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Amazon and the future of food retail

Amazon Go - on the inside

A funny thing happened a couple of months back. On June 11th, Amazon shut down its restaurant delivery business.
 
Here in NYC though, the company opened its latest cashier-less Amazon Go store right next door to my office.
 
On the same day they pivoted out of a corner of e-commerce, they continued their march on brick-and-mortar.

Jeff Bezos discussing the Amazon Go initiative + shutdown of Amazon restaurant delivery

This sent my mind racing. Here’s my thought process on that day (I can recall because I keep a very good personal journal and don’t call it a diary and I need some sort of personal space between a startup and two small kids and why are you laughing).

Store-specific questions

  • What’s the in-store shopping experience?
  • What’s the product selection?
  • How many people working the store?
  • Can I really just walk out with whatever I want?

First-order implications

  • How does this affect foot traffic at other stores around us (Pret right next door, Duane Reade and Gregorys Coffee a few blocks away)?
  • Does cashier-less mean higher throughput?
  • What’s the rent and how much foot traffic do they need to cover costs?

Second-order / strategic implications

  • If they don’t care about financials (they likely knew food delivery would be a loser against more focused / entrenched competitors but still continued), what’s the strategic play?
  • How should other brands react?
  • Am I going crazy?
Amazon Go opened next door, along with a world of possibilities and implications in my mind

Each of these are tertiary though, not really addressing the heart of the matter: what does Amazon Go say about the future of food retail?

The nature of retail ⏳

For forever, the nature of retail has involved waiting. Whether online or in store, you’re waiting in line, at a table, or for a delivery. Even when you’re kiosk ordering at Taco Bell, you’re still standing around for 7-8 minutes waiting for Cheesy Gordita Crunch goodness.

The beauty of Amazon Go though is that it totally strips away the concept.

You scan your app to get in, pick up whatever you need off the shelf, and literally walk out.

There’s absolutely no waiting for anything (unless you take some time at the Starbucks machine to make a latte).                                                 

As an example, it took me 50 seconds to buy Advil one morning when I had a headache. 50 seconds.

This is probably the closest we will ever get to pure “grab and go” retail.

Thank you Amazon Go for being the most efficient headache relief vehicle ever invented

In need of a quick lunch between meetings? A full meal-kit to take home for a family dinner? Some deodorant before you hit the gym? A frittata with an expiration date 4 days from now (seriously)?

An egg frittata in the Amazon Go fridge section with an expiration date 4 days from when I took the picture. Not for me.
No joke I took this picture on 6/12

In a weird way though, the frittata above encapsulates everything about Amazon’s approach.

Just as with online retail, their approach is predicated on being the most convenient option available. Selection is a (close) secondary concern relative to the speed with which you can get it; remember: the whole initial hook from Amazon Prime’s initial launch was 2-day express shipping! Amazon Go, like Prime, has established itself as one of the fastest delivery mechanisms in commerce.

The selection itself may not be the best (a sweet potato + jalapeno wrap had literally no flavor, something I never thought possible for either sweet potatoes or jalapeno), but my god is it convenient.

And yet, as I observed the store over the next 6-7 weeks, I noticed a very interesting dynamic.

Despite the hype around Amazon Go, Pret’s business next door seemed completely unaffected. I can’t honestly recall more than 10 customers even in the Go store during peak lunch hours 3 weeks post-launch.

Pret's business next door still looking brisk a few days after the Amazon Go store opened
A look at the Pret located next door to Amazon Go the day after the latter’s opening.

Even looking at my own behavior, I routinely shun access to nearly identical Starbucks vanilla and caramel lattes in under 90 seconds from a machine in the store. Instead, I’m loading my wallet balance in the Starbucks app and walking a few extra blocks to pick up my order.

Why?

The answer it turns out is the one at the heart of all retail, and the very thing Amazon is trying to eliminate with its stores: time.

Convenience vs. experiential retail 🎭

When the store launched, Amazon’s VP of Physical Stores Cameron Janes told CNBC “New York really fits…what we’re looking for. It’s high density…Lots of people on the go. It’s a great fit for us.”

The hypothesis makes sense – you want to introduce a frictionless walk-in / walk-out experience where there’s a ton of foot traffic and people seem perpetually pressed for time.

But convenience isn’t everything, especially when it comes to food.

Take my (and other Manhattan office workers’) day as an example. With precious little time outside the office anyway, I prefer to enjoy that time, and luxuriate in the experience, rather than treat it as a quick, convenient trip for sustenance.

I know after those moments pass that I’ll be back at my desk in the thick of it yet again. In that context, lunch and coffee serve as my ritualistic respites from the daily grind, opportunities for me to step back and treat time as a luxury.

