Amazon Alexa

INSIDE THE LAB WHERE AMAZON’S ALEXA TAKES OVER THE WORLD

Amazon’s Echo speaker, one of the company’s own devices with its Alexa voice assistant inside.
AMAZON

WHEN IT FIRST launched in 2014, Amazon’s Alexa voice assistant was little more than an experiment. It appeared first inside the Echo, itself a wacky gadget launched without warning or much expectation. As it took off, though, and millions of people began to put a smart speaker in their home, Amazon’s ambition exploded. The company saw an opportunity to build a new voice-first computing platform that worked everywhere, all the time, no matter what you were doing. And it began to chase that vision at full speed.

While one team at Amazon works on the Echo products themselves—including the Echo SpotShowDotPlus, and probably a bunch more since you started reading this sentence—and another works on the Alexa service itself, a different team is working on engineering Alexa’s world takeover. While Apple and Google offer access to their assistants slowly and methodically, Amazon has flung the doors off their hinges and let anyone in. The company knows the path to success is not just in Echo devices, and that Amazon can’t possibly make every gadget anyone wants to use. So they’ve created a new division called Alexa Voice Services, which builds hardware and software with the aim of making it stupendously easy to add Alexa into whatever ceiling fan, lightbulb, refrigerator, or car someone might be working on. “You should be able to talk to Alexa no matter where you’re located or what device you’re talking to,” says Priya Abani, Amazon’s director of AVS enablement. “We basically envision a world where Alexa is everywhere.”

The word “everywhere” has taken on a whole new meaning in the last few years. Thanks to decades of improvements in processor efficiency, bandwidth accessibility, and the incredible availability of cheap electronics, almost anything can be connected to the internet. Cars and trucks and bicycles, sure; all your home appliances, switches, bulbs, and fixtures; even your clothes, shoes, and jewelry. They’re all coming online, and Amazon wants Alexa in all of them.

One of Amazon’s Alexa development kits, which manufacturers can buy to construct their own voice-controlled products.
AMAZON

So far, Amazon says it has about 50 different third-party Alexa devices on the market, devices like the Ecobee Thermostat and Anker’s Eufy Genie. The AVS team spent the last two years building the systems and tools to take that to a new level, with the hopes of having hundreds and thousands of Alexa devices on shelves sooner rather than later. The battle for voice-assistant supremacy rages on among the tech giants, the stakes higher than ever as companies attempt to be the one on the other side of the wake word. To win, Amazon’s assembling an army.

Plug and Play

When Abani joined Amazon in 2016, she found herself having the same conversations over and over: everybody wanted to add voice to their product, but nobody knew how. “The first four months, all I was doing was sitting with our biz-dev team in god knows how many meetings,” she says. These were thermostat companies, who knew temperature control but not voice recognition. They were lighting companies who knew how to optimize LEDs but not how to set up a mic array. Amazon had already been through all this in building the Echo, Abani says, “and I took on the job of understanding all the different components required to add voice to your product, then packaging them and disseminating them to the world.” They built kits with all the parts you’d need to get started, packaged the right software with easy documentation, and even worked with chipmakers like Intel to build Alexa support right into the CPU.

Now, two years later, if you want to Alexa-enable your product, you just go shopping. Amazon offers seven different development kits for a few hundred dollars apiece, each with a specific product type in mind. The first one Amazon built had two mics in a line; a new one has seven laid out in a ring exactly like the Echo. “It’s the same mic array, the same technology in terms of the algorithms and wake word engine,” says Al Woo, a product manager on the AVS team, holding up the Echo-like kit. “If a company wants to develop a product that matches as closely as possible to the performance and function of an Echo device, this is how.” The gizmo in his hand has a fully exposed motherboard and wires dangling everywhere, but Alexa’s already up and running. With it, developers can have a demo-ready Alexa integration in just half an hour.

With each development kit, Amazon provides instructions on which microphones and processors to buy along with it. The kit helps developers start prototyping and testing devices much more quickly, without needing to hire a bunch of voice-recognition experts or test a thousand different mics. As much as it can, Amazon wants to make voice a plug-and-play hardware add to almost any device. Anyone should be able to buy a kit, build a product, download the Alexa software, and get everything running without any prior knowledge or any help from Amazon. Amazon might not even know the product exists until it hits shelves.

The Sol lamp, made by a division of GE, is a smart LED lamp with the Alexa voice assistant built in.
C BY GE

Right now, though, voice tech is early enough that Amazon tends to be intimately involved in most products using AVS. For now, that’s OK: Amazon’s still learning too. It works with partners like Sonos to figure out how to optimize Alexa’s music abilities, then offers the results to all partners going forward. The AVS team is also working on making Alexa available to completely new classes of devices, too, through products like the new Alexa Mobile Accessories Kit. With the AMAK, Bluetooth accessories like headphones and smartwatches can connect to Alexa through a smartphone. Alexa’s also about to be available on PCs around the world, with the same far-field voice recognition as an Echo. All the necessary software and info to get started is right there on Amazon’s website.

