Amazon Fresh ‘Just Walk Out’ Stores: The point most people seem to forget

by Tom Fender, Development Director, TWC

24th March 2021

Those of us who have visited Amazon’s new Fresh store in Ealing (it has now also opened a second store near Wembley) have been impressed by the technology.

Some have commented on the fact that the ‘just walk out’ concept reduces the number of jobs. However, I believe the number of staff deployed in these stores is significantly higher than the average 2.2k sq. ft. store – they’re just deployed ‘front of house’ in customer service roles rather than on the tills.

At a time when Nasa has put a probe on Mars, it does make you wonder why we still patiently (or impatiently) queue up to pay for things in stores. Literally hundreds of customer research studies over many years have consistently shown that the biggest customer frustration when shopping (or in hospitality venues) is the paying part. Why wouldn’t technology make lives easier in this department, when technology makes so many other things easier?

And foodservice has had ‘pay and go’ technology for a while (admittedly it is an easier technical solution than Amazon’s….but the point here is, consumers are getting used to this type of pay and go technology). Convenience shopping is meant to be quick. This brings ‘frictionless’ – usually used in reference to e-commerce – into physical retail. It gives back time to consumers.

But the biggest advantage Amazon has is not necessarily the technology. They have that now. And it will improve. No, the biggest advantage Amazon has now – and is only going to grow with each customer transaction – is DATA.

‘While conventional wisdom has held that customer service is Amazon’s secret sauce, Bezos’s core innovation was to place data at the centre of his corporate culture’ – David Sellinger wrote in 2014. We have had seven years to understand and replicate this. How many businesses have?

So here are my thoughts on Amazon Fresh in the UK.

Amazon wants to know everything about you – what you buy, what you listen to, what you’re spending money on. The one major gap in their knowledge bank is ‘food’, despite their purchase of Whole Foods (not exactly a mainstream retailer) and partnership with Morrisons (mainly focused on large supermarkets). Will Amazon need to open up hundreds of ‘Fresh’ stores to get the intelligence/knowledge they need to understand the principles of convenience shopping? Probably not.

You need to be an Amazon Prime customer to get access to the store (although the website suggests other ‘guests’ will be invited). There are over 10 million Amazon Prime customers in the UK. Future store openings will obviously be in places with a high density of Prime customers. Those 10 million Prime customers have made life very easy for Amazon – they have very helpfully given Amazon their precise address. Maybe those clever people at Amazon will send offers direct to those people living close to a new Fresh store, I am one of those customers, what does this mean for me…?

Amazon can link my food purchases to non-food purchases I make on the Amazon website, building up an even better understanding of me. Here are some examples:

• I buy a BBQ on a Monday for delivery on the Thursday – Amazon sends me incentives to buy burgers, beer, sausages.
• I buy gym equipment/sports equipment. They ping me offers on healthy foods too.
• I buy toys or items for a pet – they send me offers for dog / cat food.
• I suddenly start buying items for new born babies (clothes etc.) – Amazon starts sending me offers for nappies, baby food etc.

Amazon has all transactions logged to a specific individual – their name, address, email address, telephone number (offers can come through multiple sources), interests, hobbies and a pretty good guess at their age. KNOWLEDGE and DATA becomes the BIGGEST COMPETITIVE ADVANTAGE in the FOOD INDUSTRY, not price, not range, not NPD, not promotions, not home delivery. 

Amazon will know what food products I buy on a regular basis. Amazon can send me offers to keep me loyal…or to encourage me to ‘trade up’, creating premiumisation on an industrial scale. It also knows what products are typically bought with other products. If I buy product A, but not product B, when most people like me buy Product B with A, then send me an offer to try Product B. This offer voucher will obviously be paid for by the manufacturer of Product B (not by Amazon). The vouchers will be digital, which are much cheaper than paper vouchers. But they also have a far higher ROI for suppliers because they are targeting the right people with the right product – it brings an end to blanket ‘carpet-bombing’ of paper vouchers.

If I suddenly stop shopping at the Amazon Fresh store it can check if I am ok (although the team will know I am heading off on my hols, because I will have bought new shades and sun cream from Amazon in the last few weeks)…. that I am not bedridden (let us send you some paracetamol in a courier: yes Amazon is getting into UK Pharmacy too) or not annoyed for any reason. Incentives are sent to re-engage me. So far in this customer journey, Tesco can do a lot of this via its Clubcard (as long as a customer remembers to have it in store with them), but let’s consider how much more Amazon can do.

It can link meal occasions to events – so if you download a movie, Amazon can offer linked deals of food and drinks. Amazon can even offer food and drinks based on the type of movie downloaded – certain types of movie are likely to be watched by certain types of people, who will want certain types of food and drinks (date night, romcom, action, documentary). Amazon will get it occasionally wrong, but machine learning will mean it will learn from mistakes. Of course, a lot of those movies are on Amazon Prime so suppliers will be encouraged to sponsor around the movies which are likely to generate the interest in the products viewers will want to eat/drink.

Amazon also knows what music subscribers listen to and what genre it is, so someone who regularly listens to running playlists can be targeted with sports products (protein shakes, energy bars) along with gym equipment and clothing.

Amazon knows what its customers are reading too so if a customer buys cookery books, it can offer a discount on food and kitchen equipment…. buy an Indian cookery book – receive an offer for a pestle and mortar and a blender. And some basmati rice, cumin, coriander, turmeric and garam.

Remember, Amazon also has Alexa sitting in many homes so when families start to talk about going to buy a new pair of Nike trainers or the latest tech – who is going to hear about it first and be front of the queue with relevant offers?

It ‘saves’ your purchases so that you can ‘repeat purchase’ again in one easy click. How many purchases in UK c-stores are repeat/regular? 50%? That’s £20bn p.a. of repeat purchasing in UK c-stores – with almost no effort made by retailers to remind customers and/or simplify the process for them. This might be called ‘low hanging fruit’ in the corridors of Amazon towers.

Amazon could be capturing so much of a household’s shopping that it could reach a stage where consumers pay a subscription direct debit of £150 pcm and it covers music, food, TV/movies, reading material/books. It is the ultimate in subscription lifestyles – you pay a fixed fee, and Amazon delivers everything. By opening up a chain of physical stores, Amazon is setting up a distribution network for click & collect and returns which they can control – ‘the last mile’ is always the most difficult and costly for a distributor. And I suspect there could be quite a few empty commercial premises available for cheap rent (or purchase) following the pandemic.

Don’t forget you can also use Amazon as a bank now as well or at least a payment service so if customers shop somewhere else, rather than register, payment can be made by Amazon Pay – so the team knows what is being spent even when it is not with them directly.

Finally, Amazon’s offering helps attract a younger shopper….UK c-stores are predominantly used by older consumers.

The opportunities are endless. But it all comes down to DATA. If the word ‘data’ scares you, put it another way – it’s about knowing your customers better than your competitors know their customers and, sometimes, even knowing what your customers want to purchase before they know themselves.