Streamlining for success

May 28, 2019

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Martin Newman

By Martin Newman

The Consumer Champion

Years ago now, in Retail Week, I wrote that Amazon would eventually open a bricks-and-mortar store. Even for an online retailer – indeed, the online retailer that everyone thinks of when you mention the phrase – it was the obvious direction of travel then, and it remains so.

I was – and it’s pleasing when this happens – dead right. The first Amazon Go store opened in Seattle in January last year. It was followed by a second, downtown location in August, and a third, at South Lake Union in Seattle, in September. There are now 11 stores across the US, but Amazon’s ambitions are clearly much bigger than those relatively modest beginnings. Some rumours talked of 2,000 stores, but Amazon have played this down and pointed to the fact that they’re still learning the trade of being bricks-and-mortar retailers.

Of course, Amazon being Amazon, this is no run-of-the-mill shopping experience. Because they understand the value of innovation and disruption in the retail space, they’ve reimagined the whole concept of in-person retail. Most of the shopping process, from purchase through checkout to payment, is automated and performed via an app. Once the customer has downloaded the Amazon Go app, cameras in the store monitor which items he or she selects from the shelves and adds them to a virtual basket. If they put it back on the shelves, it comes out of their basket. This is clever tech. Instead of queueing at a checkout, the customer’s Amazon account is then debited automatically, and the whole business can go on without ever having to interact with a member of staff.

This is obviously designed for maximum convenience and speed, and it’s exactly the sort of thing that a lot of customers are seeking. It makes shopping quick and easy, in theory, and it’s something that other retailers are clearly going to watch carefully and try to emulate. We’re now starting to see it in this country. The branch of Sainsbury’s Local on High Holborn has recently gone “checkout-less”. It’s the same concept as Amazon have pioneered: you use technology to sweep away the inconvenience of physical checkouts and the handling of hard cash, to speed up the whole process, increase customer satisfaction, and, let’s not be coy about it, boost profits.

That’s one of the key metrics here. How do you work with what you’ve got, which is a finite resource, to extract the maximum profitability? It’s basically a question of sweating the assets. The approach that Sainsbury’s have taken is interesting. Obviously, a radical cut in the number of staff – no checkouts means no checkout operatives – is a huge cost saving, though they’ve retained a one-person helpdesk. They’ve also stopped selling cigarettes and alcohol; although these are high-value items, they need age verification, which means they need staff, which takes time. So they’re slimming down and focusing more tightly. And the objective is to minimise costs and maximise sales.

I make no bones about this, the kind of dramatic scaling-back of staff is a risk. People are a retailer’s greatest resource, an empathetic and responsive tool for improving customer service and drawing trade in. Yes, they’re expensive, but cutting them can be a false economy. They need to be trained, valued and retained.

That being said… Amazon, and now Sainsbury’s, are trying something new. They’re being disruptive, and that’s good. It’s a risk, but my watchword is: if you’re 100% sure, you’re 100% late. In such a competitive market, where everything is up for grabs and no brands, however venerable, are sacred, retailers have to look at every opportunity, every angle, every possible gap in the market to make their business better, more efficient and more adaptive. So I’d advise everyone to watch Amazon and Sainsbury’s very carefully. Maybe it’s the future; maybe it’s not. But they’re they canaries in the mineshaft, and their health will affect the health of the whole sector. So keep your eyes peeled.

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