Amazon’s other job, at least for now, is to make sure Alexa’s great on every device. Even with all the development kits and software, other manufacturers still make so many tweaks and adaptations that Amazon feels the need to take a final step to make sure the Alexa experience works across any device. The team knows that when people have a bad Alexa experience, they won’t blame poor mic layouts or bad audio transparency. They’ll blame Alexa. “We want to make sure it doesn’t come into the review whether Alexa works good or not,” says Pete Thompson, Amazon’s vice president for AVS. “It just slides in, and works.”

Is This Thing On?

Alexa performance is where JR comes in. JR stands for Junior Rover, and refers to the custom-built robot in charge of testing third-party devices to make sure Alexa works right. It’s a small, whirring machine, with an orange base, four wheels, and a platform on top that can hold up to 50 pounds and extend up to six feet up. A Microsoft Surface powers the device from a four-pronged stand on one side. The Surface’s wallpaper features a cartoon drawing of JR, big eyes and eyebrows and sort of a 2018 Thomas the Tank Engine look.

JR’s office is a windowless, soundproofed room inside the Sunnyvale offices of Lab126, Amazon’s hardware group. This is where a team built the Echo, and where the AVS team tries to spread Alexa to the world. The building itself is as office-parky as you’ll find anywhere in Silicon Valley, more like a building in which you’d find a law office next to a dentist next to a massage parlor. Well, except for all the security guards and Amazon swag.

When an upcoming Alexa-enabled device comes to Amazon, it goes to Sunnyvale and then straight into JR’s lab. Someone sets it up on a table in the lab, and JR begins chatting with it. The robot moves around a track of magnetic tape on the floor, stopping in the same spots every time around. At every stop, a speaker on JR’s platform issues a command or two: Alexa, what’s the capital of Jamaica? Alexa, who wrote The Canterbury Tales? It speaks in any of 22 different voices, loudly or softly, in lots of languages and accents. Sometimes, a MacBook across the room will play white noise on another speaker to simulate the sound of a lively kitchen, to see how the device performs. Every question and answer gets recorded and scored, and when the test finishes Amazon delivers the feedback to the manufacturer. It’s a broad, deep test of how the device might work in someone’s house.

An Amazon employee used to run all these tests, painstakingly setting up and recording every interaction. Each device would take three days or more to properly test. JR runs day and night, seven days a week, with no bathroom breaks or sick days, and can complete a test in six hours. Amazon’s working on building more robots like JR, and new testing facilities for in-car Alexa and all the other kinds of devices they haven’t even thought of yet.

Along every wall of the testing lab, the AVS team has laid out some of the current Alexa-enabled products. Speakers next to speakers next to speakers next to unreleased speakers I can’t tell you about yet. A thermostat. A fancy light. A Lynx robot, sitting with its legs dangling in the air. Standing in the room, you’re surrounded by Alexa. And that’s just the very beginning. Amazon hopes to make Alexa work well, make it work everywhere, and make it the most important and intimate computer in your life. If that means helping a refrigerator manufacturer compete with the Echo, so be it. As long as there’s Alexa in there, Amazon still wins.

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Convenient Store Squeeze

Convenience Stores Are Getting Squeezed by Fast Food and Dollar Stores

  • Industry posts weakest merchandise sales growth since 2013

  • Gas station retailers face pressure to merge, boost offerings

Photographer: Christopher Dilts/Bloomberg

The U.S. convenience store industry is facing an inconvenient truth: Americans are changing the way they shop for snacks and drinks.

The nation’s 154,500 convenience stores are getting squeezed by competition from all sides. Fast-food restaurants and supermarkets are slugging it out in price wars, while dollar stores keep popping up everywhere. And Amazon.com Inc. offers quick delivery for basic items. That’s putting pressure on gas-station retail chains to merge.

The $550 billion convenience store industry last year recorded its weakest merchandise sales growth since 2013, and businesses are rushing to improve loyalty programs, offer better food and let customers order online. Some are even testing delivery. In a sign of the changing times, Circle K owner Alimentation Couche-Tard Inc., a Canadian company with 7,700 stores in the U.S., hired its first-ever chief marketing officer.

“They’re just facing a lot more competition for convenience than ever before, whether it’s for coffee, food service, whether it’s for gasoline,” said Todd Hale, a consultant and former senior vice president of consumer and shopper insights at Nielsen Co. “Now they have to figure out what they’re going to do in the world of e-commerce.”

That means more consolidation could be on the way for the fragmented industry, where chains make up less than 40 percent of the market. After a recent shopping spree by market leaders Couche-Tard and Seven & I Holdings Co.’s 7-Eleven Inc., supermarket giant Kroger Co.’s 784 convenience stores are now up for grabs. Some investors, frustrated with the earnings and stock price of Casey’s General Stores, have urged the Iowa-based chain to also consider a sale.

