Why Grocers May Want To Join Amazon's Cloud

Food retailers that want to win with shoppers by offering a range of Amazon-like capabilities have a friend in Tom Litchford, the head of worldwide business development for retail with Amazon Web Services (AWS). The veteran technology executive is an evangelist for the speed, flexibility and potential of cloud computing to transform food retailers’ operations following a year of unprecedented digital growth.

He may not seem like a friend at first glance, considering that AWS is part of Seattle-based Amazon, but Litchford makes a compelling case for why retailers should use the same technology to run their businesses that Amazon does.

“The perception is sometimes that retailers don’t want to work with us, which is totally the opposite of what’s happening,” says Litchford. “We have thousands of retailers around the world that work with us. There are a few vocal grocers that are more competitive or inward-facing, but the customers that work with us are taking the long view. The most important thing they think about is not focusing on the competitive dynamic, but listening to their customers and doing what their customers are asking, and then giving their builders the ability to go solve those customer problems.”

The aversion by some retailers is rooted in the view that doing business with AWS is the equivalent of providing financial support to a competitor. AWS is Amazon's smallest division with annual revenues of $45.3 billion that represent 11.7% of Amazon's total revenues of $386 billion. However, AWS generates operating income of $13.5 billion that accounts for 59% of Amazon's total operating income of $22.9 billion. With AWS driving profits, Amazon is able to build out a massive supply chain infrastructure to enable fast shipping for Prime members or invest in emerging retail concepts such as Amazon Fresh that compete with traditional grocers.

That may be true, but Litchford maintains that AWS offers retailers the ability to do the same things that Amazon does and he cites the following examples: product recommendation, fraud detection, demand forecasting, call center operations, and cashierless store experiences such as those found in Amazon Go stores.

“We take the learnings from working with Amazon’s consumer business, and we offer them to all of our customers,” notes Litchford. “How we operate the Go stores, we don’t hide that. We say, ‘Here’s how we did it, and here’s the services we used.’”

In the case of the Go store, Amazon applied its customer-first lens to the issue of store experience and friction at the checkout. It knew the business outcome it wanted to achieve — a cashierless experience — and then focused on a technological solution.

“We looked around and saw the technology that was emerging to solve that problem was computer vision, but there was no way at the time to take feeds from hundreds of cameras simultaneously and figure out what was going on,” says Litchford.

What AWS did was develop a service called Amazon Kinesis Video Streams, which allows for the monitoring of a large number of video streams, and the management of the data generated so that a shopper can just walk out of a Go store after choosing products and receive a receipt minutes later.

“We are always looking for where friction is in the shopper journey,” observes Litchford.

Where Litchford sees friction these days is in the grocery e-commerce world. Shoppers rushed to use pickup and delivery services, but most grocers rely on manual pick processes in stores.

“That model is not sustainable,” asserts Litchford. “They have to figure out how to get to more of the micro-fulfillment center architecture in place so they can apply more automation. We like to work backward from business outcomes. We work with our customers to figure out what their challenges are, and try to apply technology to solve the problem There is so much today that we can do. Technology has finally made it easier, less complex and cost-effective.”

That wasn’t the case when Litchford began his career. Growing up in the 70s and taking computer science classes in high school got him hooked on technology. “I’ve always been a geek,” he admits. After graduating from Florida Atlantic University with a computer science degree, he went to work for NCR as a systems engineer at around the time that point-of-sale scanning technology was rolling out.

“When I started in the technology world, we had the ideas, but the technology was either cost-prohibitive or took too long to implement,” recounts Litchford. “If you had an idea, it could take 12 months to procure the hardware and software and get everything set up just to try a test.”

He spent 18 years with NCR, followed by 13 years at Microsoft and five years at the National Retail Federation as VP of retail technologies, in which role he led the trade group’s Chief Information Officer Council. He joined AWS in Nov. 2017 as head of worldwide business development for retail, one of 22 industry verticals within the organization.

During that span, Litchford has been part of, and has had a front row seat for, a retail technology revolution, but it’s nothing like what he sees happening now, especially when it comes to speed and the capabilities available to retailers.

“With AWS, you can have stuff up and running in an hour,” he notes. “You can be doing computer vision tests, voice tests, IoT stuff, just about any idea you have. We want to change the culture to a culture of experimentation.”

Within the retail vertical he leads, retail is further broken down into three segments consisting of general merchandise; specialty retail, which includes fashion apparel and hardlines; and food and drug, which includes grocery, drug and convenience. To lead the food and drug group, Litchford recently hired Scott Langdoc as global lead of grocery, drug and convenience retail. Langdoc was previously CIO at West Sacramento, Calif.-based Raley’s Supermarkets, and prior to that, he held the CTO role at Fujitsu and also led the retail practices at AMR, which became part of Gartner, and IDC.

Langdoc and Litchford have a unique perspective on food retailers’ technology challenges and are focused on cloud migration and modernization strategies, partner solutions and go-to-market capabilities suitable for all types of fast-moving consumer goods retailers.

“Retailers — at least over the course of my career — don’t do a good job of understanding consumers and the technology those consumers are using, and how that is changing their shopping behaviors,” says Litchford. “Another big problem retailers have is, data is siloed everywhere. So just getting to the point of being able to use machine learning, we have to figure out how we get this data in some single source of the truth, and clean it up.”