Amazon fresh… till tech beware

listen if you are on the move

Amazon has opened a till-less grocery store in London- it’s first ‘Just Walk Out’ shop outside the US, this is less of a threat to grocers and more of a threat to till technology companies like NCR, Wincor Nixdorf or Oracle

I saw the first ‘Just Walk Out’ Amazon store in Seattle nearly two years ago, so, as any good retailer, I had to go and have a look at the new store in Ealing which opened on the 3/3/21 . The good folks of Ealing were queuing around the block to get in and were certainly wowed by the ‘just walk out technology’ but were distinctly under-whelmed by the convenience shop itself.

‘Just Walk Out’

Visitors have to scan a QR code (generated on the Amazon account on their smartphone) to get through a security barrier as they enter. The store utilises hundreds of cameras and depth-sensors, and software developed using deep-learning artificial-intelligence techniques. Once customers have selected their items they then just walk out and are automatically billed to the card registered on their Amazon account. The technology does not involve facial recognition (yet); a colleague stands in front of an entrance to the BWS section to do a think25 check- he didn’t ask me!

COVID restrictions have accelerated the adoption of ‘scan and go’ on smartphones that many UK grocers have developed to improve the checkout experience (Tesco, Sainsbury’s Asda and M&S). See earlier story Retailers accelerate instore digital adoption. The Amazon solution promises an even more frictionless customer experience by removing the need for customers to self scan items. The developers are so confident in the system that they don’t even put in random checks like the other grocers.  ‘Just Walk Out’ technology in motion.

A so-so Convenience experience

Amazon Fresh store in Ealing is a 2500sq foot convenience store, delivering against convenience missions (dinner for tonight, meal for now and top up shop). It certainly wins on the ‘just walk out’ technology making checkout quicker and easier. Walking around the shop as a customer when I visited in the first few days of opening didn’t feel too different from walking around the convenience stores run by Tesco Express, Sainsburys Local and Coop. They had done an OK job on ranging but macro space was still traditionally laid out rather than supporting missions, the pricing was erratic across different categories and at a premium in some areas, and own brand felt basic rather than great food. This means the price/ quality = VFM equation was not quite balanced.  But Amazon is a fast learner and will probably get that right over time.

 Technology vs property play.

Whilst Amazon will be a fast learner in running retail shops, one of the key lessons from Bezos’ letters to shareholders since 1997 has been to make big bets on things that can scale. Amazon is a technology company and currently makes most of its profit from AWS and Amazon Advertising Services. Amazon’s just walk out technology is a very scalable technology play like AWS and Amazon market place.

Location is No 1 driver of store choice

When it comes to convenience stores, being able to grab and go could prove very popular. But location is key. Physical stores will ‘suck up’ significant capital and need a capability that Amazon doesn’t have in property and location services. Most of the best convenience store locations have already been taken by Tesco, then Sainsbury’s and then Coop, and it’s becoming increasingly difficult to roll out more than 100 stores per annum.

‘Just Walk Out’ as next Amazon technology play

Amazon is also offering to sell its ‘Just Walk Out’ technology as a service that can be installed in other companies’ stores and ultimately it might decide that there is more money to be made pitching this to the established supermarkets than challenging them head-on with bigger stores of its own. This launch won’t pose a big, immediate threat to the larger established grocers but it is a shop window for a new technology from Amazon that other established and new tech companies are also developing. We know only too well that Amazon has the potential to be a hugely disruptive force; this is forcing everyone to up their game.

Till companies caveat emptor

Amazon ‘Just Walk Out’ has the potential to be a highly disruptive force and it is a threat if you are a till or systems manufacturer.

NCR, Oracle, Wincor Nixdorf beware.

Published by Andrew Mann

Managing Partner at NorthBailey. Having had senior marketing & insight roles at Tesco, Sainsbury's, Asda, Coop and M&S, I'm now using my experience & network to solve strategic marketing problems for NorthBailey clients

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