Photo: Amazon
Amazon Fresh grocery store opens touting low prices and cashier-free checkout
The first Amazon Fresh grocery store is officially open to the public in Woodland Hills, CA, and the retailer is promising low everyday prices across the store on a mix of national, local and private brands as well as “delicious prepared foods” and a choice between traditional checkouts and a cashier-free experience.
A company blog post emphasizes the role of consistently low prices in the Fresh store’s mantra. It cites examples including:
- Bananas, $0.15 cents each
- Freshly baked bread, $0.89 cents each
- Rotisserie chickens, $4.97 each
- Fresh brand Natural Whole Chicken with no added hormones, $0.99 cents/lb.
- 10 count of Quaker Oatmeal (all flavors), $2.50
- Paninis and hoagies made in-store daily, $5.99
The store, which has been open to customers on an invitation-only basis in recent weeks, is also offering sale prices on center store items from Coca-Cola, Frito-Lay and General Mills. It offers five percent back to customers using the Amazon Prime Rewards Visa Signature Card or Amazon Prime Store Card. Free same-day delivery and store pickup is available for Amazon Prime members.
Customers at the Amazon Fresh store can choose between shopping with traditional shopping carts for a regular checkout experience or using an Amazon Dash Cart to exit the store without having to wait for a cashier.
The cashier-free system, which uses a combination of computer vision and sensor fusion to identify items being purchased, is activated when shoppers open the Fresh QR code in the Amazon app. They then exit through the Dash Cart lane to complete their purchase.
Mindful of current times, the Amazon Fresh location has instituted the same safety protocols as those used in Whole Foods during the pandemic. The store will require customers to wear face masks to enter the store and will provide free, disposable coverings for those who want one. The store is limiting shoppers to 50 percent of capacity to help ensure social distancing.
Store hours are 7:00 a.m. to 10:00 p.m.
Discussion Questions
DISCUSSION QUESTIONS: What will be the keys to success for the Amazon Fresh grocery store concept? What will the opening of this store and others to follow mean for grocers operating in those areas?
Poll
BrainTrust
The Amazon Fresh concept leverages all the learnings from the past years, incorporating them into one store solution. I think it’s a compelling offer for shoppers. The restrictions imposed by the pandemic make this concept even more attractive, because of elements like cashier-less checkout for example. The grocery category has always been hyper-competitive, and so this is just part of the daily battle for customers’ grocery dollar and loyalty. But Amazon has two big advantages over other competitors: 1.) technology deployment and 2.) Prime members. What Amazon lacks with this store is scale.
The convenience of different checkout options is sound and will be welcomed by consumers. Competitive prices and good value are important to most grocery shoppers so that aspect is on point too. However success is more also related to what the store sells and the type of experience it offers and these things, together with the other areas, are the real keys to success. If Amazon wants to capture food shoppers it has to create an all around great experience. Of course making the store work isn’t just about the people who come to shop there – it’s about how the store can support online sales and fulfillment and help Amazon to increase its presence in the grocery market.
Aside from the depth and breadth of assortments, competitive pricing, and premium prepared foods, the success of the Amazon Go concept will come down to execution. We have seen and heard all about the RFID scan and go technologies, and it will be interesting to see how this plays out for Amazon. Especially because aside from the innovative checkout technologies, they will face significant competitive pressures from Trader Joe’s, Lidl, Aldi, and other value oriented grocers who offer quality private labels at lower prices.
In order to differentiate this scan and go format from the sea of competition, there should be an element of service, and a brand purpose beyond getting the customers in and out of the store seamlessly. The winning strategies in the grocery segment center around becoming the one stop shop for all things for your home, health and hygiene. In addition, it wouldn’t hurt to have a grocerant, sushi bar and cafe to attract more consumers.
Let’s see how this plays out.
Amazon Fresh is a great concept. Amazon is a brand that people trust. For the success of this concept, there needs to be flawless technology. That’s one of the value propositions. Easy, convenient and SUPER SAFE! In the recent past, the technology of cashierless stores – as in the ability to fill the basket and go – was about convenience. Now it’s about health and safety. The timing is great for that. Just consider that part of the success or failure will depend on Amazon Fresh being in the right location for their customers, the right marketing, the right value proposition, etc., just like any other retailer.
