simply replenish as needed? Though this service is focused on consumers, for many small businesses, it could be a better alternative to traditional distribution or running to Costco or Sam’s Club for stuff. I’d expect Amazon to build out this aspect over time.
For Retailers & Distributors
- Increased retail competition – just when you thought it could not get worse for retailers, it is getting worse. Things that one swings in to just grab could be diverted to this. Think of convenience, pharmacies (e.g. Walgreens and CVS), grocery (Walmart, Kroger, Safeway, Publix), electronics (Best Buy, Costco, Walmart, Target), sports equipment (e.g. Dick’s, Sports Authority).
- Increased distributor competition – the businesses that source from traditional distributors could shift some of their purchases to this kind of model. It will create the need for distributors to up their service level to stay competitive which can also drive up their costs.
Overall, I think I just experienced the future today. I’d love to hear your thoughts.
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by Smoke | Mar 9, 2015 | Blog, Brands & Distribution, Distributors, Law and Policy
Last week I wrote about Channel Conflict in the 3 tier system of alcohol distribution between wholesalers and Anheuser-Busch Inbev and the craft community. I received quite a few interesting comments from my friends on both sides of the issue.  One highly respected industry member commented to me “Very nice job trying to ride the third rail of these issues and explain a complex issue in simple terms.â€
Well here goes again with an issue that I get asked about frequently. Another interesting channel conflict is between and among the members of the retail tier. This channel conflict involves questions regarding who (what types of retailers) can sell which types of beverage alcohol and when alcohol can be sold (e.g. Grocery Sales of beer spirits and wine and Sunday Sales). These questions are raging across the country in different states. The conflict pits independent liquor stores (and specialty chain liquor stores depending on the state) against the corporate chains (Costco, Kroger, Publix, Target, Walmart etc). An example of this is the Sunday sales of alcohol at retail in Indiana. After passing out of committee with a “poison pill change†Sunday sales was killed in the Indiana legislature. Sunday Alcohol Sales Meet Familiar Fate.
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In a closely related question pertaining to which type of retailer can sell which products, in 2014 Tennessee passed a law allowing grocery stores to sell not only beer, which they already could sell, but also wine. Wine in grocery stores passes; what’s next?
In Florida, Walmart and others are pushing legislation for the right to sell spirits within the same store as groceries and not be required to have a separate stand-alone entrance. Publix, another grocer, does not support the change since they already have stand-alone entrances throughout the state. Beer and wine are treated differently in Florida and groceries are able to sell inside a grocery store. Publix opposes, Walmart backs Florida bill to let grocers sell liquor. Update – More Here: Florida: Spirited Battle Ahead over Florida’s Liquor Separation Law
3/23 Update: Beer bill on tap in Florida House on Tuesday
In some cases, these fights are spilling over into the courts and not just the legislatures. Walmart lawsuit highlights Texas’ surprising alcohol laws. In the case of Texas and Walmart’s litigation, it is about their right to sell products that the specialty retailers currently have a lock on and have created work-arounds for ownership of large-scale chains. UPDATE:
The reality is there are so many new brands, it is hard to keep up with them all, for people in the industry, let alone consumers. This proliferation of new brands is driven by today’s consumer thirst for new things, literally. Generally speaking, I believe more open markets are better for consumers, but taken to extreme can cause massive consolidation and the independent specialty liquor shops and specialty chains find themselves at a significant disadvantage to the corporate chains. Markets like California and Arizona are examples of wide-open sales of beer, spirits and wine. This has been the case for a long time. In these markets the corporate chains dominate the retail landscape. The independent sector is a much smaller portion of the total business. The large specialty chains have also been very successful in these markets (Bevmo! and Total Wine & More).
The relative advantage of full line retailers (grocery) is what is driving the fights over Sunday sales. Liquor stores are not open on Sundays, but the grocery chains are. The groceries of course want to be able to sell alcohol, as they are open, fully staffed and have consumers in their stores who would like to purchase it. The liquor stores would have to man their stores with staff and the thinking among many is the incremental sales on Sunday will simply come out of sales during the week they would get anyway. Their worse fear is that the groceries will end up with a greater share of the incremental business with so many consumers already shopping in their stores on Sunday. The package stores won the recent Indiana fight by taking a quite reasonable position – that all retailers should be under the same sets of laws. In the end, the groceries could not support losing the significant freedoms they currently have just to get Sunday sales.
To people (consumers) who live in both more “open†or “closed†states, these fights seem strange indeed.  There has been a long-term trend to more liberalization of alcohol laws on a state-by-state basis. But this liberalization has been gradual and certainly not continuous. As the large grocery/mass retailers have shifted their attention to gaining share of the increasingly important beverage alcohol market and Total Wine continuing their massive expansion around the country, the independent sector will continue to be under pressure and where organized, able to continue to slow the pace of change through state legislatures and regulations. That said, the most strategic of the independents and specialty chains are innovating and investing
in their ability to serve their customers and compete effectively with the other retail sectors. Walmart and most other full service retailers will never have the specialized staff that a focused specialty retailer of alcohol can have (There are exceptions on a store level, but this is true overall). This high level of knowledge and service with customers is what will keep consumers coming back. I think the bigger fear is a large specialty retailer (Total Wine) that has it all – scale ($1.5 million in alcohol sales) and low pricing, product depth (10,000 skus typically) and highly knowledgeable employees. They are very strong.
The wholesalers and most of the suppliers all try to stay out of these arguments, since both sets of retailers are their customers. DISCUS (Distilled Spirits Council Of The United States) though has a long-standing policy to fight against anything that disadvantages spirits to other types of alcohol. They have been quite effective on this front in many markets. The craft (beer, spirits and wine) producers definitely benefit from a thriving independent market as they get more opportunities for their smaller or new brands than in the corporate chains, but they also benefit by having a more open market with multiple channels for consumers to buy alcohol. It’s a tough balance to maintain with many competing interests, but in the end the market will drive it, albeit more slowly than many consumers want with the local legislation and regulations market by market.
I’d love to hear you thoughts on these issues and other examples in your state.
Cheers,
Smoke
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