The Amazon Fresh debacle is a lesson for all operators

An Amazon Fresh store opened down the street from our home in Encino, California, part of the sprawling LA urban landscape. Have you been to one of these? I could not resist. As a customer, you enter the store (a full-size supermarket), scan your Prime app, get your shopping bags, do your shopping, fill your bags with groceries, including fresh fruit and vegetables, scan your app on the way out and leave. No checkout required. In two hours, a receipt arrives on your smartphone.

It works

More than half of Amazon Fresh stores in the U.S. use Amazon’s Just Walk Out technology. From my experience, it works. Although, on one occasion, I was billed for boysenberries instead of blueberries. On another trip, I was not billed for two greasy $4.99 roasted chickens (a draw item), probably because I was all over those birds before the attendant could mark them with their magical electronic tags. Give me a break – it was dog-eat-dog in the poultry section. When I explained the errors to the Amazon returns people in the store, they had no way to remedy either situation.

Something is missing

My last visit was six months ago. While I did enjoy the technology, beyond that, there was something missing. Apparently, I am not alone in my ambivalence for the brand and the concept. In the first week of August, there were significant layoffs at Amazon Fresh. Regarding the layoffs, Amazon spokesperson Jessica Martin said Amazon is assessing the Fresh stores’ organizational needs, according to a company statement. And, the Washington Post reported that hundreds of workers lost their jobs.

New 'zombie markets'

At stores around the country, Amazon has put a hold on Fresh openings. Many of the on-hold locations have signage placed in front of the store. Bloomberg reported that Amazon has paused expansion of its line of Amazon Fresh grocery stores as it evaluates “how to make the chain stand out to shoppers,” according to Amazon chief executive officer, Andy Jassy. Some of the unopened stores are now being referred to as zombie markets.

An expert opinion

What went wrong? How can such incredible technology fail to resonate with consumers? Technology is a key component of Amazon's grocery challenges. In an NPR report, Karan Girotra, a professor at Cornell Tech, said “the Amazon Fresh job cuts underscore Amazon's failure to lure in shoppers and secure a competitive edge through its automated shopping experience.” (I am happy to let Karen do the talking for fear of losing my Prime membership).

"When Amazon entered this business, their assumption was they could use technology to compensate for their late entry, for their lack of scale and lack of a large physical network," Girotra noted in the NPR article. "The hope was technology would give them an edge, but it didn't really happen."

Apparently, many shoppers haven't bought into Amazon’s futuristic grocery experience. Foot traffic data analyzed by Bloomberg Intelligence shows customers shop at nearby competitors far more frequently than they do at Amazon Fresh locations.

A lesson for operators

I searched my soul, trying to understand why I hadn’t been back to my local Amazon Fresh store, because I love the concept. The real problem: There wasn’t one product in that store that was compelling enough to bring me back.

Here’s the lesson for office coffee service (OCS) operators:

Quality is important. If you have the best coffee, and your client absolutely loves it and they cannot get it anywhere else, the client will put up with a lot. We have all seen that happen when trying to take over an OCS account from an operator who is failing on the service side. It takes time.

Prices are excellent at Amazon Fresh, but price only goes so far. It can get an operator in the door, but when it is accompanied by mediocre quality, that will only be tolerated by the customer for so long. In fact, my favorite stores are ridiculously overpriced, like Gelson’s and Bristol Farms, but they have those certain products — tuna salad, chicken salad, wild caught salmon, wild caught Chilean seabass, lemon bars – that just keep reeling me back in.

Service – How can you beat the service that allows you to walk in and walk out without having to check out? It’s good, but convenience is not good enough. In this recent Automatic Merchandiser Vending & OCS Nation podcast, operator Barry Rosenberg compared the recipe for business success to baking a cake. “It’s not all sugar, it’s not all flour, it’s not all eggs; it has to be a variety of ingredients in all right proportions.”

We can compete

Operators compete in the OCS space with Amazon every day. The fact that Amazon does not understand that it takes more than technology and price to satisfy the customer should be encouraging to all OCS operators. We can deliver the combination that Amazon will never be able to provide: quality products, a personalized approach designed to meet the specific needs of a client, and a level of service (along with technology) that will be appreciated as a key part of the mix. When we add customer service and human interaction to the recipe, we can take on Amazon anytime.

ABOUT THE AUTHOR

Bob Tullio is a content specialist, speaker, sales trainer, consultant and contributing editor of Automatic Merchandiser/VendingMarketWatch.com. He advises entrepreneurs on how to build a successful business from the ground up and specializes in helping suppliers connect with operators in the convenience services industry – coffee service, vending, micro markets and pantry service specifically. 

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