The Amazon Fresh model never checked out. I was wrong in 2021

Cigarette?

Considering the veritable top shelf of techno-porn stretching for miles around our discipline, it might be worth revisiting a recent example to illustrate its pitfalls. And what happens when you add time, perspective and a healthy dose of consumer reality? I’m talking about Amazon Fresh and its ‘unstoppable’ invasion into supermarket retailing.

You remember the buzz?

Four years ago, Amazon was lauded for its ‘buy and walk out’ grocery model. You scanned your app, entered the store, filled your basket, and brazenly walked out, feeling part tech maven, part jewel thief, as RFD tags and Amazon cookies invisibly colluded to debit six quid from your credit card.

Back in 2021, it was the toast of Twitter and the bane of any discussion about retailing down the pub. The checkout was portrayed as something akin to the Great Wall of China in its ancient obstructiveness, and Amazon’s ability to remove it was the eighth wonder of the world. A killer move that would put Amazon “in pole position to win everything,” as one particularly moronic commentator put it.

The company’s gleefully overstated ambitions only heightened the techno-porn. Amazon announced it would open two new Amazon Fresh stores every week until it overtook Tesco, which it predicted would happen in 2025. Yes, yes. The move would “transform” the British high street. Harder, harder. The new tech signals the end of traditional shopping experiences. I’m close, close.

Another cigarette?

I remember going to the first Amazon Fresh in 2021. Walking out with my pastry was a genuinely thrilling moment. Then I stood on Ealing Broadway and reviewed my technologically advanced sausage roll-buying experience. Reader, I have to be honest, I lost the plot that day. The combination of surrounding hype, the newness and the inalienable, unbeatable reputation of Amazon convinced me that this was the future. OK, I didn’t proclaim the death of Tesco that day. But I was certain this was big.

I gleefully fell for it. And when you give yourself over to the pornography of change, it does feel fantastic. You are future-focused. More advanced than your peers. You see something they don’t. The excitement blinds you to heavier, more prosaic things. A cooler, more cynical head would have seen the flaws.

For starters, checkout isn’t the herculean issue Amazon and the launch press made it appear. Sure, on a weekly two-hundred-quid shop, it’s the longest five minutes of your week. But Amazon Fresh wasn’t operating in that sector. It had chosen the twenty-quid high street mini-shop where checkout is a brief, already automated non-issue. Shorn of its main benefit, the offer was suddenly less compelling.

Then there was the brand issue. Amazon is a titanic brand, but it’s parked in the wrong place for Fresh to work. When you’re sitting at home and need earplugs or a toilet plunger (again), its salience is immediate and unassailable. But walking the high street on the way home without anything for tea, are you going to opt for the limited inventory of Amazon Fresh or the familiar green warmth of M&S and the scotch egg you grew up on?

And it’s worth remembering who Amazon Fresh was up against. I know everyone is currently depressed about the state of British everything. But our supermarkets remain the best fucking operators on the planet. Amazon Fresh was probably a dead man walking from the start, but its demise was all the more certain given the competitive playing field of the UK high street and the incredible retail athletes that occupy it.

The reason Amazon’s inventory was so crap wasn’t due to a lack of budget or planning. It was something basic and more intractable, core competence. The greatest theory in the history of modern strategic thinking is deceptively simple: companies develop a handful of core competencies that enable them to extend and protect their success. Understand these competences, leverage them, and you’re on your way to more success and diversified business growth.

But remember that with competence in one area comes incompetence in others. Just as a left-hander struggles to do anything with their other appendage, companies that are incredibly good at some things are usually useless at others. Starbucks can’t sell coffee through supermarkets, for example. You’d think it could because it’s big, and rich, and has lots of coffee. But brewing cappuccinos for premium prices in semi-pleasant, well-run cafés has almost nothing to do with the packaging, distribution, pricing, stocking and restocking of coffee beans in global mass-retailers. Apart from the coffee beans, the two businesses have nothing in common.

Which is why Starbucks has Nestlé do it for them. The ultimate implication of core competence is to recognise your limitations and outsource challenges to companies with other competencies when you exceed them.

Except for its relatively hands-off operation of Whole Foods, Amazon does not have a competence for the high street or for grocery. You can argue that it might have developed with the launch of Amazon Fresh. But that’s what everyone says when they extend beyond their core competence for the first time. Like a left-hander saying they’ve broken their wrist but will use their right hand instead. It sounds good until they start scribbling like a jabbering serial killer on meth.

And there was the small issue of profitability to worry about too. We all know Amazon doesn’t care about initial margins. Indeed, so blatant was Bezos’s love for loss-making that it ushered in a bizarro business era in which making a profit was deemed a backward move for big startups.

But by 2021, we were coming to our senses.

Which should have set off alarm bells about Amazon’s dodgy business model. Opening little stores without the need for personnel sounds like a perfect model for profitability. But the tech to replace them came with six-figure costs. And while checkout staff weren’t required, a similar number of people were needed to explain how the whole thing worked and prevent entrepreneurial members of the local community from disrupting the new retail model with on-demand five-finger discounting.

This week’s announcement that Amazon is shuttering all 19 of its UK physical grocery stores, converting five to Whole Foods, and retreating to its core competence comfort zone of e-commerce and home delivery will come as no surprise to anyone. Now anyway, more than 2021 Mark - or I note The Drum’s editor-in-chief around the same time.

But we need to recall the breathy discussions of Amazon Fresh back in 2021 and use it to temper any future fantasies. Before our combined arousal at the potential for AI ushers in any more predictions of the death of creatives, marketing, accounting software, lawyers, search, media planning, programmers and the rest, we should pause, ponder Amazon Fresh, and remember revolutions rarely happen as frequently or quickly or completely as we predict.

Mark Ritson is a former marketing professor, brand consultant, and award-winning columnist. He is also the founder of the MiniMBA in Brand Management, which has just kicked off (but still has some spaces), and has trained thousands of brand managers on how to do it better.

2021: Only a fool would bet against Amazon succeeding on the high street

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