Replenishment Economy: Here’s what the experts think.

Welcome to the Replenishment Economy

“most of the items we purchase and consume on a day-to-day basis require no shopper consideration or inspection whatsoever. In fact, it’s conservative to say that at least 50 percent of the items in the center aisles of a grocery store are products purchased almost entirely on a replenishment basis; items like sugar, flour, frozen vegetables, detergent, tissue paper etc.” – Doug Stephens, Welcome To The Replenishment Economy

Samuel Gibbs, writing for The Guardian, puts this into a vivid scenario I’m sure many of us will identify with:

“Have you ever been stuck on the toilet with no toilet roll? An end to that nightmare might soon be in sight. Amazon’s next big thing in the “internet of things” lets you order a new roll at the touch of a button, even as you sit in the smallest room.” – Samuel Gibbs, The Guardian

Amazon’s “next big thing” that he mentions is of course Dash. A Wi-Fi enabled ordering device that is connected to your Amazon account and pre-programmed to add a specific product to your shopping basket at the touch of a physical button.

Here’s Amazon’s launch video for Dash.

The Replenishment Economy Begins

This is that start of what Retail Prophet Doug Stephens coins “The Replenishment Economy”. Futurists and technologists have long prophesied that the Internet of Things (IoT) is coming but with Amazon bringing into reality The Replenishment Economy this feels like the first time there is a visible application of IoT in a way that has a retail and economic drive.

“…to fully appreciate the future we’re heading toward, imagine the scenario I mentioned earlier (reordering Tide with a Dash Button) but now eliminate the button. Imagine that the stock-tracking and reordering capability is embedded in the washing machine itself.”

“In the replenishment economy, the refrigerator becomes responsible for ordering more margarine, milk and eggs. The dishwasher is responsible for replenishing detergent…The grunt work of shopping for routine items will done by our devices. We will need only to approve, reject or modify the order before it’s sent off and fulfilled.” – Doug Stephens, Welcome To The Replenishment Economy

So What?

You maybe thinking, “so what?”.

The “so what” is that The Replenishment Economy removes further friction in buying commodities. Amazon’s success is built on removing friction at the point of purchase – think about the 1 click ordering, fast website, quick upsells etc. This is where business intelligence, warehouse management and logistics all come together to form a frictionless shopping experience which will increase sales.

It’s an experience that only requires the push of a single physical button and you’ve made a sale.

It would mean that we no longer have to shop for the commodities in life such as loo roll, toothpaste, flour, sugar, washing powder. These purchases will be handled by smart devices in our home. But it’ll require a change in shopper behaviour not just technology.

Recent research by The Co-operative Group suggests this change is happening. More on that below.

A Shift in Shopping Behaviour

“It’s possible the premise behind this technology will seem unnecessary or even lazy to sophisticated consumers. Currently, is it really that difficult to stock up on paper towels when you go to the grocery store? You’ll likely be able to find cheaper options than Amazon Dash is offering, and you can also pick the exact brand you desire.” – Bobby Emamian, Re/Code.

Bobby has a great point. For the shopper who plans their shopping needs in advance there seems little need for something like Dash. (Read The Downside of Dash)

Though Bobby later in the article suggests that “perhaps most modern shoppers are indeed too busy in their day-to-day lives to go to the store.” and this would seem to be backed up by a report published by The Co-operative Group.

In this report they say that “More and more consumers are crossing off the idea of the shopping list and pre-planned meals in favour of spontaneity…” (Mission Impulsive, Co-op Convenience Retailing Report, 19 October, 2015) it goes on to state that “modern consumers are favouring mid-week top up shops over a big weekly or monthly shop.”

So there is research supporting a change in shopping behaviour. Especially among younger demographics.

“When you start to think about behavioral changes — what is that shopper’s journey throughout the day? — you begin to understand that this is a much more powerful concept than just knowing who somebody is.” – Doug Straton, head of the North American E-commerce Center of Excellence at Unilever.

Here Doug Straton is talking about the difference between building a buyer persona to profile a customer verses actually understanding what they do throughout the day.

The Replenishment Economy, powered by IoT enabled devices, has the potential to fit into a shopper’s daily journey because these devices are designed to remove friction in the buying cycle.

When this shift in shopping behaviour happens retailers will have to learn new ways to sell their products to customers. Thankfully, retailers still have time to adapt.

“Whether the concept excites you or scares you, the Internet of Things has the potential to change the way people make choices and go about their daily lives.” Knowledge@Wharton, The Internet of Things: How It Will Change The Way You Shop

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