After reading a few posts here on Picnic and the Dutch supermarket landscape, I would like to share something on Amazon and the supermarket landscape. Last year, Amazon bought the supermarket chain Whole Foods for $13.7 billion and seemed to be on its way to disrupt a new industry: grocery shopping. A video in which Amazon introduced the ‘Shop and Go’ concept, with automatic payments and skipping the cashier went viral. (https://www.youtube.com/watch?v=NrmMk1Myrxc) A few days ago, this became a bit more specific: it is planning on opening 3000 supermarkets called AmazonGo (Bloomberg, 2018). If it manages to live up to this ambition, it would be one of the biggest supermarkets in the US within a few years (Majid, 2018).
While the concept of AmazonGo currently seems to target concepts such as 7-Eleven and other small convenience stores rather than the big supermarkets, the technology behind AmazonGo is very promising. The technology is based on computer vision, sensor fusion and deep learning: it automatically detects when products are taken shelves and added to a visual ‘cart’ (Amazon, n.d.). This technology also has a major impact on the way supermarkets can use data. With real time tracking of which products are bought and who buys them, there is a lot of potential for targeting specific customers, optimized product placement and assortment decisions. Of course, Amazon has to keep the consumer’s privacy in mind, which is inevitable these days.
Looking at the way Amazon targeted other industries before, I am really curious to see whether we will be shopping at AmazonGo in the future instead of Albert Heijn. Even though this does not sound very likely, I do believe AmazonGo’s technology is here to stay. Not only can this technology be applicable to supermarkets, but it can be used to a lot brick-and-mortar stores in general, especially for commoditized goods with low differentiation.
References:
Amazon (n.d.) Amazon Go. Retrieved from: https://www.amazon.com/b?ie=UTF8&node=16008589011
Bloomberg (2018) Amazon Will Consider Opening Up to 3,000 Cashierless Stores by 2021. Retrieved from: https://www.bloomberg.com/news/articles/2018-09-19/amazon-is-said-to-plan-up-to-3-000-cashierless-stores-by-2021
Majid, A. (2018). Amazon Go wil 3000 kassaloze supermarkten openen – en dat is slecht nieuws voor Ahold Delhaize. Retrieved from: https://www.volkskrant.nl/nieuws-achtergrond/amazon-go-wil-3000-kassaloze-supermarkten-openen-en-dat-is-slecht-nieuws-voor-ahold-delhaize~b24c37ed/
Hi Maarten, I definitely agree with you that the technology implemented by AmazonGo will have profound impact on our ‘traditional’ supermarket experience. With regards to AmazonGo’s potential in the Netherlands (or even Europe), I think this will depend on incumbents’ strategies and responses to these developments. If organizations such as Albert Heijn manage to implement a similar concept within a reasonable timeframe, AmazonGo will likely have a hard time to establish themselves in the market. However, we should also consider Amazon’s enormous financial resources and increasing integration in society (e.g. amazon prime). Amazon seems to become a platform for many services, which could be very attractive to customer. How convenient would it be if you can get your groceries, study books, and insurance from the same company?! I really think existing supermarket organizations should carefully assess the developments and come up with adequate responses, or risk being dominated by the rapidly growing giant Amazon (or other platform firms that decide to have a go at the supermarket business).
What do you think?
Thanks for your post!
Hi Frenk, I totally agree with you that it will be difficult for Amazon to get a foothold in the Dutch market – for online shopping, I think we generally still use Bol/Coolblue. Furthermore, they will definitely encounter liability of foreignness once entering here, as I expect that Dutchies rather go to an AH/Jumbo. I recently saw a video of AH offering a similar proposition in their To Go shops, but was still less convenient than Amazon’s technology, but at least they seem to be stepping up their game. At the same time, I agree with the convenience this proposition would offer, maybe at some point we will all be convinced by the convenience Amazon will offer their customers. Anyhow, whatever happens, I believe the supermarkets are gonna face interesting challenges in the coming decade. Thanks for your comment!
Thanks for this interesting post Maarten!
I have been thinking about this new technology and I also believe it has a great potential in the future. I think it will be a nice complement to the delivery services which are becoming more and more popular. I definitely believe that online grocery shopping will become the main way of doing your groceries. As today, I think it is the most convenient way of shopping. Therefore traditional supermarkets will be threatened and will have to change their way of doing business. Traditional supermarkets will lose customers that switch to online shopping, while still facing high infrastructure and labour costs. AmazonGo is a great example of fighting this threat. The shops are usually smaller, so they can rent smaller buildings and they require less staff. Furthermore, they will also attract people who value convenience. If AmazonGo (or similar players) would place their shops in high traffic areas, I see a nice future for them.