AMAZON: THE RE-INVENTION OF THE STORE … IS THIS GROCERY’S NEXT FRONTIER?

Amazon: The RE-INVENTION of the Store

IS THIS GROCERY’S NEXT FRONTIER?

Amazon has been making a concerted effort to get into the grocery business…an industry that in the US is worth $620 billion a year. And even though on-line grocery shopping only represents 2% of this total, the on-line retailer sees huge potential for future growth. Indeed, recent surveys show that by 2025 on-line grocery shopping will increase by another 25% of current totals. recent survey from financial services firm Cowen & Co. found that 18% more people shopped for groceries and other consumable goods on Amazon in the first quarter of 2016 than did in the year-ago period

There has only been one snag: on-line grocery shopping has been largely confined to centre of store items, particularly dry goods such as detergent. Consumers still want to see and feel the products they buy before they buy them.

The answer? For Amazon, it has been to get into the brick and mortar business-but in a radically different way. In fact, the company has been running a pilot program in Seattle for the past several months called “Amazon Go”, a new type of store that operates on advanced retail technology that the company has developed itself. The stores are 1800 sq. ft. The new technology allows customers with the Amazon app to simply enter the store, scan their smartphone, and take whatever they desire with no need to go through a checkout line or undertake a direct transaction.

Amazon is not leaving the category to its online operations, though, with plans to open 20 physical grocery stores in major U.S. cities over the next two years, and with ambitions to open as many as 2,000 over the next decade

The store requires customers to launch a QR-code based app, which they scan upon walking into the site. The retailer’s “Just Walk Out” technology detects when products are removed from or returned to shelves, keeps track of them in a virtual cart, and totals the cost when customers depart the store. The app eventually automatically charges the card saved in the associated Amazon account and provides a digital receipt.

The system leverages technologies used in self-driving cars, including computer vision, sensor fusion and deep learning, according to Amazon’s website.

The company also has plans for convenience stores and grocery pickup locations, dubbed “Project X,” though it’s unclear whether Amazon Go is part and parcel of those plans or something else entirely. The Wall Street Journal h also reported that the e-commerce giant has plans for “multi-format” stores, akin to German grocers operating here like Aldi and Lidl, which are smaller-than-average stores that only offer private-label goods

How significant a challenge is this to the traditional grocery sector?

Many U.S. retailers are taking it very seriously and adopting similar technology themselves.

Kroger, for example, is piloting a project called “digital shelf edge” that uses in-store sensors and analytics to provide product recommendations, custom pricing and other interactive elements through customers’ mobile devices, according to The Wall Street Journal.

The new systems are currently installed in 14 stores near the company’s Cincinnati headquarters and will roll out to more locations throughout the year.

In that context, Kroger’s move is a way of upping the value of brick-and-mortar stores. Kroger’s new technology seems to promise a more efficient shopping trip — one that saves time searching the store and highlights products shoppers might be interested in, but don’t have on their lists — while at the same time offering interactive elements like online shopping. In short, Kroger is creating a better

In addition to lively interactive experiences, these technologies offer new ways to collect data. In Kroger’s case, the company already knows a lot about its customers through loyalty card data, and digitizing the store could provide insights about how customers move through the aisles, what items respond well to promotion, and so on.

While all this newfangled technology may dazzle us, what it is really all about is connecting with customers and their shopping experience. In the case of Amazon Go, the proposition to the consumer is for an easier shopping experience by “eliminating check out and line ups”.

In the near future, retailers should consider using include artificial intelligence, machine learning and wearable devices for virtual reality “to craft shopping experiences like never before and make dramatic changes in the consumer experience,” according to Matthew Shay, president and CEO of the National Retail Federation.

Stephen Brobst of data and analytics solution provider Teradata has said customer shopping transaction data details are no longer sufficient when it comes to understanding consumers. Today, a shopper’s buying behavior and preferences must be tracked, analyzed and understood. This includes pathing (or path analysis) and data discovery to understand what the shopper searches for and all behaviours and clicks and visits across channels.

Omnichannel remains a buzzword, but retailers have a long way to go in creating good customer experiences across the points of customer interaction. Omnichannel has grown considerably during the past few years, but retailers now need to focus on people and processes.