Facing a Slowdown

Merchandise sales are slipping at U.S. convenience stores

Source: Bloomberg Intelligence, IRI

Note: Data, which excludes freshly prepared food, extends through Dec. 17, 2017, and through the equivalent period of each year

Part of the industry’s difficulties are rooted in economics. Couche-Tard, which is grappling with slowing same-store merchandise sales, has blamed “anemic” real-wage growth for the struggles of its lower-income customers, while also citing fewer visits by Hispanics. As the income gap between top and bottom earners continues to widen, retailers and restaurants catering to cash-strapped customers are more likely to succeed, according to research by Cowen & Co.

That trend is pitting convenience stores against dollar chains, which have been beefing up their food offerings, including eggs and milk, according to Jennifer Bartashus, a retail analyst at Bloomberg Intelligence. And as fast-food restaurants race to announce value menus, convenience stores are finding it harder to get customers to grab a slice of pizza or a sandwich after filling their tank.

Burritos, Wraps

While gasoline drives about 60 percent of sales at a typical C-store, what customers buy inside accounts for about two-thirds of profit. In addition to snacks and beverages, companies have been adding more lucrative prepared food, which also provides a cushion against long-term threats such as the rise of fuel-efficient cars and falling cigarette consumption.

At QuikTrip Corp., an Oklahoma-based chain with more than 700 stores, shoppers can choose from everything from wraps and salads to made-to-order flatbreads and burritos. Wawa Inc.’s hoagies drew crowds to its new location in Washington last month. And after adding Swirl World frozen dessert bars a few years ago, Georgia-based RaceTrac Petroleum Inc. now makes sandwiches on demand in 95 of its 475 outlets across the Southeast.

“We’re giving them an alternative so they don’t have to make another stop in their day,” said Dayna Reed, RaceTrac’s executive director of reporting and insights. “The entire industry is looking at what food service means and how we can grow the food-service business.”

The strategy shift is proving volatile for some. Casey’s lowered its same-store sales predictions for prepared food last month after a weak quarter, which analysts at Barclays Plc said coincided with an advertising push by Yum! Brands Inc.’s Pizza Hut.

Convenience stores have responded to competition with price cuts, rewards and private-label products. Casey’s is offering a discount on gas to customers who buy pizza, while Couche-Tard is doing “strategic promotions” at stores it bought from CST Brands Inc. Meanwhile, Arkansas-based Murphy USA Inc., which operates more than 1,400 gas stations in 26 states, is launching a pilot loyalty program.

Amazon Angle

Amazon’s foray into food and its virtual convenience store Amazon Go is also pushing the industry to improve digital tools and adjust to e-commerce. Customers can order online from Casey’s or Pennsylvania-based Wawa, with limited delivery options. 7-Eleven is testing a delivery platform in Dallas after experimenting with drones, and has lockers for Amazon and UPS parcels in 10 percent of its 8,900 stores.

Still, convenience stores’ assortment of single-serve products such as energy drinks and ice cream, which can be consumed right away, offers them some protection from online retail, according to Rob Wilson, a managing director at L.E.K. Consulting in Chicago.

“I would expect Amazon and e-commerce growth to have more of an impact on channels outside of C-stores,” he said. “They’re going to take away the planned purchase a lot faster than they’re going to take away the impulse and gratification purchase.”

One of the industry’s biggest assets remains the time it saves customers, who spend an average of 3 minutes and 33 seconds for their purchase from the moment they leave their car to when they return, according to the National Association of Convenience Stores.

To build on that advantage, C-stores need to better curate their selection with more healthful or locally made products in order to keep up with consumer tastes, said Bloomberg Intelligence’s Bartashus. The quality of prepared food or coffee will also matter as fast-food restaurants tout improvements such as antibiotic-free chicken, she said.

“If they don’t try to evolve at least a little bit, there is a risk that they could be left behind as the rest of the retail industry evolves,” she said.

Whole Foods Problems

‘Entire aisles are empty’: Whole Foods employees reveal why stores are facing a crisis of food shortages

Whole FoodsA Whole Foods store in Houston. Bettina Elias Siegel

  • Whole Foods employees say stores are suffering from food shortages because of a newly implemented inventory-management system called order-to-shelf, or OTS.
  • Whole Foods says the system reduces unnecessary inventory, lowers costs, and frees up employees to focus on customer service.
  • Employees acknowledge that less food is spoiling in storage rooms, but they describe OTS as a “militaristic” system that crushes morale and leads to many items being out of stock.
  • “Last week, we ran out of onions and potatoes twice,” an employee of a Brooklyn Whole Foods store said. “Entire aisles are empty at times.”
  • “It has for weeks had empty shelves, and I shop there twice a week,” one customer told Business Insider. “The prepared-food section is not refreshed, and food looks stale.”

Whole Foods is facing a crush of food shortages in stores that’s leading to empty shelves, furious customers, and frustrated employees.