I believe Amazon has checked off all of the boxes for a winning concept. Providing customers with shopping and checkout choices, low prices, some featured national brands, card usage discounts, and delicious prepared meals represents a formula for success that competitors again will have to figure out how to emulate. Obviously Amazon learned from its Whole Foods and Amazon Go experiences, to the extent that this blended model appears to be their current go-to-market strategy. However we all know that Amazon is constantly trying new innovations as well as “rolling and fixing” those it launches.
I’m not sure why they are doing this when they own the premier brand in grocery. I guess hubris may be driving this move. Why not go with Half Foods vs. this tech enabled concept? I believe what H-E-B is doing with micro-fulfillment is a far more interesting and sustainable for the industry as more and more delivery and BOPAC become part of the evolving customer journey.
Amazon has a solid customer base and wealth of data that will inform the product assortment. It knows about its customers much more than a typical retail store would ever know. The cross sell opportunities to offer Amazon Prime/grocery delivery subscriptions abound.
The impact on existing grocery stores in the vicinity will be high.
Obviously they are going to subsidize the prices a great deal, particularly on everyday items. But their measure of success and profitability will be holistic, as it should be.
The pricing above is competitive with national markets indeed. Although it doesn’t say in the article, I am guessing the regular lanes take cash if the customer doesn’t have a credit card? This store combines the best of the learning from Amazon. If there are retailers that compete in the vicinity of these stores, and they can’t compete on price, then it has to be another differentiator such as customer service, broader assortment, fresher perimeter departments, etc. to keep their customers from permanently defecting to the Amazon store. My guess is that shoppers would cross-shop several stores.
Amazon Fresh’s safety, speed and strategic pricing could reignite consumers’ desire to visit stores again.
The touchless, cashier-free experience sets Amazon Fresh apart, as germaphobia is a key 2020 trend. Speedy same-day delivery and BOPIS is vital in grocery where freshness is paramount. Competitive pricing with an everyday low price strategy is a direct attempt to erode Walmart’s EDLP and grocery leadership. Additional sales and credit card rewards make Amazon Fresh pricing extra tantalizing.
Keeping in-demand items in stock at all times will be key. Also, Amazon’s private brands offer affordability, innovation and exclusivity to build loyalty in the intensely competitive grocery space. As a result, local rivals need to rethink how they can compete with quality, freshness and outstanding service of their own.
Amazon has touched on all the key elements of running a successful physical store – safety, touch-less checkout, low price items. But I also see a huge opportunity to include personalization in the Amazon Dash Cart given that Amazon already has purchase history and other data points on the shopper. I also see a more robust preference center when a shopper logs in and make changes to get the most accurate and personalized recommendations.
I just don’t get it. There’s Whole Foods Market, which contain traditional SCO, and there’s Amazon Fresh, which I guess is competing with it and using different tech, and apparently different prices.
Why? I must be really dense. I don’t think Amazon Fresh has any additional brand equity. I just don’t get it.
I don’t think Amazon sees Fresh competing directly with Whole Foods. I think management sees it as format to take on Kroger and other mainstream grocery stores. A quick Google search showed Ralphs, Pavilions, Gelson’s, Trader Joe’s, Smart & Final, Walmart and other chain and independent stores in the area around the new Amazon store.
I get that part. But it tells you how little they think of WFM brand equity. Still, the tech part really bugs me. I mean, if Amazon Go is all that, why not put it in the WFM stores?
That is the question. ;o)
If Amazon can deliver what they promise it will turn the structure of grocery shopping upside down. This is truly disruptive. And it may portend the biggest change in grocery that we’ve seen since the development of the supermarket.
It focuses on everything today’s consumer wants. Good product! Great pricing! Convenience!
And before we start criticizing the cost and the ability to execute on the technology, in China similar technology for similar concepts is being executed in hundreds of grocery stores today.
Amazon has a winner here. But I emphasize they must — MUST — deliver on their promises.
