Cast your mind back 20 years and imagine a day in 1996. You are bored, so what do you do? Boot up your desktop computer, wait for a minute (or more) while your dial-up connects and bingo you’re online! You’ve got the world at your fingertips – kind of. There’s no YouTube, Huffington Post, or Candy Crush. There’s no Google, Twitter, Facebook, or Wikipedia. Slim picking by today’s standards. You can however, order a book from a company called Amazon (it’ll never take off – after all why wouldn’t you just go to the book store?) and unbelievably you can order your groceries at Tesco.com and have them delivered to your house (again, why would you? You can’t trust someone else to select your apples!)
Fast forward two decades and you can now buy books online at Tesco and if you live in Seattle you’ll soon be able to go food shopping at a physical Amazon store. Things appear to have turned full circle as Amazon continues to expand its offline presence with the launch of Amazon Go; the next generation supermarket. To differentiate D itself from its grocery rivals unsurprisingly Amazon is moving towards a technology-driven solution which removes the need for physical checkouts. Instead, using smart technology, customers’ products are uploaded to their Amazon Go app automatically as they are put in the basket/trolley and when they walk out of the door the balance of those goods is charged to their Amazon account. For those of us that hate queuing for a pint of milk it sounds like a dream come true.
Given Amazon’s clear desire for accelerated growth it unsurprising that it is developing its grocery offering over and above Amazon Fresh since eight out of the 10 largest retailers in the world rely heavily on food. And the top three – Walmart, Carrefour and Tesco are all fundamentally grocers at their heart. However, if Amazon Go proves successful and is rolled out nationally and subsequently internationally Amazon, already the world’s largest online retailer, has the potential to dwarf the ‘Big Three’ grocers.
Why?
Because Amazon will find itself with one of the largest and most powerful customer datasets in the world.
Amazon’s online customer insight is already so advanced that it is developing anticipatory shipping based on its understanding of each of us which will enable it deliver goods that we might order to a location near our house before we’ve even ordered them. This will cut delivery times down to an hour or less. It has done this as analysis revealed that the length of delivery time was causing a blockage in the PDJ resulting in cart abandonment. By fixing the problem it believes conversions will increase by at least 10 per cent. To put this in context that’s around 100 million additional orders. Not a figure to be sniffed at.
If Amazon already knows enough from our online behaviour to predict future orders imagine what it could do if it adds a whole new dataset derived from offline behaviour to its data repository. It will make Clubcard, the doyenne of customer insight, look positively puny.
Amazon is well used to using big data to prompt purchase. It was one of the first to develop a recommendation engine and it now uses its insight from its video service to commission original programming, such as the critically-acclaimed The Grand Tour. With such experience behind it it will have no trouble in using its insight to drive its customers towards Go and Fresh and once they’ve got them there keep them through a raft of relevant offers and incentives across all its platforms – not just grocery. An incredibly compelling proposition.
So what of Carrefour, Tesco and Walmart? And indeed other convenience chains that will be pit against Go. Presuming that Amazon flourishes, competition to keep customers will be fierce since the grocery sector is renowned for its cutthroat tactics to steal market share. In particular the battleground will be drawn around Millennials, Gen Z and early adopters who could potentially see Amazon Go not only as a grocer but as a lifestyle choice. The key for established grocers and will be in having a comprehensive understanding of their brand and ensuring it is at the heart of the customer experience.
Just because Amazon is stealing customers with its checkout-less stores, it doesn’t mean that customers of Costco, for example, want the same thing. Technological bells and whistles are great, but only if they are relevant and useful. Being able to walk out of the door without having to produce your wallet is brilliant for a time-poor 20-something, but if your average customer is a 60+ lady that doesn’t have a smartphone then it’s completely pointless.
However tempting it may be to jump on the bandwagon and being seen to keep up with the technological tidal wave all decisions must be made in the context of the brand. If it doesn’t make sense to the brand it won’t make sense to the customer and will end up damaging the relationship and driving away custom.
Amazon Go is an exciting prospect for customers and a real threat to how offline grocery currently works. Only time will tell if the future is totally contactless, but until then the established players must stick to their guns and do what is right for their brand and customers.
Manfred Abraham is managing partner at BrandCap
