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The power of 'now': Amazon Go's real-time connection

Author: Jonathan Reeve
 
Amazon is trialling a new grocery store format (Amazon Go) in Seattle. Amazon Go’s technology has attracted huge interest. For example, sensors on the shelf detect when a product is picked up and add the item to a virtual shopping cart. However, the focus on technology misses the real reason this store format could be so disruptive. Amazon Go is built around a digital connection, with every customer scanning their phone to enter. This gives Amazon an unprecedented real-time opportunity to understand and influence every step of the shopping trip.
 
Why is Amazon’s approach so radical? Consider loyalty programs, the main tool store retailers currently use to understand their customers. These programs are expensive, on average costing 2% of sales. The retailer is willing to bear this cost because, in return, they acquire the customer’s identity and can build a 1:1 relationship. Their customers value the program when they receive relevant and personalised communications and promotions. Store retailers without a loyalty program may not even know the names of their highest-spending customers.
 

Amazon Go achieves the nirvana of store loyalty programs

Amazon connects with its store customers in a completely different way. Amazon Go involves radical changes to the traditional shopping trip, for example by using the smartphone to track purchases and eliminate the checkout. However, the most disruptive element is the real-time digital connection the smartphone enables. Amazon Go has no need for a traditional loyalty program because the connection gives 100% visibility of customer actions as they take place. This is the nirvana of store loyalty programs and opens up almost unimaginable levels of customer understanding and personalisation:
 
  • A traditional supermarket with a loyalty program can see I’m a dog owner and send me an email highlighting this week’s dog food promotions.
  • Amazon can see I’m a dog owner and that I just walked past the pet food aisle without buying any dog food… and then send me a personalised offer to in real-time to encourage me to visit the pet food aisle right now.
 

The strategic challenge for traditional retailers

To understand the challenge for traditional retailers, consider the personalisation maturity matrix we have developed at Eagle Eye. It looks at the two building blocks of digital personalisation:
 
  • The ability to capture data about your customers
  • The ability to use data about your customers


The personalisation maturity matrix

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The horizontal axis represents a retailer’s ability to capture data about their customers
 

  • All retailers can see “what” products have been bought and track trends in overall sales by product or retail outlet.
  • Retailers with a loyalty program can also capture information about “who” bought “what” on each shopping trip (at least for customers in the program).
  • Retailers with a real-time digital connection can not only identify “who” bought “what” but also “where” the customer is in their shopping journey.
 

The vertical axis represents a retailer’s ability to use the data they hold about customers
 

  • At the most basic level, any retailer can create a campaign that targets all customers with the same message, for example a national or local TV campaign.
  • Retailers with a CRM tool can target individual customers with tailored messages. Sophisticated retailers can even deliver personalised offers – for example, based on past behaviour, I may receive a double-points offer but you receive 20% off.
  • Retailers with a real-time digital connection can deliver “hyper-personalised” communications that reflect the customer’s location and stage in the shopping journey. For example, I may receive one offer when browsing at home and a completely different offer (for the same product) when I am in the store.
If we were to plot Australian retailers on this matrix, estimating positions based on publicly available information:
 
  • Retailers without loyalty programs (e.g. Aldi and Bunnings) sit in the bottom-left quadrant. These retailers follow an Every Day Low Price strategy and lack the capacity to incentivise customers to identify themselves and create a connection.
  • Retailers with a loyalty scheme and CRM (e.g. Coles, Woolworths, Myer) can track spend to a unique identity and reward customers based on their individual preferences. However, they typically face two challenges:
  1. Many customers don’t want to join a loyalty scheme – even the top-performing schemes only achieve 70% participation.
  2. Most schemes are built on inflexible legacy systems and lack the ability to interact with customers in real-time or deliver personalised offers.
  • In the top-right sits the digitally-connected retailer who can recognise each customer, wherever they are in their shopping journey, and respond with hyper-personalised communications in the moment. Amazon Go is still a long way from this point, but it has a huge head start because every customer creates a digital connection by scanning their phone as they enter the store. Amazon has 100% visibility of “who” is shopping in their store. The most advanced retail loyalty program operated by a traditional retailer is Loblaw’s PC Optimum in Canada. The program has an unmatched ability to use data, supporting over 100 million personalised offer combinations for its 13 million members.
     

The power of ‘now’ in retail


Tim Mason, Eagle Eye CEO, summarises the opportunity thus:
 
“’Near me’ searches have been fantastic for Google because they dramatically increase the  relevance  of search results.  A connection ‘now’ in the store is the equivalent opportunity for retailers – it’s completely transformational”.

So, what can retailers do to capitalise on the opportunity highlighted by Amazon Go, when for most the store is still a “digital black hole”? There are some simple steps to enable rapid progress for a relatively modest investment. The priority is finding ways to digitally connect customers to your store by unlocking the technology that is already in your customers’ pockets.
 
Contact us today.