(I like to make predictions. My prediction is that if this takes off, in the next five to 10 years, Amazon will bundle their grocery business and spin it off as an independent entity. The delivery of value to Amazon shareholders with such a move would be extraordinary.)
I find the Amazon approach to physical retail very curious. We went crazy talking about the book stores, the Go and the 4-Star stores and what happened? Not much. In this instance, you KNOW they want to get into grocery in a big way, but is this scalable?? Could there be hundreds of these? Or, like all other Amazon physical ventures, is it in fact just a test or a learning venture? It seems huge, but history tells us something else. And you know what they say about those that don’t know their history.
In a way, this store is a little bit of a disappointment. While the actual store itself displays many developments that may tell us what supermarkets of the future may be like – Dash Carts, casherless checkout, etc. — the Dematic-automated microfulfillment center is apparently manual. That’s an important part of supermarketing in the future. Nonetheless, everyone should take a careful look at this unit’s front end which has Amazon’s technology now installed in a real supermarket of some 35,000 square feet. How it performs in the next year will give us some important lessons on how grocery retailing may evolve.
While this will create a lot of interest and many Amazon fanatics will use it, they will have exactly the same issues that all fresh grocery stores have and will have to operate to an equally high standard if they are going to make this work. Fresh grocery needs to be exactly that – Fresh – and of good quality. No amount of technology will make up for that and customers will not accept poor standards just because of the technology. Amazon will need to get their supply chain right so that they can maintain those high standards that grocers operate at. It is not as easy as it looks and is a very different operation from online retailing. Good luck to them and I hope they have brought in the experience of this type of environment to make this work.
Doesn’t it come down to how “fresh” the fresh is, the quality of the assortment, and the competitiveness of the pricing? If that’s not right then the technology doesn’t matter. Amazon has been learning and experimenting for years to get this store right. If you look back at the Amazon way of doing things — profit can come much, much later as long as sales and share are growing. Just ask those brick and mortar book stores.
Convenience, quality and value will keep consumers coming. If Amazon harnesses its learning from Whole Foods they have an opportunity to solve the perennial “what’s for dinner” problem.
Wow! That’s innovation. Shoppers will love it. The combination of real value and contactless transactions is a winning hand for Amazon. There will be a smaller group of (probably older) shoppers who will bemoan the changes and long for the “old days.” But Millennials don’t want much interaction with store personnel anyway, so it’s perfect.
The underlying issue is the cost of operations for the store. Growing this business will allow Amazon a way to expand their cashier free checkout model. Even if it provides adequate service for customers, the (in)convenience of location will limit growth. The problem is that the technology and capabilities are already outdated, more than four years old since it was launched in late 2016 with at least a year of run up marketing. The customer experience value has dropped and competitors like Grabango, Walmart, Target et. al. have equivalent or slightly less formidable customer experience solutions. Low prices aside, the customer will still veer to most of the 40,000 grocers already operating with familiarity, curbside pickup solutions and location advantages. This has to be a long run effort for Amazon if it pursues it – and the idea of selling shovels and picks is limited as the advantages aren’t big enough. Just another competitor in areas where it opens, even if Amazon sells lower.
After nearly two decades of experimentation, acquisitions and dedicated “Fresh” delivery fleets focused on grocery “around the edges” – this feels like the first attempt to go at the core industry (where 90 percent of grocery sales still occur in-store) – competing head-to-head with well established leaders who have significantly upped their game in data analytics in recent years.
Early on, it’s a legit threat to local and regional grocers that have yet to embrace data analytics as a competitive differentiator, and perhaps that is the point – selecting markets where weak regional grocers still have market share to lose.
Why would anyone shop Whole Foods when Amazon Fresh is cheaper, fresher, and easier to shop? Is Amazon trading down lofty “whole paycheck” to reasonably priced food for everyone? Will Whole Foods be rebranded as Amazon Fresh? Stay tuned.
I live in the area and was part of the invitation-only group to shop at this first Amazon Fresh store. The Dash Cart is unique and convenient because it enables an equivalent of self-checkout as you shop. Another benefit of the smart cart is it displays an Alexa shopping list with item store locations. A grocery list can be created in advance on the Amazon website, app or via Alexa and then automatically shown on the cart without having to use a phone after the initial QR code sign-in scan.
