Competing Against Amazon and Big Box

Here are some of my ideas for what I've been calling the "Better Bodega" or the "Micro Store of the Future." It's written in response to trends I've seen with Amazon and other Big Box stores.

Amazon, of course, is the disruptive giant in the world of retail. Lately they've started making and marketing their own line of branded products, a clear and present danger to other manufacturers and retailers. I can personally testify to having bought Amazon branded electronics like computer mice and ethernet adapters and also Amazon diapers. They were all of excellent quality.

Big box stores have responded in kind by adding their own online offerings, along with other improvements to their in-store experience, in an attempt to fight back. Target, for instance, was recently described in a Fastcodesign article as pursuing a high(er) end strategy, lead by an in-house team of over 300 designers. The goal would be to offer more and better things for less, all conveniently in the same place.

What I want to highlight here is a trend I'm seeing towards vertical integration, with companies selling their own products through their own channels. Additionally, I want to point out that quality isn't the same differentiator it once was. When everyone has the same access to the same outsourced contract manufacturers, everyone also has the same access to the same quality. Brand matters less and the channel itself matters more. The upshot is that if I was purely a product company, without a channel of my own, I'd be worried.

Amazon is clearly dominating the online channel and big box has it's own entrenched players, so in this Better Bodega thought experiment, rather than competing on just product or brand, I'd be looking for a different channel entirely. That's why I wanted to take a fresh look at the corner convenience store bodega and reimagine what it could be.

The bodega's biggest advantage is the natural monopoly it earns via proximity. If there is a choice to go to one of two corner stores, one on this block and one on the next one, the closer one wins 90% of the time. As compared to online or big box, the corner store has the potential to be faster and more convenient. It may not be cheaper, but the natural monopoly, combined with vertical integration, would provide an opportunity to win back margin. It doesn't need to be cheaper.

My vision for the Better Bodega is something like a cross between Trader Joes, Ikea, and CVS, miniaturized and heavily curated for each neighborhood, tailored to fit the individual footprint of the store, between 100-2000 sqare feet.


Besides the advantages of being down the street, I see it competing in a number of ways:

Discovery

Part of the fun of going to the grocery store (especially Costco!) is the fun of finding and trying new things. Amazon has it's own recommendation engine, but online discovery just isn't the same. Each trip to the corner store could bring something new, and each neighborhood store would be worth exploring in it's own way, to see how it differs from yours.

Curation

The size of the store would naturally force carefully selection of what it stocks on shelves. Each store manager would have responsibility for this. This may sound scary, but I point to Waterstone's bookstore, in the UK. They had an incredible turnaround by allowing each store manager to tailor their in store experience to the surrounding neighborhood. Rather than sending them planograms and dictating what to do, each store manager, well... managed.

Trust

This leads me to my next point. One of my favorite marketing books is Seth Godin's "Permission Marketing". In it, he presciently predicts the rise of relationship, as opposed to interruption based marketing, and in the mid-90's, predicts exactly what Amazon turned into today. Here's a great quote:

“in virtually every industry the most trusted brand is also the most profitable. Frequency led to awareness, awareness to familiarity, and familiarity to trust. And trust, almost without exception, leads to profit.”

Humans are social beings, meant to build relationships with those around us. Physical proximity and Frequency of encounters is a huge factor and what better opportunity than with the store in your neighborhood? One of the little bodega's in my neighborhood has an email list where the owner asked us what kind of loose leaf teas he should carry in his store. Unsurprisingly, he has a cult following.

The Last Mile Problem

The corner store also offers a great solution to the last mile problem and a perfect opportunity for a digital/brick and mortar hybrid. The last mile problem, if you didn't know, is simply that the largest logistical expense in shipping, is the last portion of the trip to the customer's door, where there is no bulk handling or economy of scale.

Amazon is currently testing pickup lockers, but they are not widespread enough for it to be truly convenient and it should be well tied to some price break on the shipping.

The corner store could potentially be the ideal pickup point for parcels, farm share boxes, meal kits (imagine a meal kit with no subscription plan! just off the shelf, like a more grownup, nutritious Lunchables), and so on. What if the micro store could serve as the modern day equivalent of the delivery boy with his paper route? Logistically, distribution from the store would turn the last mile problem into the last block.


Clearly, the online channel isn't going away, but a number of formerly pure digital retailers have found a need to establish a physical presence. (See Warby Parker and Casper). The need to touch, feel, talk, and see are just inseparable from human nature. I see the Better Bodega serving as the new interface between the digital and physical worlds.

 


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