Why Tesco could beat Amazon in checkout-free stores

In March, Amazon opened its first London-based checkout-free supermarket. The premise is simple: you walk in, grab the things you want and walk out. All transactions are calculated and charged via an app, the receipt is sent to your email and that’s that.

On paper it all seems very convenient, but Amazon Go stores haven’t proven hugely popular with the capital’s supermarket shoppers. Despite this, Tesco decided to open its own checkout-free store at the end of October – and it’s showing early signs of success.

So what can Tesco, the 17th biggest retailer, teach Amazon, the second biggest retailer and largest online marketplace in the world?

Innovation with a clear purpose

Although Tesco is a legacy ‘bricks and mortar’ retailer, it continues to put innovation through data at the heart of its strategy.

Clubcard is one of the most successful loyalty schemes in the world. Back in the mid-nineties, Tesco was struggling and lagged well behind rival Sainsbury’s. It understood  the only way to change the game was through data and it established Clubcard, the modern-day loyalty scheme blueprint.

The scheme was a massive success. Clubcard holders were spending 28% more in Tesco and 16% less with arch-rival Sainsbury’s a year after it was introduced, enabling Tesco to overtake its competitor for the first time. It’s a phenomenal case study in smart, data-driven marketing.

Innovation in checkout-free tech could be equally transformative. As customers, we have always been ‘trained’ for the checkout experience, which is older than Tesco and in many instances rather unsatisfying and transactional, both literally and metaphorically. So innovating around this key part of the customer journey seems long overdue, and it is this innovation that plays in perfectly with Tesco’s core purpose: ‘serving shoppers a little better every day’.

Overcoming mental barriers

Compare this to Amazon, and you can start to see where some obstacles lie. Where does a physical Amazon Go supermarket fit with its purpose of being “the Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online at the lowest possible prices”?

Online is the key word here. Amazon has built its success from being ahead of its competition online. From being the world’s biggest bookstore to now the largest marketplace, it has hastened the demise of many retailers over the years.

So it’s a big mental leap for it to enter into more traditional, physical retail – what’s the strategy here? Its online grocery arm Amazon Fresh, for example, is available to all Prime members now with same-day delivery. Perfect. It’s a natural extension of the core business. But why now a physical store?

Tesco has an instant advantage in this space. It already has a core group of loyal shoppers and so has less ‘winning over’ to do to gain trust. It will take time for Amazon to pivot from being known as the solely ‘online’ marketplace (and why it would want to do so, I’m still not entirely sure). However, with developments like the speculated launch of Amazon department stores and its entry into healthcare and finance, I have no doubt consumers’ connotations of the brand will only change as it extends its ecosystem and footprint.

A better in-store experience

We also mustn’t forget how innovations like this also impact staff. We hold the belief that to be truly customer-centric, you must first be employee-centric. Customers have relied upon Tesco’s employees for over 100 years, so it’s important these employees are taken on a positive journey of change. It’s interesting to see how taking the burden of manning checkouts away from employees, thereby allowing them to stay on the shop floor, can create a wholly more customer-centric experience.

The collection, use and availability of data is critical here and can assist the staff to both deal with any pain points their customers are experiencing and assist them in their shopping journey. This could drive incredible levels of loyalty and then, through increased personalisation, a better in-store experience.

Collecting behavioural data over time in-store could ultimately be the next generation of the loyalty programme -  the natural extension and next generation of Clubcard, but without the need of a physical card or membership number. We’re talking real-time rewards based on what shoppers are doing there and then (instead of post-purchase) coupled with the ability to apply new levels of recognition and gratification. Add in AI and it could become a game changer. Amazon should certainly take note.