Warning: Cannot modify header information - headers already sent by (output started at /services/webpages/i/n/infonet-tech.com/public/wp-content/themes/infonet/single.php:8) in /services/webpages/i/n/infonet-tech.com/public/wp-content/themes/infonet/header.php on line 16
Battling the Basket Bandits - They're using a mouse instead of a gun to rob your register of sales - InfoNet Technology

Blog

Convenience

Battling the Basket Bandits – They’re using a mouse instead of a gun to rob your register of sales

January 20, 2017

Battling the Basket Bandits – They’re using a mouse instead of a gun to rob your register of sales - Featured Image

Battling the Basket Bandits

They’re using a mouse instead of a gun to rob your register of sales

By

Erik J. Martin, CSP Correspondent
For years, convenience operators have felt relatively insulated from the encroaching threat of online competitors. But a newly identified e-commerce phenomenon that’s casting a foreboding shadow over grocery stores should make the industry sit up and take notice.

They’re called “basket bandits,” and they use a mouse instead of a gun to rob your register of sales.

Bill Bishop, chief architect of Barrington, Ill.-based Brick Meets Click, coined the term earlier this year after identifying a growing trend in the marketplace. He defines basket bandits as online retailers that sell some of the merchandise commonly carried in a full-line multichannel supermarket (which Brick Meets Click defines as traditional one-stop-shop supermarkets with both online and physical presences). These bandits, such as Amazon, Costco.com, Drugstore.com, Blue Apron, Thrive Market, Beautybar.com, Hello Fresh and Dollar Shave Club, have successfully nabbed small wedges of the grocery business pie.

“If the online site offers everything that a full-line supermarket would, we would call it direct competition. But if it’s a subset of the competition, we call it a basket bandit,” says Bishop.

Together, basket bandits command a whopping 84% of all online grocery trips today, vs.10% for multichannel supermarkets, according to Brick Meets Click. “While no single basket bandit is having a significant impact on most grocers, when you combine their efforts together, they can certainly have a significant impact,” says Bishop.

The top bandito banana is, of course, Amazon, which caters to customer need states using various branded platforms, including Amazon Prime, Prime Now, Subscribe & Save, AmazonFresh, Prime Pantry, Amazon Family and Amazon Dash Buttons. Altogether, Amazon sites attract nearly half (48%) of all online grocery trips.

Both grocers and mass merchants such as Target and Kmart are at the mercy of basket bandits, and Steven J. Montgomery, president of b2b Solutions LLC in Lake Forest, Ill., believes basket banditry is more than a passing fad.

“I expect this to be an ongoing and permanent change as more and more consumers elect to use the internet for purchasing groceries,” Montgomery says.

Bishop concurs: “We have customers today who are more willing and compelled to find more specialized offers and not just be satisfied with what’s available in their nearby supermarket. Basket bandits undermine the economics of the general-purpose store.”

Experts expect this movement to have legs in large part because the retail grocery business continues to fragment; the availability of and demand for online options that offer easily searchable products will lead to further fragmentation, which weakens brick-and-mortar grocery market share.

And that begs the question: Can the basket-bandit trend extend into the realm of convenience retailing?

Ryan Razowsky, director of operations for Rmarts LLC in Deerfield, Ill., which operates five c-stores in the Chicagoland market, says yes.

“We consider them a very serious threat—not just for grocery items but for standard convenience-related items as well,” says Razowsky. “I firmly believe there will be a day in the near future when you can order two Gatorades and a Snickers bar through Amazon and it will be cost-competitive and equally, if not more, convenient.”

Bishop posits a similarly frightening scenario.

“What if, for example, an online program or service was created that allowed consumers to purchase their tobacco products and get them routinely shipped to their home? That would be devastating for convenience retailers,” he says. “Or what if some company began offering a cost-effective program that delivers the confection of your choice right to your car so you didn’t have to stop by as routinely at a convenience store for candy?”

While the likelihood of these hypotheticals is currently slim, “the important point is that innovation will continue to occur and competitors will continue trying to knock off sections of the convenience-retailing business,” says Bishop. “Convenience operators need to realize that ‘basket bandits’ isn’t just a clever term for what’s happening online—it’s really a symptom or indication of some broader trend in play that needs to be considered.”

The restaurant industry is already experiencing its own digital disruption in the form of third-party delivery systems such as DoorDash, GrubHub and Uber. But because most of these companies simply deliver the goods, it has yielded more opportunities than threats for traditional brick-and-mortar restaurants.

Bishop offers the same advice to c-stores: If you can’t beat ’em, join ’em. “A convenience store focusing on its foodservice offerings should establish strong relationships with one or more delivery services so they can become a caterer. And they need to make it easier for people to order online and choose from an interactive menu,” he says.

Better to join forces with an external delivery company then handle courier matters in-house, Montgomery says.

“There are many reasons for this, including the liability that comes with having employees making deliveries,” he says, citing as a relevant example 7-Eleven’s 2015 decision to enlist DoorDash to deliver products to customers in New York, Chicago, Los Angeles, Boston and Washington, D.C. “Any of these services are better suited for urban environments, where high population density makes it economically feasible.”

Razowsky believes the on-demand delivery trend motivating basket bandits is being fueled by younger generations, whose disruptive preferences need to be taken seriously.

“Millennials are more motivated by convenience and less by price. Many of them would rather have something delivered at a higher cost than wait in line inside of a c-store,” he says.

To thwart the basket bandits of the world, convenience retailers need to stand for something beyond merely “convenience.”

“Operators also have to be marketers and establish a brand,” says Bishop. “And what you are standing for should make a difference and be appealing to your customers.”

Exerting digital influence via apps, websites and GPS/online locator maps is one strategy Bishop strongly suggests, as is leveraging digital communications on gas pumps to cross-promote sales inside the store.

Improving checkout efficiency can help, too. “Retailers need to speed up the way  customers are able to pay and get in and out of the store. Mobile pay or self-checkout lines could be strategies to pursue,” Razowsky says. “I would also emphasize your  convenient location, having great customer service and clean facilities, and face-to-face interaction, which we believe people enjoy [and] that basket bandits cannot provide.”

Another way to neutralize the competitive menace posed by basket bandits is to partner with them. Consider adding lockers to your store where patrons can pick up packages delivered by UPS, FedEx, Wal-Mart and/or Amazon, as many 7-Eleven stores have done.

“There is a role in the distribution and fulfillment of basket-bandit products that the convenience-store retailer can play. Adding lockers creates a trip generator, a revenue generator and a way to have a place in this more contemporary form of shopping,” says Bishop.

Basket bandits may be today’s big, scary threat, but Bishop advises retailers to be prepared for more disruption.

“We see this accelerating set of retail innovations, and the basket bandit is kind of a symptom of how that is playing out. But it’s not the only way it’s going to play out,” says Bishop. “You have to look over the horizon and be ready for things that could be a challenge.”

One such hurdle—which basket bandits exacerbate—could be fewer trips to the pump.

“C-stores are going to have to deal with the possibility of fuel purchases declining due to better gasoline mileage in cars, fewer cars using gasoline as a fuel source, and more of Uber and other services providing transportation alternatives,” says Montgomery.

The moral of the story? Be prepared to flex and adapt quickly, Bishop says.

All things considered, Montgomery remains optimistic: “I have seen the convenience industry respond to a number of new competitors who have sought to take trips and share from it. In each case, the industry has responded and weathered the storm. I expect it will do so with basket bandits.”