The competitive advantage may be the free Amazon Fresh delivery for Prime members (on orders $35+), which can be scheduled within a future 2-hour window. Every item in the store can be delivered by an Amazon Flex driver, essentially turning the store into a grocery distribution center. Costco, Target and Ralph’s (Kroger) stores in the area may be able to compete on unique selection and pricing, while delivery options are limited. Amazon Fresh is ahead in technology and delivery convenience.
The keys to success will be the same as with any other grocery: having the items people want at the prices they want. (Will they always have bread at 89 cents. Make of that what you will.)
Ideally, Amazon will fully report on the operating results of this project — yeah right! — and it won’t just disappear into the haze of retail history
While the wonder and excitement about this Amazon Fresh store are notable, I’m just as curious about its conventional elements. Touch-less checkout and smart shopping carts are futuristic, certainly, as is liberal use of in-store sensing and AI. Yet this is still very much a supermarket with traditional aisles, departments and a very familiar-looking promotional circular.
So while some of the shopper-facing tech is novel and exciting, I’m at least as interested in observing how competently Amazon Fresh will manage space, assortment, pricing, inventory management, private labels, shopper loyalty and personalization — not to mention digital order fulfillment, cost of operations, and real estate strategy.
These are familiar and expected elements of the grocery shopping experience. For Amazon Fresh to make a mark, its performance must be equal to or better than the best of breed in all those dimensions. That’s a big ask for a startup, no matter how deep its pockets.
For now, I choose to suppress my “gee-whiz” response to the in-store tech and keep an eye on the rest. Amazon is celebrating what’s different about this store. I’m waiting to see evidence about what’s better.
I just missed seeing this before I left LA! Although I did tour it prior to the opening and I don’t think there are any surprises here. Amazon has a really strong mix of good prices, customer data and technology that’s hard to compete with. Supermarkets in the area would be wise to double down on customer data — understand who their best customers are and treat them accordingly — at least as a first step. That deep connection and understanding of customers is how to compete with Amazon and it should guide marketing, merchandising, and even technologies that will make sense going forward.
Amazon has the core elements on offer to be successful — value pricing, great quality fresh food, quality prepared foods, tech-enabled shopping for convenience for those that want to use it (including Dash carts and Alexa stations throughout the store). Visually, from the images, the store appears to deliver. The question is, how does this improve upon the offer from other nearby grocery brands. Is the store layout any different such that it enables a shorter visit for the same shopping list? Granted, they will emphasize their delivery and pickup options which have become so important in this category during 2020, but is that enough? Perfect execution is critical! If Amazon can truly deliver on all of these promises, then they may have a big success on their hands.
Other questions remain unanswered. What about an automated micro fulfillment capability to service those delivery and pickup orders at a reduced cost? Currently, this appears to be a manual, labor intensive process just like every other grocery store. And why did this need to be a new brand? What makes Whole Food unsuitable for this target market? For that matter, why not incorporate the tech in the Fresh store into Whole Foods? Yes, there are reports of doing that, but I am not sure they have been confirmed by Amazon.
Many consumers will try this simply because the Amazon name is on the door, even if simply out of curiosity. For Amazon to succeed with more of these stores they have to prove they can execute better than the rest. And that includes one important element I haven’t mentioned yet — maintaining inventory to avoid out of stocks! If they can do that, and execute everything else flawlessly, then they’ll have a winner.
It will be interesting to see how Amazon does with all of the touchpoints of the in-store customer journey. Our research shows they lead the way with the online journey touchpoints — can they replicate that in-store and have they mined all of the learnings they can from Whole Foods to get to this point? As someone who loves tech, I think those offerings are spot on, but the big question is, can they scale this up and make it a competitive force by doing everything else right?
Understanding the merchandising and pricing is different, but this sure looks like a Whole Foods….
Also looks like they need to do produce “by the piece” rather than by weight to make the cashier free checkout thing work out….
Still waiting for that hundred or thousands of stores roll out of grocery stores by Amazon we’ve been hearing about for years. Maybe this will finally be the start?