As if the competition wasn’t already hot enough in UK grocery retailing, Amazon is now ramping up efforts to secure a food store in London.

The US etail titan launched a pilot of its Amazon Go format in its home city of Seattle last December, threatening to change the face of grocery shopping.

The 1,800 sq ft store uses CCTV footage and sensors to track which items customers have taken off the shelves, before linking those purchases to their mobiles – allowing shoppers to pay for items without having to scan them or queue at checkouts.

But how serious is Amazon about launching the innovative concept in the UK?

And should the online Goliath’s plans be causing sleepless nights within the boardrooms of Britain’s established grocery players?

Long-term ambition

Sources close to the situation tell Retail Week that it has been “a long-held ambition” of Amazon’s to launch a bricks and mortar presence in London.

But what may have been little more than a pipe dream a few years ago is edging closer to becoming reality.

Retail Week understands that Amazon has approached a number of commercial property agencies for advice on securing stores, although it is yet to formally appoint anyone to carry out the work.

That process in itself is not expected to be completed in a hurry, meaning it is likely to be a few months before the serious work begins.

Finding the right location for a debut store is far from a short-term project and, even when Amazon does pick its spot, it will need to set aside at least six months to complete paperwork and jump through various legal hoops.

Add in the six-month period that will surely be required to fit out the store with sensors and CCTV and it is unlikely that we’ll see Amazon Go pop up in the capital for at least two years – giving its potential new rivals plenty of time to prepare.

US track record

However, retail property sources warn that Amazon’s embryonic talks with agencies far from guarantee its move across the pond.

Google was understood to be involved in similar discussions not so long ago as it contemplated opening a London shop, but such plans ultimately fizzled out.

And the likes of US homewares chain Crate & Barrel, and sportswear giant Under Armour, have been eyeing Britain for a number years without taking the leap into standalone stores.

Perhaps the surge in business rates in prime London locations have proved off-putting, but the recent track record of other US retailers in Britain – such as Gap, Banana Republic, Forever 21 and Best Buy – will also serve as a warning.

The financial might of Amazon means it can afford to test and learn – and even make losses initially – where those predecessors couldn’t.

“It’s ticked boxes so far, but it’s a very embryonic pilot and from a commercial point of view we’ve not seen how successful it can be.”

Neil Saunders, Conlumino

But Jeff Bezos and Co will want to make sure they get their bricks and mortar offer right in the US first, in order to quickly establish a foothold in the hugely competitive UK grocery sector.

With its Amazon Go pilot in Seattle having only been open a couple of months, there is little evidence to suggest the etailer is ready to do that at this stage.

“From what I’ve seen it’s been successful in terms of implementation – the technology works, which is one of the most critical things – and it’s generated a lot of interest,” Conlumino managing director Neil Saunders tells Retail Week.

“It’s ticked boxes so far, but it’s a very embryonic pilot and from a commercial point of view we’ve not seen how successful it can be. That’s obviously an important part of the equation going forward.”

However, Saunders believes the Amazon Go proposition is “very good” and “has a chance of being successful” on a national scale in both the US and the UK, where consumers are more accustomed to using technology as part of their shopping experience.

“The UK consumer would certainly be interested in it because it is not perhaps as steep a learning curve for them. It’s something they would probably get used to quite quickly,” Saunders says.


Professor Heiner Evanschitzky, director of the Aston Centre for Retail Insights at Aston Business School, reckons the UK’s established grocers should be worried about the prospect of Amazon’s bricks and mortar arrival.

But he says the big four can differentiate themselves by heightening their focus on customer service, rather than trying to mimic the etailer’s use of technology.

“Checkout-free grocery stores take the next logical step in customer convenience – from self-checkout to “just walk out” – which many will welcome,” Evanschitzky says.

“But the development does not have to signal the death of the cashier. Instead of trying to mimic the ‘human-less’ format or compete on price – where the likes of Aldi and Lidl will always come out on top – the big four should play to their strengths and focus on their most important asset: shop staff.

“One of the effects could be that Amazon can charge consumers less through lower prices, so that is a very real, longer term threat to the grocers.”

Neil Saunders, Conlumino

“Despite the trend towards automation, many customers still want guidance and advice, as well as simple human interaction.”

Saunders, however, cautions there is more than just technology for the likes of Tesco and Sainsbury’s to be concerned about.

“The biggest threat, if this works well, is that it gives Amazon a major advantage on the cost side of the equation. It strips out a massive amount of cost in terms of labour from stores,” he explains.

“One of the effects could be that it can charge consumers less through lower prices, so that is a very real, longer term threat to the grocers.”

That’s the bad news.

But the good news is the supermarkets should have at least two years to prepare for Amazon’s arrival and another seismic shift in the ever-changing grocery market.