Many customers are blaming Amazon, which bought Whole Foods in August for $13.7 billion. Analysts have speculated that the shortages could be due to a spike in shopper traffic in the wake of the acquisition.

But Whole Foods employees say the problems began before the acquisition. They blame the shortages on a buying system called order-to-shelf that Whole Foods implemented across its stores early last year.

Business Insider spoke with seven Whole Foods employees, from cashiers to department managers, who asked to remain anonymous for fear of retribution.

Order-to-shelf, or OTS, is a tightly controlled system designed to streamline and track product purchases, displays, storage, and sales. Under OTS, employees largely bypass stock rooms and carry products directly from delivery trucks to store shelves. It is meant to help Whole Foods cut costs, better manage inventory, reduce waste, and clear out storage.

But its strict procedures are leading to storewide stocking issues, according to several employees. Angry responses from customers are crushing morale, they say. (Many of the photographs in this story were provided to Business Insider by customers.)

“At my store, we are constantly running out of products in every department, including mine,” an assistant department manager of an Illinois Whole Foods told Business Insider. “Regional and upper store management know about this. We all know we are losing sales and pissing off customers. It’s not that we don’t care — we do. But our hands are tied.”

Whole Foods did not respond to several requests for comment on this story. The company’s executives have described the changes as cost-saving, and employees acknowledge that they have helped reduce food spoilage in stock rooms.

But even those who agree the company needed a better system to reduce losses and waste say it has gone too far.

How order-to-shelf is leading to food shortages

Whole FoodsA Whole Foods store in West Hartford, Connecticut. Derek Beere

OTS operates under a strict set of requirements, mandated by Whole Foods’ corporate office in Austin, for purchasing, storing, and displaying products on store shelves, employees said.

One of those requirements, they say, has led to a dramatic reduction in Whole Foods stores’ so-called back stock, the products stored in back rooms until they are needed on store shelves.

“The system is now set up to pretty much only have enough product to keep the shelf full and no extra,” an employee of a store in Sacramento, California, told Business Insider. She said her department’s back-stock area was now 25% of the size it was before the implementation of OTS.

An employee of another store said the seafood department, which once had a giant freezer to store extra inventory, was now sharing one with the meat department.

“Last week, we ran out of onions and potatoes twice,” an employee of a Brooklyn Whole Foods store said. “Entire aisles are empty at times.”

Whole FoodsA Whole Foods store in Boston. Paul Fantoni

A reduced back stock means that any unexpected increase in shopper demand or a product-shipment delay can result in out-of-stock items across every department, multiple employees said.

“If a truck breaks down and you don’t get a delivery, then you have empty shelves,” an assistant manager of a Chicago-area Whole Foods said.

An employee of a Texas Whole Foods store told Business Insider that stocking issues were “horrible” over the holidays and that the produce department “looked embarrassing.”

“I get constant and consistent complaints from customers for continuously being out of staple [products],” the Sacramento employee said. “It’s frustrating as an employee and also as a shopper.”

Employees say the system has ‘crushed’ morale

Whole FoodsA Whole Foods store in New York City. Jennifer Irwin

Whole Foods gets stores to comply with OTS by instructing managers to regularly walk through store aisles and storage rooms with checklists to make sure every item is in its right place and there is no excess stock. If anything is amiss, or if there is too much inventory in storage, the manager in charge of that area of the store is written up. After three write-ups, they can lose their job.

“Out of 400 boxes in your cooler, if you have one of those boxes facing the wrong way, you are penalized,” said one employee, who described the system as “militaristic.”

“It’s like taking a really high-stakes exam with 100 questions every day, and if you miss a single question you fail,” they added.

Multiple employees said these tests had “crushed” morale in stores because workers are terrified of getting “walked” and missing some small detail.

“You are so concerned about passing this military-like test that you actually start to lose your department’s operational conditions,” an employee said.

Another worker explained: “We think of it as punishment. They think of it as a way to correct errors.”

Whole Foods is streamlining food-buying to cut costs

Whole FoodsA Whole Foods store in Boston. Business Insider

OTS shifted some power from local buyers to Whole Foods’ corporate headquarters in Austin, which the company calls its global office, employees.

Before OTS, “buyers were more in control of what to bring in and how much to bring in,” a Whole Foods employee said. “Now everything is mandated at the global level, and while each store is different due to location and logistics, buyers must comply with the new system. This creates out-of-stocks, frustrations, and stress on all levels.”

Whole Foods has called it a cost-saving approach and says it has improved stocking issues.

“We’re moving basically from a federated system of purchasing to a unified system of purchasing, and we expect to see a lot of cost savings there,” Glenda Flanagan, a Whole Foods executive vice president, said on an earnings call in May.

The company has also said OTS frees up employees to focus on customer service.

