Why Amazon’s Cool-Sounding Locker Strategy Didn’t Work

Why Amazon’s Cool-Sounding Locker Strategy Didn’t Work

MARTY LARIVIEREOPERATIONS ROOM SEP. 24, 2013, 12:58 PM 2,189 2

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About a year ago, we had a post on Amazon Lockers — the Seattle firm’s attempt to solve recurring last mile problems. Customers could have their purchases delivered to a secure, nearby location. No need to sign for a package; no need to worry about someone walking off with your box. You just need to enter a code to pop open the locker that has your stuff. But there is an obvious complication here: Those lockers have to go somewhere. Amazon’s plan was not to buy real estate but to plant them in existing retail locations. But which stores would benefit from hosting Amazon lockers? That is the question that a recent Businessweek article examines (Do Amazon’s Lockers Help Retailers? Depends on What They Sell, Sep 20).The incentive for any business hosting an Amazon locker isn’t the monthly stipend the online retailer pays — “not even worth it,” says the manager of a Manhattan copy shop — but the lure of higher store traffic given the online retailer’s enormous sales volume and the gazillions of brown boxes sent across the nation each day.

Amazon has the lockers in nine large metro areas and touts the delivery option as a customer convenience for the many people who can’t reliably get their online purchases at work or at home. For a bricks-and-mortar business, the idea is that people coming to collect their Amazon purchases will buy other stuff on their way out the door.

So do people buy other stuff? It turns out that depends on what else a store sells. Apparently both Radio Shack and Staples are dropping out of the program. As the article notes, a lot of what they sell is also available from Amazon making price comparisons a little relevant. 7-Eleven, however, doesn’t have quite the same issue and is considering expanding the number of stores that have lockers. Similarly, the article reports that the lockers have also worked well in cafés.

A spokeswoman for Philz Coffee, a San Francisco-based chain, says the lockers have proven most popular at its Berkley and Palo Alto shops, where university students had requested lockers so they could more easily collect their Amazon goods.

At several levels this makes a lot of sense. It is really not clear to me why Staples would have thought having Amazon lockers in its stores was a good idea. Anything that would make ordering from Amazon more convenient would seem to be counter productive. Conversely, for a café, anything that brings in, say, 20 or 30 extra people a day would be attractive. Amazon doesn’t do lattes so there is no direct competition.

There is one significant difference between Staples and a café, however. Staples stores are big with plenty of floor space. A cafe in a college town? That’s not so clear. That is, I would suspect for many places like cafés or convenience stores accommodating Amazon Lockers involves real tradeoffs since to fit them in means giving up some tables or some product display space.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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