Wednesday, October 12, 2016

Amazon will develop convenience store

There is a rumor that Amazon will develop a convenience store supply chain.

Bloomberg: Amazon to Build Convenience Stores, Wall Street Journal Reports

The possibility of Amazon entering the grocery business was reported firstly in Wall Street Journal. The news source is vague, and Amazon has not published a comment about it.

Wall Street Journal: Amazon to Expand Grocery Business With New Convenience 

I believe it is certain that Amazon is willing to build its own convenience stores. Amazon's goal as a company is to establish an "everything (A to Z) store."  It has launched food delivering services. And recently, Amazon provided ultrafast delivery in limited areas. The next move is to own depots in which any commodity are ready to sell.

In Japan, Amazon replaced a partner who offered a domestic delivery service, because of a conflict with the contract. It is too difficult for outside companies to commit the Amazon's requirement for fast delivery. Then, it is natural for Amazon to develop its own delivering web.

On the other hand, convenience store industry is a red ocean, especially in Japan. There are many companies, such as Seven and I Holdings, possessing huge infrastructures. They offer a large variety of goods including fresh vegetable, roasted coffee, and electric devices. You can also pay commodity fees at a convenience store. It seems there is no room for an outsider to create a new value.

In the US and the UK, convenience stores are not frequently seen. Rather, there are many grocery stores, but most of them are closed at midnight. The number of items is fewer than that in a convenience store. Therefore, I think Amazon will develop a franchise chain in the US and the UK easily compared to in Japan.

Another problem of developing convenience stores is the stock. Every store is suffering in managing dead stock, especially fresh foods. One of the advantages of Amazon is the high qualified administration of the stock. It seems difficult for each convenience store to maintain the stock at an appropriate standard.

I believe Amazon will develop its convenience stores in the US and the UK, but it is unsure Amazon will be successful in Japan.

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