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jerryking : hub-and-spoke   3

Amazon Wants to Rule the Grocery Aisles, and Not Just at Whole Foods
July 28, 2019 | The New York Times | By Karen Weise.

In early 2017, a memo, “Grocery Shopping for Everyone," circulated inside Amazon that imagined an ambitious new grocery chain........The new stores, the document envisioned, would have robust sections for produce, fresh food and prepared meals. Nonperishable products, like paper towels or canned beans, would be stored on a separate floor, away from customers. Shoppers could order those items with an app, and while they shopped for fresh food, the other products would be brought down in time for check out. There would also be an area to pick up groceries ordered online and to manage packages for delivery drivers......A few months later, in June 2017, Amazon barged into the grocery business in a different way, by announcing a blockbuster deal to buy Whole Foods for $13.4 billion.......The memo and other big grocery proposals stopped circulating inside Amazon, as Whole Foods demanded everyone’s attention.....now, two years later, instead of Whole Foods being the answer to Amazon’s grocery ambitions, it seems to have only whetted executives’ appetites.

The marriage has made clear the difficulties of selling fresh food inexpensively, either in a physical store or through delivery. Bananas are not the same as books....But the combination has also shown glimmers of success, particularly in delivery. And that has provided some fuel to Amazon executives pushing to add another food-selling option — one built from the ground up that would change how people buy groceries.....Amazon is now quietly exploring an ambitious new chain, probably separate from Whole Foods, that is not far removed from the one outlined in the old memo. It would be built for in-store shopping as well as pickup and delivery.....“People really need to understand — Whole Foods is the beginning, it’s not the end,” ......“It’s not everything.”......In an effort to shed Whole Foods’ “whole paycheck” reputation, Amazon bought more from national food distributors and cut back on the local farms......Other price-cutting efforts failed. The former head of a major produce company said Amazon told him it wanted to sell marquee fresh items at low prices every day. The executive said he had to explain that certain products, like berries or lettuce, may be available all year thanks to global supply chains, but that they cost more in the off-season. Forcing flat, low prices would put too much risk on growers.

Amazon executives, the person said, were caught off guard by the response. It didn’t seem as if they had fully appreciated how seasonality made predictable pricing far harder than selling cereal or paper towels.......Amazon has also run into some trouble integrating Whole Foods into its delivery machine.

Amazon never saw delivering cold milk and fragile fruit to doorsteps as something for the masses, according to former employees. Instead, executives thought of it as an option for people who wanted high-quality foods and could afford a premium price to have fragile and fresh items arrive at their doorstep......In theory, that was a good fit for Whole Foods and its affluent shoppers. Within six months, Amazon began making two-hour deliveries from Whole Foods in four cities for Prime members. Six months later, that had expanded to more than two dozen cities. It’s now available in 90.

But Whole Foods stores are not like Amazon’s delivery warehouses. Because Whole Foods sells so many fresh items, its stores have smaller back-of-house areas than a standard supermarket. That means employees who pick products for online orders must gather more items from the same shelves as shoppers. They roam aisles with scanners in hand, asking associates on the floor when they can’t find something......deliveries have shown big potential, making up almost all of Whole Foods’ growth......The promise of serving customers, but doing so more efficiently, has Amazon thinking again about aggressive investment in groceries.

Rather than dramatically substantially expand Whole Foods, .....Amazon is considering designing stores specifically with pickup and delivery in mind, and with a smaller area dedicated to fresh shopping — as the old memo imagined.....Amazon is interested in “creating multiple customer experiences under one roof.”.......Amazon has been looking for spaces close to Whole Foods locations, indicating a hub-and-spoke approach where one store serves as the warehouse and commissary for others.....To be a major grocery player, Amazon would need a little more than 2,000 stores, the old memo estimated. That’s far fewer than the 5,000 run by Walmart, the country’s top grocery seller, but more than the roughly 1,200 operated by Publix. Whole Foods got Amazon about a quarter of the way there.

A store designed with different shopping options......would be “highly scalable.”
Amazon  back-office  BOPIS  grocery  home_delivery  hub-and-spoke  in-store  Kroger  perishables  price-cutting  seasonality  supermarkets  Whole_Foods 
july 2019 by jerryking
Can Wal-Mart Clerks Ship as Fast as Amazon Robots? - WSJ
Dec. 18, 2014 | WSJ | By SHELLY BANJO, SUZANNE KAPNER and PAUL ZIOBRO.

The fast rise of rivals like Amazon.com Inc. and a far reaching change in shoppers’ habits has made it obvious that traditional retailers need to compete online. The trickier question is how to pull it off. Retailers’ answer is something called “omnichannel”—an attempt to use one set of inventory and assets to fill all orders.

The plan is driven by economic reality. Companies that already spend heavily maintaining thousands of stores aren’t able or willing to shell out the billions of dollars necessary to replicate Amazon’s 135-plus network of warehouses and fill them with inventory. While they are building distribution centers, they also hope some sweater sets can be shipped to online customers from a local Macy’s , or that Internet shoppers will pick up the television they ordered at a nearby Target.

Retailers are relying on the approach more heavily than ever this holiday season. It makes perfect sense in theory. In practice, though, the efficiencies possible in tightly packed, highly automated warehouse are hard to reproduce with inventory spread across stores built for live customers. Workarounds run up against space constraints, and items aren’t always where computer algorithms predict them to be.

“This is the first year,” said Jason Goldberger, head of Target.com, which is shipping orders from 136 of the company’s 1,800 U.S. stores. “We’ll learn.”

Big retailers have thousands of often sizable stores built near where their customers live. But the chains were built decades ago on a hub-and-spoke model. Pallets of goods were trucked to centralized warehouses. From there, boxes were sorted and transported to thousands of stores. Now with e-commerce, retailers are faced with delivering millions of items to millions of customer homes.
Wal-Mart  Amazon  omnichannel  distribution_channels  hub-and-spoke  retailers  supply_chains  e-commerce  automation  distribution_centres 
december 2014 by jerryking

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