Amazon Go's entry to the UK convenience market is likely to lead to plenty of column inches and long queues outside its stores, however it is unlikely to result in a 'major change in the grocery dynamics', at least not in the short term, a leading analyst has suggested.
Bruno Monteyene of Bernstein Research was commenting on reports, first revealed by The Grocer, that Amazon has secured several sites in London for the cashierless convenience concept.
Amazon Go is currently present in 10 locations in the US.
Segmented Offering
"In the convenience market there are different segments: (1) residential top-up stores, (2) high traffic stores, (3) very small magazine/cigarettes/snacks stores," Monteyne wrote in a briefing note.
"The Amazon Go stores clearly fit in the high-traffic store segment catering for people on the move or people working locally. In that sense, they are equally competing in the space of chains like Pret-AManger, Eat or M&S stores. Sainsbury's & Tesco also have convenience stores in this segment, but they cover other convenience segments as well."
Monteyne said that with the focus of the stores very much on transient traffic, Amazon will likely focus its attention on food-to-go and ready meals, an area in which the UK is already well-served.
"Given Amazon's weakness in fresh and PL ranges in its current offering, they are now moving to segment with the highest level of product innovation and quality differentiation," he said. "Finding the right sourcing partner will be critical and we don't think the Morrisons' range is sufficient."
Point Of Differentiation
In addition, he noted that the checkout-free concept, which while a point of differentiation, is likely to be replicated by Amazon's main rivals before long.
"Expect very long queues upon opening, humongous amount of press and analyst coverage, expect trials by UK retailers to further simplify the check-out process (similar to what Ahold does in the Netherlands), but don’t necessarily expect a major change in the grocery dynamics in the UK yet," Monteyene said.
"This particular convenience segment seems an even bigger challenge than the segments Amazon has targeted for the last 10 years with limited success."
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