Order-to-shelf “has transformed the inventory levels that we have in the back room, essentially clearing them out so that we’re mainly focusing on what we call our never-outs, the key items that we need to have in stock all the time in our stores,” Whole Foods’ vice president of operations, Ken Meyer, said on an earnings call in February. “So it’s creating a really strong, efficient process from the way the goods are received in the back door to bring them right out to the shelf. And it’s really improving and helping our out-of-stocks as well — dramatically.”

Every employee who spoke to Business Insider agreed that the system had been effective in reducing extra inventory. Stores’ back rooms and freezers that were once cluttered with unsold items — which could spoil before they were sold — are now nearly empty.

Whole FoodsA Chicago Whole Foods store. Twitter/@firstmate_kate

Multiple employees also said that before OTS, Whole Foods needed a more organized buying system.

“We had an outside company grade us on our inventory and our back stock” shortly before OTS’s implementation, one assistant department manager recalled. “We failed. We had millions of dollars in inventory just sitting around, hurting our bottom line.”

But now, the manager said, Whole Foods has gone to the opposite extreme.

“On paper, things look good — our spoilage is in check, and I don’t have a lot of back stock,” he said. “But I have never seen so many empty shelves in my store.”

Whole Foods workers are hoping Amazon will restock shelves

Whole FoodsA Whole Foods store in West Hartford, Connecticut. Derek Beere

Some employees are hoping Amazon fixes Whole Foods’ out-of-stock problems.

“A lot of team members are hoping Amazon saves us, saying, ‘I can’t wait until Amazon learns how much money Whole Foods is losing with order-to-shelf,'” one employee said.

“You would think that with Amazon’s reputation for being a brutal employer that they would be behind the system,” he added. “But they are not. This is an entirely Whole Foods-driven problem.”

One employee at a Texas Whole Foods store said that when Amazon representatives at a recent question-and-answer session were asked about stocking issues, they indicated they weren’t aware of the problems and said they would have to be addressed with Whole Foods’ leadership.

Whole Foods said in May that accelerating its rollout of order-to-shelf had helped put the company on track to achieve $300 million in cost savings by 2020.

Some customers are turning away

Some Whole Foods customers who have noticed stocking problems say they are looking to shop elsewhere.

“My regular Whole Foods store is in Oxnard, California. It has for weeks had empty shelves, and I shop there twice a week,” Duane Palm told Business Insider. “The prepared-food section is not refreshed, and food looks stale. The bread is stale. Everything has turned downward since Amazon took over.”

“Something has gone terribly wrong with control and management at this store,” he added. “I found the same sad story at the Hillcrest store in San Diego.”

Whole FoodsA Whole Foods store in San Francisco. Tommy Wiles

Patricia Brook said she found the same problems at a store in Fort Collins, Colorado, mentioning its stock of products from Whole Foods’ value brand, 365.

“No 365 cottage cheese, no 365 plain nonfat organic yogurt, no Brat Hans chicken breakfast sausage, no Norwegian salmon, no 365 brown eggs — shelves are bare!” she said. “So I come back once. Still bare! I come back twice. Still bare!”

She added: “Something has dramatically changed.”

Adrienne Elias said that she and her husband had for years been loyal to Whole Foods but that in the past year she had noticed constant out-of-stocks, poorly stocked shelves, and “limp, brown, soggy” produce.

“We found ourselves thrilled at the news that Amazon was assuming ownership, hoping that they would be able to fix the problems, a lot of which we believed to be the result of very incompetent staff,” she told Business Insider. “We thought that perhaps it would simply take more time.”

“Last week, after a totally frustrating shopping experience, we decided that they could not fix it or, most likely, they did not want to fix it,” she said. “Regretfully, we will begin shopping elsewhere.”

Amazon Go is Open

 Amazon Go, Checkout-Free Store, Opens To Public Tomorrow & MNB’s “Content Guy” Has An Insider Preview Today

by Kevin Coupe

You may feel a disturbance in the Force tomorrow.

Amazon Go, the company’s checkout-free retail concept that has been in beta test mode in Seattle for more than a year, finally will open to the public.

Until now, it only has been open to Amazon employees. Outsiders – and there have been many, especially from both the retail and supplier sides of the food business – have had to settle for wandering by, craning their necks, and trying to persuade the security guard to allow them just a quick look.

Tomorrow, though, the doors will swing wide and people will be able to take a look and, by purchasing product, test out this combination of “computer vision, deep learning algorithms, and sensor fusion” that creates what Amazon calls Just Walk Out technology.

Not everybody, though. To enter the store, one must have an Amazon account and a credit card on file, along with the Amazon Go mobile application installed on a smartphone.

But now, you get an advance inside look. Amazon invited me out for a personal pre-opening tour, guided by Gianna Puerini, vice president of Amazon Go … and I was more than happy to hop on a plane and head to Seattle.

The overarching impression I got from my time in the store was that it has lots of bells and whistles, but no apparent gears – the technology is smooth, the shopping experience is convenient and seamless, and Amazon Go signifies a major leap forward in retail innovation.

