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Shall we leave the future of shopping to Amazon?

Photo: Copyright: POS TUNING | pixabay.com
POS Kompakt - Issue 01/2017

The days when Amazon was just an online retailer are long gone. As early as November 2012, Amazon founder Jeff Bezos announced on American television that: "We would love to open stationary shops." Amazon just didn't know how. Now that has changed. Amazon announced its latest coup at the end of last year: Amazon Go. A fully automated convenience store in Seattle - unfortunately not open to the public for now.

The announcement of this format alone, which obviously is not yet ready for market, sent huge shock waves through global retail. Not only that more than 60 billion euros of turnover is now generated through the Internet in Germany, with approx. 4/5 of it through Amazon according to the trade journal, but also that all traditional retailers are enviously looking toward online retail with its annual growth rate of almost 10% and - to a lesser or greater extent - are trying to grab their share of the pie. Whilst traditional retailers have been arguing for more than 10 years about whether it is multichannel or omni-channel and about how to get their own ranges onto the Internet, Amazon is now turning things around and going on the stationary attack. So the question is no longer: will stationary retail disappear? But: who will operate it?

The prerequisites needed to also be successful in stationary retail, are conceivably good for Amazon. The top online pupils have continuously and strategically tuned their logistics. The Amazon processes and infrastructure are now so good and so huge that Amazon is now freely offering its expertise on the market. The product is called "Fulfillment by Amazon". According to Internethandel.de, a pallet space costs approx. 4.25 euros per month, a stock movement costs between 1.20 and 1.50 euros, the one-off charges per assignment are 99 cents and shipping is charged at 20 cents per kilogram. Lots of small retailers certainly cannot achieve sophisticated logistics with high availability for that money. The commission charges are also bearable at 7-15%. However, Amazon does not just offer its logistics to third parties. The provision of the Amazon server for hosting services contributed almost 10% to the 107 billion USD turnover in 2015. Another aspect is that Amazon has now taken over from Google as a product search engine. Amazon answers around 33% of the product related searches, and Google only manages 14.3% according to the study "Cross-Channel Turnaround".

Amazon also experiments with various technologies to find their place inside the shopper's own four walls. Two good examples are the Amazon Dash-Button and Amazon Echo or Alexa. Whilst the Dash-Button reorders a certain product from Amazon at the push of a button, Alexa is Amazon's ears in the shopper's home. With simple speech activation, Alexa can maintain the shopping list, amongst other things, and the order is "of course" placed with Amazon. For a long time food retailers in particular were delighted that German shoppers obviously weren't hugely interested in online shopping, Click & Collect or delivery services. We have seen lots of providers come and go and statements about the profitability of the corresponding offers by established German retailers are never made. Now Amazon is launching Amazon Fresh. Rewe boss Alan Capparos promptly sends out the warning "we'll have to wrap up warm" in the Rheinische Post. According to a study by Oliver Wyman, in future six to eight billion euros could move from stationary food stores to online delivery services. Even if the food magazine for Amazon Fresh "only" predicts a turnover of 120 million by 2021, we have to remember that lots of stores will no longer be able to remain successful if the average shopping basket in stationary food retail reduces by just one to three euros per purchase, according to Wyman. The analysis shows that around 15 percent of supermarkets – 1,500 to 1,700 in real figures – will soon be making a loss if this forecast comes true. Around 40,000 jobs in stationary retail would be on the line.

Josef Willkommer comments on this in his blog on the Techdivision.de site as follows: "The comfort zone in which classic retail found itself for many years has led to laziness and even to snobbery in some cases." And he continues: "On the one hand, Amazon, Zalando & Co. are named and shamed and are viewed as the nail in the coffin for classic retail, but on the other hand retailers often watch, without reacting, how the young, wild ones roll up their sleeves and produce some cool "shit" with their commitment and creativity as well as the use of available and extremely powerful technologies and how they focus on the customer – as things should be in a buyer's market." Retailers certainly wouldn't answer with a "no" if you were to ask them if they are actually focussing on their customers. Although: focussing means concentrating on the essential and blocking out "background noise". Do retailers actually manage that? Or do retailers still concentrate too much on the necessary but bothersome side activities. Moving goods, displaying prices, pulling goods forward, cashing up. Shoppers can see that retailers are making an effort, but more with the goods than the shoppers themselves. This correlates with the fact that 40% of German shoppers perceive shopping in store to be a bothersome duty, according to a current study by Cap Gemini. 71 percent find it difficult to compare products, 66 percent are bothered by the long queues at the till, 59 percent complain that the advertising promotions in store are irrelevant to them and 66 percent simply cannot find the products they are looking for. This all culminates in the fact that 40 percent of shoppers believe that classic retail will no longer be important in future. On the other hand, three quarters of all shoppers still want to be able to see and feel the goods before purchasing.

Automation and digitalisation at the POS is helping to counteract this trend and create the famous "shopping experience" for the shopper. The aim is to eliminate bothersome tasks, to automate necessary processes - such as pulling the products forwards or paying - and to use the time resources gained to offer the shopper services. Amazon Go showed the way forward and Zebra Technologies also presented the corresponding technologies at this year's NRF in New York. And if you want to see how the future of stationary retail works, I would like to warmly invite you to the Euroshop and to POS Tuning's exhibition stand (hall 3, stand A96). Alongside new technologies for the automation of shelf maintenance, and true to the motto "automation, digitalisation, focus", we will be presenting the "Pocket Shop" - the shop for your back pocket with which shoppers will be able to buy online but stationary in future. If the shopper grabs a product, it automatically lands in his virtual shopping basket. If the shopper puts the product back, it disappears from the virtual shopping basket. Payment is also automatically made at the time when the shopper leaves the store. The Pocket Shop not only works in the shop, but also at sales machines. At the same time, the Pocket Shop is the direct link between the manufacturer, retailer and shopper. Functions familiar to the shopper from online shops can therefore also be transferred to traditional sales channels.

The current situation in stationary retail reminds me of the Sputnik shock from 1957. Amazon is on more than an equal footing in the race for stationary shoppers. Now it is up to stationary retailers whether they want to shape the future of shopping or leave the playing field to an American online book retailer. All that is left to say is: Happy Shopping!

Oliver Voßhenrich, CEO and Category Manager, POS TUNING

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