In these moments, I don’t want just any coffee. I want a maple latte from Gregory’s (maple syrup in coffee is dope AF don’t judge).

I don’t want a quick veggie wrap, I want to take the extra 15-20 minutes to walk into a Pret or Dig Inn at peak lunch time to pick out something made fresh and on-site. And if I’m really in a time crunch, I’ll augment this experience through digital order ahead, where I can still at least enjoy the experience of walking a few blocks, into a store, and back to my desk.

In short, food is a unique corner of retail. Success is predicated on delivering a consistent guest experience vs. mere convenience.

With every visit, we ask guests to subconsciously make this trade-off between time and experience. And they willingly oblige, paying upfront with the former in the hope that the benefit of the latter far outweighs that initial investment.

Sidebar: the “good enough” scenario 🥉

As of now, Duane Reade / CVS seem most threatened by my local Amazon Go. Aside from the pharmacy aspect (which Amazon can’t replicate…yet), there’s significant overlap in available items – quick snacks, drinks, freezer items. Here I’ve found Amazon’s convenience makes the biggest impact, as I typically spend most of my large chain pharmacy visits repeatedly checking my phone while waiting in line to purchase quick snacks (oh, the horror!).

Chain pharmacies like Duane Reade and CVS seem most at risk from Amazon Go - same selection, but far more convenient shopping experience
A smattering of Amazon Go’s “pharmacy-like” selection

Should Amazon’s selection expand and improve though, it could create a “good enough” scenario where – coupled with the frictionless experience – would suffice (at least some of the time) for busy Manhattanites.

Assume they will get better – they’re at 13 stores nationally and don’t plan on stopping.

In that case, how do affected brands proactively solidify – and indeed improve – their position?

Stay out of the middle 🥊

I listened to a Kara Swisher podcast ~5 months back with Hudson’s Bay CEO Helena Foulkes, the Canadian retailer that owns Saks, Saks Off Fifth, and Lord & Taylor (video here, podcast here).

Foulkes wasn’t the first to say it, but she articulated it really well in the below discussion regarding Lord & Taylor’s troubles:

Foulkes: Lord and Taylor, I think, has amazing loyalty among the people who shop there. There are not enough of them, but they’re amazingly loyal and we have incredible people working in that business. I think it’s in the toughest part of retail.

Swisher: The middle?

Foulkes: The middle, exactly. It’s neither the high-end luxury where you can really own it, nor is the low-cost deep discount retailer.

Swisher: It’s not up at Saks, it’s not down at Ross.

Foulkes: Yeah. We have a fairly high cost structure and I’ve brought in a new leader, she’s here today, Vanessa is the president of Lord and Taylor. She’s doing amazingly innovative things with that business, but it is handicapped by its positioning in the marketplace.

Swisher: In the marketplace.

Foulkes: Yeah.

Swisher: How do you change that? You have to go up or down, right? Or some way, right? You can’t really go down with Lord and Taylor.

Foulkes: You can’t go left. You can’t go down. I think you have to get personal and local. You have to stop saying “We’re a chain.” You have to say, “I’m in Westfield, New Jersey, and I’m going to be incredibly relevant for this market that I serve. I’m going to bring in new services, stylists, and do things that really matter to the people who live in this community.”

Now, traditional retail is a more straight-forward, black-and-white luxury vs. discount divide. The variety of food retail though offers operators much more flexibility.

Since inception, Amazon has always positioned itself on the cost + convenience end of the spectrum. The answer for food retailers then isn’t to go the direct opposite route (luxury), but rather to identify what your brand stands for and its place in your customers’ lives.

These core principles inspire everything from your food philosophy, menu, physical store layout, delivery strategy, tech strategy, engagement tactics…all things we’ve laid out previously in our restaurant strategy playbook. Leaning into what makes you uniquely you demarcates a clear position relative to Amazon, and indeed the broader food retail spectrum.

To crib an example from my neighborhood: three-day old frittatas next door? Well everything at Pret is made today, gone today, and remade for the next day, and on, and on, due to their commitment to quality, freshness, and social good.

Pret's core branding and brand principles will continue to serve as a moat from Amazon Go

Pret and Amazon align on convenience and the “grab and go” format – but the core principles driving the overall guest experience couldn’t be further apart.

Instead, they’re strategically reminding customers at every turn exactly why they opted for their brand in the first-place. It’s not a choice simply based on convenience – there are other options out there for that. Instead, the guest <> brand relationship is grounded  in a broader ethos covering the brands priorities for their guests and community at-large.

From a qualitative standpoint, it seems to be working out in their battle against the Death Star of retail.