A spectrum of options

At Amazon Go, the focus is on convenience, but it would be a mistake to see it simply as a typical convenience store with fancy technology. At just 1,800 square feet and carrying a few thousand SKUs, the store is designed to “offer customers a spectrum of convenient options,” Puerini said, with a focus on what always has been Amazon’s holy trinity of priorities: “Price, selection, convenience – and I think we’re offering all three to customers.”

Amazon Go’s convenience offerings essentially fall into two categories – quick meals, beverages and snacks for immediate consumption, and grocery offerings that allow for convenient meal preparation after work at home. In the former case, that means fresh products that are made on the premises (the kitchen is visible from the 7th Avenue sidewalk, underlining Amazon’s commitment to quality fresh food) and at another Amazon kitchen in Seattle, as well as provided by select outside vendors. There’s also a selection of 365-branded private label items from Amazon-owned Whole Foods.

“We … have stuff from local third parties that are customer favorites, like an Alki Bakery or a Molly’s,” Puerini said. “We think the mix serves our customers. But we’re doing a wide variety ourselves – grain bowls…sandwiches…salads…the whole gamut, what we think customers want on the go and when they’re in a rush.”

As one moves through the store, the selection starts to change, with an emphasis on full meal solutions, pantry essential, dairy, raw proteins, and – perhaps most significantly, Amazon-branded meal kits that currently are available via Amazon Fresh in Seattle, New York, New Jersey, Philadelphia, and Washington, DC. (These are the same meal kits, by the way, that Amazon announced just after meal kit business Blue Apron went public, inadvertently helping to cause its stock price to crater.)

“At any given time there are four to six (meal kits) in rotation, balanced across vegetarian, different kinds of protein,” Puerini said, noting that they’ve gotten high marks from Amazon Go customers who have bought them.

The vehicle through which Amazon Go is able to get high marks – or low ones, for that matter – is the mobile app, which allows customers not just to enter the store, but communicate back to leadership about the experience and the product mix.

“We’re constantly adjusting it,” Puerini said, “looking at what’s selling, what do people like, and constantly adjusting to meet customers needs. I think that one great thing is that through the app, customers can send us direct feedback, so we also get this additional flow of information … we act on those suggestions when it makes sense.”

Demographics

Since over the past year the beta test has involved just Amazonians, I asked Puerini if she expected both a much broader customer demographic and some changes in the mix once the store opens to the public; I would think that at the very least, the general public will skew older than the seemingly preternaturally young Amazonians who have been shopping the store.

“I think the good news is that being hungry and being in a rush and wanting a fast, easy experience are somewhat universal, so that works in our favor,” she said. “As far as selection goes, because we’re constantly looking at that anyway, if we see changes, we’ll adapt … We’re going to work hard to be ready for any customer.”

To be honest, it is hard for me to wrap my head around exactly how it all works. The shopper scans the smartphone app to gain entry, and then can put the phone away while shopping; one doesn’t even need to pull it out in order to leave. The technology tracks the shopper and everything he or she takes off the shelves, and automatically charges the shopper’s Amazon account once the store visit has been completed.

Two interesting wrinkles. One is that the app has a trip timer, which shows the shopper how much time has been spent inside Amazon Go on each visit; while the timer doesn’t underline it, the implication is you also know how much time you didn’t spend on a checkout line.

The other is that if I go to visit the store with five people, none of whom have the app, I can get each of them in just by scanning my phone five more times. Then, they can scatter throughout the store, take products off the shelves, and then leave separately … and all the products they took will get charged to my account.

I was fascinated by the fact that the store does not have electronic shelf tags – rather, they use the old fashioned printed variety. I wondered about that, but Puerini said, “We didn’t think in this case that it added a lot of value to the customer experience. We of course adjust pricing to stay competitive, we want to offer customers great pricing. But we didn’t think the ability to do it in real time added a lot to the customer experience. But you never know what the future will hold … if we think it would add material value, then it is something we could evaluate.”

When I thought about it, I recalled something that a friend of mine – one of the country’s best price-value retailers – told me about electronic shelf labels. “They shout high prices,” he said, adding that he never would use them in his stores because they would be inconsistent – both practically and in terms of image – with the broader value message. So, if sharp pricing is key to Amazon Go’s value proposition, printed labels would seem to be the right way to go.

Additional notes

• Alcohol sales. Beer and wine are available, but in a corner of the store that is monitored by an employee. You can only pull alcoholic beverages off the shelf or from the cooler if you have ID. After that, the system works the same way as for every other category.

• Out of stocks. This is “one of our top priorities,” Puerini said, “if not our top priority, because especially in a store where customers can come in and out so effortlessly, things move pretty quickly, so a lot of our associates’ time is spent making sure the shelves stay stocked. It is so core to having a good store that obviously it is a huge focus for us.”

• Numbers game. Puerini said that the only limitation on the number of customers in the store at any given time is the fire code. The technology itself has no restrictions.

