By Mark Richards

And probably collects another $2bn. With the opening of its first checkout free supermarket in Seattle, Amazon has sent shock waves through the industry, especially with the major UK supermarkets already looking at cutting jobs. So how does Amazon’s ‘walk in and help yourself’ store work? And what does it mean for the UK?

Let me tell you something that really annoys me. It should probably come with the hashtag ‘First World Problems’ but bear with me: I am certain I’m not the only person who feels like this. I often call into the supermarket on my way home: buy something for dinner and – if it has been a difficult day – maybe a bottle of wine as well. I use Apple Pay on my phone and a nifty little app called ‘Stocard’ means I have all my store cards on my phone as well. But then – if I am using the self-service checkout and I have bought some wine – I have to call someone over.

“Can you just tell the machine I’m over 18?”

“Have you got any ID? Ha ha ha.”

“Yes, these lines on my face.”

Leaving aside the ‘customers like a little joke’ paragraph in the training manual, how ridiculous is that? I can pay on my phone, collect my points on my phone, but I need to find someone to verify that I am way past 18.

I cannot believe that is a problem that exists in Seattle. At least not in the grocery store that Amazon has just opened.

Welcome to Amazon Go

That is Amazon Go at 2131 7th Avenue, Seattle – and if queueing for a checkout is your equivalent of me having to prove my age every time, Amazon Go is just what you have been waiting for. Here is how it works:

  • As you go into the store you scan your Amazon Go smartphone app and pass through a turnstile
  • You then take what you want off the shelves – with cameras and sensors tracking your purchases
  • And that is it. You leave – and Amazon duly charges your purchases to your nominated card through your Amazon account

So what do people think of it? The reaction – at least judging by the comments on Twitter – has been favourable. Of course, it is ironic that people queued around the block so they could get into a shop where they did not have to queue to get out. But people queued up to see the first car and the first plane: and how long were the queues to buy the first iPhone? When real innovation comes along, people want to be there.

Last year Amazon sent shock waves through the grocery industry when it paid $13.7bn (£9.9bn) for Whole Foods Market and immediately began heavily discounting.

Tesco and Sainsbury’s are cutting back on staff

Now we have Amazon Go and if I were a British supermarket boss I would be terrified. Remember those hedge fund millionaires we wrote about who made a fortune betting against Carillion? You might just suspect that they have added Tesco and Sainsbury’s to their list of targets, especially as both companies have recently announced plans to drastically cut costs.

In the short term, Sainsbury’s (apparently trying to save £500m over the next three years) and Tesco are responding to yet more pressure from Aldi and Lidl, both of whom reported good trading figures over Christmas, as both were named among the top brands in the UK for the fourth successive year.

In the YouGovBrandIndex poll of the top ten brands in the UK, Aldi took the top spot, followed by Lidl, Netflix and BBC iPlayer. Figures from Kantor Worldpanel show that Aldi and Lidl remain the fastest growing supermarkets in the UK, both posting 16.8% growth in the 12 weeks to December 31st.

Amazon tops the league for customer service

Back to Amazon and this week it was revealed that Amazon has kept its place at the top of the ‘Customer Satisfaction Index’ published by the Institute of Customer Service. First Direct were in second, followed by Yorkshire Bank and Superdrug. Interestingly the survey found that those aged between 18 and 44 were more likely than those over 44 to pay extra for a premium service. Could that be because they want a shopping/customer experience that is tailored to them and their own personal needs?

Think about it: you go into your local Waterstones and what do you see? There – in the prime real estate, quite possibly purchased by the publishing companies – are the books they want to sell you. Log on to your local Amazon and what do you see? There, on your laptop, are the books you actually want to read. That is a significant – and profitable – difference.

Worrying times for the supermarkets

Amazon Go Checkout Free Supermarket Opens in Seattle

So these are worrying times for many UK retailers – but especially for our supermarkets, as they are attacked on one side by the march of technology and on the other by the discount retailers. They are also under attack from a generation we have written about so frequently – the millennials, those people roughly born between the early 1980s and the year 2000. Millennials report enjoying the supermarket experience much less than their parents’ generation – and in particular, they give low scores to the speed of the checkouts and the availability of staff.

So maybe reducing staff numbers to save money is not the way to go. But our big supermarkets seem to have made their mind up. Simon Roberts, retail and operations director of Sainsbury’s said,

“We’re proposing a store management structure that will deliver best-in-class leadership and, in many cases, an improved reward package for new management roles.” He added, “The proposals will introduce a more efficient and effective structure, designed to meet the challenge of today’s retail environment.”

Meanwhile in news just in, Edward Smith, captain of RMS Titanic, announced sweeping changes to the management of the ship’s deck-chairs. He said, “I am proposing a deckchair management structure that will deliver best-in-class re-arrangement of the deck chairs on the Titanic.” He added, “The changes will introduce a more efficient and effective deck chair structure, designed to meet the challenge of today’s North Atlantic environment.”

Sadly Captain Smith was unavailable for further comments…