EXPERT COLUMN: Beating Amazon at its Own Game

When Amazon Fresh announced its plans to expand its online grocery business, I wrote an article in Business Week about Why Amazon Wants to Sell Books and Broccoli. Perhaps what’s more interesting to retail supermarkets and grocery chains, however, is grocers of all sizes can leverage Amazon Cloud to beat Amazon Fresh at its own game.

While some people may debate the merits of the in-store shopping experience versus the convenience of online shopping, few will argue against the need to better understand consumers’ shopping habits. This was the golden promise behind the loyalty card craze. If we track purchase behavior, we will be empowered to serve our customers better.

And to a small degree, that is the direction in which retail supermarkets and grocery chains are headed. But if you’re competing against Amazon Fresh, it’s clear that this trend is simply not happening fast enough, or with the level of benefits originally promised. Why not?

It turns out that many of the financial investments made were around technology infrastructure, including better scanners, and centralized data systems that capture scanned data associated with a shopper’s loyalty card (read “in-bound data capture”). While selling this data back to manufacturers has no doubt been a profitable venture, most consumers see few benefits other than a handful of coupons printed out following a transaction or electronically attached via a mobile opt-in.

In other words, while supermarkets and grocery chains have done a fine job of collecting data, most have struggled with actually using this data effectively to create a better shopping experience.

What makes Amazon Fresh so compelling is the wealth of consumer data it actually uses to better inform its customers. The “customers who bought X also bought Y” engine has taken upsell and cross sell to new heights in the eCommerce world. Amazon also remembers and displays not just your past order history, but products you spent time looking at, but didn’t end up purchasing.

But in the retail world, Amazon’s Price Check app has had the most devastating retail impact by making the price of any item fully transparent with nothing more than a quick mobile scan using your smart phone’s built-in camera. According to comScore, four in 10 shoppers check out products in-store and then buy elsewhere (usually online) for a cheaper price.

So how do supermarkets and grocery chains compete with these types of data-driven experiences? Well, Amazon Cloud Services allow them to better leverage the wealth of data they have collected, both cheaply and effectively.

Most companies would love to do more with the data they collect. The barriers are usually around costs being prohibitive and not having enough time to pilot a few test campaigns. That’s where Amazon Cloud comes in. Amazon commissioned a study with IDC in July of 2012 which revealed that “IT staff productivity increased by 52 percent [with Amazon Cloud Services]. IT staff are thus able to improve support of mission-critical operations. Amazon cloud infrastructure services had significant impact on application development and deployment, reducing overall developer hours by 80 percent.” Not only that, but the average savings per application was $518,990.

But Amazon didn’t stop there. It realized that because Big Data is generally unstructured, its Web Services customers needed an easy way to manipulate this data. Specifically, most companies were struggling to leverage an open-source platform called Hadoop. For those who have been trained on Hadoop, this is a powerful platform which can be leveraged to quickly deploy Big Data applications. But there’s the catch – in order to use Hadoop you need to be trained, and most companies’ internal IT staff lack the proper training to be proficient. So Amazon launched EMR, which is a cloud service that enables developers to easily process vast amounts of data.

What this means for supermarkets and grocery chains is that you can now green-light all of those Big Data projects that were thought to be too expensive and time consuming to roll out. Rather than being the data broker, as it were, supermarkets and grocery chains can begin to transform the in-store shopping experience for their consumers.

The time has come to rethink the data-driven shopper experience. Within the next few years, your consumers will not only be using their mobile devices to keep tabs on your prices, but they will be walking in with Google Glass and using Augmented Reality to enhance their shopping experience. The only question is – will they be using your app or a competitive one from Amazon?

Ultimately, there is a choice. Allow Amazon Fresh to chip away at your market share over the next three to five years, or leverage services like Amazon Cloud to beat Amazon at its own game.

Bill Carmody is the CEO of Trepoint and a guest columnist for Progressive Grocer. You can download his latest whitepaper, The 5 Ways CPG Brands Squander Their Marketing Dollars, or email him at [email protected].