• What happens if the system goes down? “We have processes in place if that were to ever happen,” Puerini said. “It does not involve rolling out cash registers.” But, she said, in a year of beta testing, it never has happened.

• What took so long to open to the public? When Amazon Go originally was announced via press releases and a YouTube video, the public opening date was slated as “Early 2017.” It now is a year later. Puerini said that “as it turns out, the response we got from our Amazonians and our beta population was big enough to get us all the information we needed to confirm that the Just Walk Out technology was a great customer experience … it exceeded our expectations, we had more traffic than we thought, and that worked out great for us.”

Final thoughts

I was trying to put my finger on what the Amazon Go experience felt like when Puerini identified the secret sauce: It’s “almost as if it were your own refrigerator or your pantry.” Exactly. That’s how easy it is.

The import of this technology can be seen in other, similar advances. Once you’ve used Clear or TSA Pre-Check at an airport, you never again can imagine having to wait on the lines occupied by less experienced travelers not equipped with either credential. Once you’ve used EZPass to go through a toll booth, or the new technologies that simply detect license plate numbers and then mail the driver a bill, it is hard to imagine going back to the days when one had to scrounge for change or cash to get through a toll booth.

Here’s the kicker – according to Puerini, there are no known reasons that the Just Walk Out technology cannot be applied to a store larger – even much larger – than the 1,800 square foot prototype in Seattle. Though, she hastened to say, “Right now, we have one store, and we’re laser focused on it.”

There’s also no reason that the technology couldn’t be applied to a nonfood store, like, say, Amazon Books. But, she said, there are no plans at present.

And could Amazon license out the technology to other retailers? “Too early to speculate,” she said.

I’ll take Puerini at her word on these issues, but as we’ve all learned, once Amazon is persuaded that it has a winner on its hands, it is capable of moving very quickly to roll things out. While there were all sorts of rumors about why it took a year to open to the public, it also is true that Amazon is willing to take its time to get things right.

For my money, I think Amazon Go is a winner. Not just because this single store seems to work so well, but because it throws down the gauntlet to every other retailer that is tethered to traditional, often less-than-pleasant ways of ending a shopping experience.

MNB readers know that I’m fond of this Jeff Bezos quote: “It isn’t an experiment if you know how it is going to turn out.”

Well, at this point, I think I know how this is going to turn out. I am reminded of a line from “Man of La Mancha” (a musical, as it happens, about a man who everybody thinks is mad because he tilts at windmills and sees battles to fight and challenges to embrace that nobody else sees … and who, in the end, gets even the most cynical to see the world through his idealistic eyes). It actually is uttered by Don Quixote’s sidekick, Sancho Panza: “Whether the stone hits the pitcher, or the pitcher hits the stone, it’s going to be bad for the pitcher.”

Amazon Go, like so much else that Amazon has done, is the stone. The challenge for everybody else is to adapt and figure out ways to compete.

Favorite Grocery Stores

Publix And Wegmans Named America’s Favorite Grocery Stores

 
I am a small business specialist who writes regularly about retail.  Opinions expressed by Forbes Contributors are their own.

Publix and Wegmans were tied for first place as the best supermarkets in the U.S.

Publix Super Markets and Wegmans tied for first place, with each scoring 77% on Market Force Information’s most recent Customer Loyalty Index. Trader Joe’s Market was a close second with a score of 76% and H-E-B was third with a score of 69%.

Publix has ranked second for the past four years. This is the second consecutive year Wegmans has earned top honors. Both companies have repeatedly been named to Fortune’s 100 Best Companies to Work For.

The Results

A group of 12,774 consumers was surveyed and rated their favorite grocery chains on attributes including value for money, cashier courtesy, fast checkouts, availability of items, ease of finding items, specialty department service and store cleanliness. Participants were asked to rate their satisfaction with their most grocery shopping experience and their likelihood to recommend it to others. The results were then averaged to rank each brand on a Composite Loyalty Index Score.

Publix outshone the competition in ease of finding items, having the cleanest stores and fastest checkouts. Wegmans was tops in its specialty department service and second in item availability. Trader Joe’s was number one in cashier courtesy, followed closely by Publix and Wegmans. ALDI won the top spot for value, followed by WinCo Foods and Costco; Wegmans was 14th on that attribute and Publix wasn’t ranked.

The complete rankings were:

1. Publix (77%)

1. Wegmans (77%)

2. Trader Joe’s (76%)

3. H-E-B (69%)

4. Aldi (68%)

5. Harris Teeter (66%)

6. Hy-Vee Food Stores (65%)

6. Costco (65%)

7. WinCo Foods (62%)

8. Whole Foods Market (61%)

9. Fry’s (58%)

10. Kroger (57%)

11. Target (56%)

12. Winn-Dixie Stores (54%)

13. Shoprite (53%)

14. Food Lion (52%)

15. Albertson’s (49%)

15. Meijer (49%)

15. Sam’s Club(49%)

16. Giant Food Stores (43%)

17. Safeway (39%)

18. Stop & Shop (38%)

19. Walmart (31%)

Disruption May Be Coming

Market Force also reported that click-and-collect services, where shoppers put products in an online shopping cart and then pick their order up at the grocery store, are becoming increasingly popular.

