Retail Focus: The Checkout-free Battle

If you were asked to predict the location of a battle between technology-enabled retail concepts a few years ago, it is unlikely that many people would have suggested Holburn, London. Nonetheless, we are now witnessing the situation where, on a short stretch of a street, three of the world’s largest retailers are competing against each other with their iterations of a convenience store concept that enables shoppers to check into the store, pick up the items that they need and simply walk out.

Removing friction

Retailers the world over have been anxious to remove points of friction along the shopper journey and technology has often had a vital role to play in this process. Pain points in grocery shopping can include navigation around the store and navigation within categories, but by far and away the biggest cause of friction has been the checkout process. This has been alleviated to some extent by a variety of different solutions, including self-checkout and self-scanning (be that through a handset or smartphone), as well as improvements in payment, with the advent of contactless being particularly noteworthy.
Despite these improvements, the checkout aspect of grocery shopping has still been seen as a pinch point, with shopper feedback almost universally suggesting that the checkout is the biggest source of friction in the overall instore experience.

 
This explains why food retailers have been looking to develop new concepts that remove the checkout process almost entirely. Powered by technologies such as artificial intelligence, sensors and cameras, retailers and their technology partners are now able to allow shoppers to browse the store, bag up the items they eventually require and simply walk out of the store without the need to check out at all.

Amazon Leads the Way

Although many retailers and tech providers around the world might claim to have been the first, it is e-commerce colossus Amazon that has been the true pioneer in this process. It has opened many Amazon Go stores as well as larger checkout free supermarkets in the USA and has collaborated with other retailers in that market for them to use Amazon's technology in places such as airport stores and food outlets within sporting arenas.
In the UK, having rebadged the concept as Amazon Fresh, Amazon has this week opened its 10th store in the London area as part of its ambitious aspiration to trade through 200+ over these units over the next three to four years.
The opening of the first Amazon Fresh store in Ealing earlier this year was seen as a pivotal moment in the UK grocery industry as it represented the first genuinely checkout free concept in the market. What was striking was that, not only was the technology amazing, but that by recruiting a number of experienced grocery professionals from UK competitors, it was able to design and open a deeply impressive convenience retail concept in its own right. Even without all of the bells and whistles, Amazon Fresh is a great proposition with an amazing private label range and a very well curated assortment. 

Tesco & Sainsbury’s not far behind

While Amazon has steadily expanded its Fresh chain, it should be noted that Tesco was already trading through a checkout-free concept, albeit one that was not open to the public (it was operating in the head office campus and was only accessible by employees). This recently changed when Tesco unveiled the first public-facing iteration of its GetGo concept in partnership with technology provider Trigo. 

 
Intriguingly, Sainsbury's has chosen to partner with Amazon to launch its first checkout-free concept which it has christened Pick & Go (although it should be remembered that Sainsbury’s had tried before with a very short-lived self-scanning concept in the same location). Clearly, with Amazon as a tech partner, the experience of checking in and leaving the store is remarkably similar to that of Amazon Fresh. 

The ‘Frenemy’ Trend

The collaboration between Sainsbury's and Amazon is noteworthy as it is just the latest instalment of a narrative which has seen collaboration between parties that could narrowly or loosely be construed as competitors. This cooperation between two retailers that might be considered as adversaries has become commonplace. 

 
For example, it might be seen in a broader competitive context that Tesco is a competitor with Greggs in terms of share of stomach, but nonetheless the two parties have cooperated to install Greggs units within Tesco superstores. Likewise, Asda is as huge toy seller in its own right but has opted to partner with The Entertainer to run instore toy departments, the advantages being that the entertainer will take excess space, responsibility and budget, while at the same time providing an authoritative toy destination that should drive footfall. In the case of Sainsbury's and Amazon, Amazon has become Sainsbury's frenemy: a fierce competitor to Sainsbury's in the grocery and general merchandise markets, but a collaboration between the two meaning that Sainsbury's is able to hit the ground running when it comes to developments of concepts such as Pick & Go.

 

Shopper experience

So, how do the three different concepts stack up against one another? In terms of the shopper journey, it must be said that it's pretty much a dead heat. All three concepts require the possession of an app or account with the three different retailers and require that a payment method is attached to each of these in order to access the store and complete purchases. The amount of administration required to achieve this is fairly minimal in all three cases. The shopper must retrieve a QR code to access each store, thus enabling them to complete their shopping trip and leave the store with a minimum of fuss.
The check-in process is equally smooth in all three cases and the staff in all three concepts have been in plentiful supply to assist customers who are struggling with either logging in or downloading an app or generating the QR code required to gain entry.
The only real pain point in all three shopper journeys is around buying alcohol, in that one is required to gain access to a separate area. In the case of Tesco, once this area has been entered, shoppers are unable to re-enter the main body of the store. One suspects that this won't be an issue once shoppers have become frequent customers, but nonetheless it remains the case that age restricted products do present something of an obstacle in the otherwise smooth experience in all three concepts.

Surprising range differentials

As already noted, the Amazon Fresh concept is a genuinely superb proposition, bringing together a mix of branded lines as well as private labels from Amazon, Morrisons and Booths. Although the focus is obviously on food-for-now and food-for-later, it is technically feasible to do a pretty good full grocery shop in the store as it includes categories like household, pet and health & beauty. The Tesco range is a fairly standard Express assortment and again it is viable to pick up a broad variety of grocery items including health & beauty and household. The Sainsbury store is much smaller than the other two and therefore has a much narrower focus on food-for-now and food-for-later, with categories like health & beauty conspicuous by their absence. One can only assume that this concept is aimed fairly and squarely at the breakfast, lunch and dinner requirements of office workers rather than at commuters or residents looking for a top-up shop. 

 
Looking ahead

With retail real estate in copious supply in city centres around the country, there is no real reason to doubt that Amazon, with its bottomless pockets, will not achieve its ambitious goals to be operating hundreds of these Amazon Fresh stores over the next few years. It has remarked that the cost of the technology for each store is decreasing all the time and combined with the quality of the Amazon proposition, it is likely that Amazon might well emerge as a genuine competitive force in the British grocery market before too long.
What is less clear is if Tesco and Sainsbury's have the will or the budget to roll out similar amounts of their new store concepts. It remains to be seen if the new shops in Holburn are merely an inquisitive toe in the water, or a more formidable statement of intent. What is doubtless, though, is that the customer experience in British food retailing is only going to get better. Retailers don't necessarily need to embrace the entire checkout free concept but may choose to look at these technologies and others like them to reduce friction throughout the shopper journey. 

 
With Aldi and Morrisons also looking set to join the checkout-free fray in the coming months, it would not be implausible to suggest that the checkout experience may be permanently changing before our very eyes.
These types of innovation might also have a very real impact on shopper loyalty. If a retailer like Tesco, Amazon or Sainsbury’s can embed a shopper in an ecosystem, featuring Clubcard, Prime and Nectar respectively, that also includes a checkout-free store close to where that shopper lives, works, or commutes, the likelihood of that customer shopping elsewhere will plummet.