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From grocery shops to salons: Amazon looks at bricks, as well as clicks, in London

·6-min read
<p>Three Amazon Fresh grocery stores have opened in London</p> (Amazon)

Three Amazon Fresh grocery stores have opened in London


Close to Ealing Broadway station on early Saturday evening, I was among those walking into a new convenience store. The aisles were full of everything you could need for your kitchen cupboards. So far, so unremarkable. However, there is one major difference: you exit the site with your groceries, but you don’t have to pay cash or swipe your card at the end. Welcome to London’s new Amazon Fresh, the “just walk out” store concept.

This till-free shop is one of three that tech behemoth Amazon has opened in the capital in 2021, and more are on the way. It has also just launched a hi-tech hair salon in Spitalfields.

The web giant is already a mega dominant force in retail, but now it is looking to expand further, this time on UK high streets. What is going on and why is Amazon betting on bricks as well as clicks?

Retail analyst Nick Bubb points out that it is early days, but adds: “Few would bet against it succeeding.”

While the layout of the Ealing store isn’t too dissimilar to a mini Tesco or Sainsbury’s on the high street, namely there are fruit & veg, meat, and meal deal sections for example, how you shop is different. There are no baskets, and instead people can put goods directly into their own bag. Of course you do end up paying your bill, but that happens afterwards, using Amazon’s tech.

As bricks and mortar has struggled in the pandemic, Amazon, led by Jeff Bezos, notched up 44 per cent net sales growth to £77 billion in the three months to March 31. Those stuck indoors have been buying goods online and watching Amazon Prime Video like never before, while businesses have flocked to use the firm’s cloud computing division.

But Amazon’s latest investment here marks another way to show off its tech, which it could potentially look at marketing to rivals, and to experiment with new ways to attract customers.

At Amazon Fresh, where in the Ealing branch there are plenty of mini cameras coming out from the ceiling, shoppers scan a smartphone app to enter, pick up goods, and walk away. Shortly after they get an email receipt and are be billed from their Amazon account.

The till-free experience is made possible by tech that detects when products are taken from or returned to the shelves, and keeps track of them in a virtual basket. As well as having established brands on its shelves, Morrisons provides goods to Amazon’s UK shops, and there is a new “by amazon” private label brand. There are hundreds of products from “by amazon” which it gets from various suppliers.

So why bring this model to the UK? As well as getting an additional revenue stream from the sale of food, the new sites also feature a counter where customers can return or pick up items bought online from Amazon. A handy way to encourage shoppers in.

Meanwhile, the Amazon Fresh stores are using the same “just walk out” technology the firm uses at its more than 20 “Amazon Go” and “Amazon Go Grocery” stores across the Atlantic. In the US this tech is being marketed to other retailers, so it is possible Amazon will consider selling the tech to UK supermarkets.

There will of course be people who don’t have or want to use an Amazon app to shop. Still, throw in the fact that footfall in neighbourhood stores could benefit as many people work from home, and Amazon could have plenty of customers to pop in.

The company hasn’t revealed how many Amazon Fresh shops it plans, but has said it looks forward to opening more in the greater London area. Amazon already has a supermarket presence here via its $13.7 billion deal for Whole Foods in 2017, and by ways such as offering Morrisons’ full range on its website.

If the latest shops are successful, it is possible Amazon’s move might encourage other chains to look at investing in new stores and in tech.

Last month, Amazon Salon launched close to Liverpool Street station, open to employees initially, but it will welcome the general public at a later date.

Amazon Salon
Amazon Salon

Styling and treatments are by an independent salon team, but Amazon has worked with partners to integrate tech across the site. It is not your conventional hairdressers. Here people experiment with virtual hair colours using augmented reality technology, while those in the chair can enjoy entertainment on Amazon Fire tablets. There are also QR codes on products such as shampoos which customers can scan and buy online via Amazon. The firm says this is an “experiential venue” and there are no current plans to open in other locations.

Amazon already sells products directly to some salons in the UK via its online professional beauty store which is available to businesses. Some could perceive this trial as a way for the digital giant to get more on the radar of the beauty industry, which could in turn win Amazon more sales and customers.

Are traditional salons worried? “We know the big tech companies like to test out new concepts, so let’s see how this one goes,” says Richard Lambert, chief executive of the National Hair & Beauty Federation. “They are entering a very competitive market, where a great customer experience is at the heart of every successful hair and beauty business.”

Amazon says the revenues, profits and taxes for the new Amazon Fresh and Amazon Salon locations are recorded in the UK and reported directly to HMRC. This month the group reported that its European retail business paid no corporation tax in 2020 to Luxembourg where it has its European HQ. That is due to it recording a €1.2 billion loss, so it therefore paid no corporation tax despite recording sales of €44 billion (£38 billion).

Some retail experts reckon the future is firmly cemented in a mixture of bricks and clicks. Richard Lim, chief executive of Retail Economics, says Amazon’s “deep cash reserves allow for continuous experimentation and it’s inevitable that we’ll see more examples of merging digital and physical experiences that leverage their tech expertise and further blur the boundaries”.

Amazon is not alone in looking at how digital and physical can work well together. Property giant British Land is looking to buy more retail parks, and says its sites “play an important role in a successful online retail strategy facilitating click and collect, returns and ship from store”.

And as Kurt Geiger’s boss Neil Clifford recently told this paper: “Customers love choice and where we have a retail presence we achieve an almost 40% better online business in that area.” The footwear chain has recently opened a handful of new London sites.

One reason some firms could view now as a good time to experiment with debut or more physical shops, is that in some cases the cost to secure them is cheaper than pre-pandemic. A number of vacant sites are expected after some retailers permanently closed branches.

“Non essential” retailers were allowed to reopen shops on April 12 and many have reported encouraging trading. Reports also suggest consumer confidence is rising, as the vaccine rolls out.

High streets have been decimated by lockdowns and face struggles ahead, from digital rivals, to business rates headaches. But, if Amazon’s behaviour is anything to go by, the death of the high street has been greatly exaggerated.

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