The Home of Investment Banking

The New Addition to Amazon’s Toolbox: Amazon Fresh

The new Wembley Park Boulevard Amazon Fresh store in London. Source: Amazon.

The emergence of the new Amazon Fresh store is making headlines for its unique shopping feature – no tills. Rather than face long queues, customers walk in and out with minimal interaction.

The convenience aspect is undeniable, but the question of why Amazon has decided to create brick-and-mortar stores for its online grocery delivery service requires further probing.

This is not the first time that Amazon has branched out into the grocery scene.

It purchased Whole Foods for $13.7 billion in 2017, with this move having been predicted to jumpstart Amazon’s grocery effort; however, due to the Whole Foods brand and its high prices, it failed to do so.

Amazon Fresh differs in that it does not claim to be high-end. Rather, its strength lies in its accessibility. Hence, it seems there will not be much competition between the two stores.

Thus far, the majority of its 12 U.S stores are located in technologically-savvy California. The first of Amazon Fresh’s international stores have been established in the London area.

It is clear that Amazon has pinpointed major cities as loci for its initial openings. Regardless, Amazon Fresh is not set for guaranteed success. Rather, it is an experiment as it offers a new form of grocery shopping.

There is no doubt that its list of innovations is changing the grocery market forever, or at the very least imposing pressure on competitors to change their traditional ways. Some of its features are so subtle that the average consumer might not even notice them.

This leads us to ask: what functions does Amazon Fresh offer compared to our familiar existent supermarkets?

1. The Amazon Dash Cart

The most interesting feature of Amazon Fresh is that customers can pair their smartphones to the Dash Cart and in turn, the cart helps them to find and check items off their shopping lists. The cart uses a combination of computer vision algorithms and sensor fusion to identify items.

When a customer exits through the store’s Amazon Dash Cart lane, sensors automatically identify the cart. The payment is processed using the card linked to the customer’s Amazon account.

The necessity of an Amazon account works as a great advantage for Amazon. Beyond obvious payment reasons, an Amazon account links the data already available on its members to their in-store shopping habits.

The end result is the accumulation of a clear insight into what consumers are looking for. As the stores gain traffic, Amazon will better predict what to stock their shelves with – whether that be products of their own Amazon Fresh brand or other third-party brands.

2. Stores that serve as hubs for contactless package pick up and free returns

We know Amazon as the digital store that has everything. The wide range of products available from third-party sellers with low prices and next-day shipping are Amazon’s famous golden features.

With the new availability of brick-and-mortar stores, Amazon returns become easier than ever. Customers can pick up or return items that have no association with food, all via a grocery store. It is almost as if Amazon Fresh is a superstore without the inventory.

Competitors such as Target and Walmart (in the U.S) or Tesco and Sainsbury’s (in the U.K) offer something similar, but the distinguishing factor is that Amazon has a significantly bigger third-party marketplace and product offerings.

A “fake superstore” utilises digital connection and leverages curbside services in both these new stores and Amazon Lockers – that alone is enough to threaten traditional supermarkets.

Kroger, a popular U.S supermarket, has already announced plans to create its own online third-party marketplace. In contrast, Morrisons (a U.K grocery chain) has already partnered with Amazon Fresh.

However, no one truly knows the effect that a digital third-party marketplace will have on in-store shopping. This is yet to be determined.

Interior of Amazon Fresh store in Los Angeles. Source: Amazon.

3. A checkout free design

Through the Dash Cart, a checkout-free experience is offered to those who are not undertaking large shops. Shoppers who are on-the-go would certainly lean towards this type of process due to both its speed and ease.

Since no other competitor is engaging in this endeavour, it is most likely that a busy consumer with no time to waste would make use of the Amazon Fresh store.

A street with a variety of traditional grocery stores typically has price as the deciding factor for its use, but the provision of a checkout-free experience may now turn a few heads.

In cities such as Los Angeles or London which are characterised by the hustle-and-bustle lifestyle, people value convenience and are technologically progressive.

Perhaps this awareness was the motivation for Amazon’s selection of these two cities as their opening markets.

The big experiment: Amazon is merging physical stores with its online platform

Thus, Amazon’s new venture indicates that e-commerce in the grocery market cannot thrive without traditional brick-and-mortar stores. It is even going beyond that.

Amazon Fresh requires the customer to log onto the Amazon app and access their shopping habits while connecting their in-store activity to their online activity.

The Amazon Fresh retail stores will be used to gather, analyse, and use information acquired about customer product preferences by requiring customers to be Amazon account holders.

Mark Cohen, director of retail studies at Columbia University, says “Amazon is proof-positive of the value of big data and the way in which you collect it and the way in which you examine it and use it.”

Amazon is one of the biggest e-commerce platforms, with approximately 197 million people around the world visiting the site. The data that they have increases exponentially, and their ability to bring it to physical Amazon Fresh stores seamlessly connects the online platform to in-store shoppers.

Amazon Fresh has its entire toolbox behind it, with consumer data being the most important tool offered.

The store is indeed innovative, but its possession of the most powerful online shopping platform behind it is the real game-changer.

More Articles