The use of click-and-collect has more than doubled since 2016, the company reported, and 78% of those who have reported using it were very satisfied or satisfied with the service. The stores most frequently cited for use of click-and-collect services were Walmart, Kroger, Sam’s Club and Harris Teeter. Twenty-six percent of those surveyed used the service at least monthly.

This means that going forward, fewer consumers may be stepping foot in grocery stores, choosing instead to drive up and have their groceries loaded in their car. Attributes such as item availability, specialty department service and value for money may then have a greater impact on future store rankings.

Online Grocery Grows

Online Grocery on the Rise as Consumers Seek Value: IRI Study

Despite steady consumer confidence, some shoppers are turning to the web to save money on groceriesInternet grocery shopping is growing in part because consumers feel they can save money by doing so, according to a new study by IRI.

IRI’s Consumer Connect Survey revealed that more than one-quarter of shoppers regularly buy grocery items online. According to the survey, consumer confidence is holding steady, with 53% of U.S. households feeling they are in good financial health in during the fourth quarter of 2017 compared with the same figure in 2016. Despite this stable outlook, consumers still appear to be turning to the Internet in hopes of saving a few bucks.

Results from the IRI survey also examined consumer confidence according to age and found that 47% of millennials, 45% of Generation X, 51% of baby boomers and 68% of seniors are feeling good about their financial health. Nonetheless, 31% of consumers in the fourth quarter of 2017 said they are struggling to buy needed groceries compared with 30% in in the same period in 2016.

“While consumer confidence has improved during the last few years, consumers can still be a bit shaky about their job and financial prospects, so we’re seeing some mixed signals in our survey results,” Susan Viamari, VP of thought leadership for IRI, said in a news release. “Many, especially younger consumers, say they think the Internet provides money-saving opportunities, so we wanted to dig further and find out what role online shopping is playing in consumers’ CPG spending. Consumers are certainly not going to do all of their CPG shopping online, but marketers must keep in mind that 76% of all shopping trips begin online and 50% of CPG category growth is predicted to be online in 2018.”

Online Shopping Trends

The following showcases how consumers shop online to find lower-priced options (sentiment for total, millennials, Generation X, baby boomers and seniors, respectively, listed below):

  • Home care options: 30%, 44%, 39%, 27%, 18%
  • Beauty/personal care options: 32%, 46%, 42%, 28%, 18%
  • Over-the-counter medication options: 21%, 28%, 25%, 20%, 16%
  • Food and beverage options: 20%, 30%, 26%, 18%, 11%

The IRI survey also revealed that consumers think shopping online provides the added benefit of reducing their impulse purchases. Overall, 51% of total shoppers, 54% of millennials, 55% of Generation X, 52% of baby boomers and 46% of seniors say they make fewer unplanned purchases online.

According to the survey,  convenience also plays a big role in online shopping, with 20% of consumers saying it is easier to find needed grocery items online. By age, 32% of millennials, 28% of Generation X, 16% of baby boomers and 12% of seniors say they find items more easily.

Ordering online with in-store pickup (click-and-collect) provides convenience without the added shipping fee. While 40% of total shoppers like this convenience, 55%of millennials, 52% of Generation X, 36% of baby boomers and 25% of seniors specifically like click-and-collect options.

In the upcoming year, the Internet will play an integral and growing role in the CPG purchase process:

  • 55% of consumers will download coupons from retailer/manufacturer websites
  • 51% of consumers will compare prices on retailer websites to find the lowest prices on needed items
  • 24% of consumers will order online for home delivery
  • 22% will order online and pick up in store
  • 12% will use online subscription services for some grocery purchases
  • 6% will use online meal kit delivery services

As e-commerce gains steam, consumers are looking for a variety of offerings that will enhance and/or simplify their shopping experience. Delivery—free and/or fast—is quite popular, but desires go beyond that, particularly among younger consumers (sentiment for total, millennials, Generation X, boomers and seniors, respectively, listed below):

  • Online purchasing with free delivery: 50%, 58%, 57%, 49%, 39%
  • Online purchasing with fast delivery: 36%, 45%, 43%, 34%, 25%
  • Online purchasing with in-store pickup: 33%, 44%, 43%, 30%, 22%
  • Online purchase of freshly prepared items: 28%, 42%, 34%, 24%, 17%
  • Subscription services for frequently purchased items: 22%, 31%, 30%, 20%, 11%

“When consumers think about online CPG shopping, they have specific ideas about what is helpful in their lives,” added Viamari. “There really is no one-size-fits-all answer, so it’s critical to understand what it is that makes your key shoppers tick.”

Lidl Cutting Back

BRIEF

Report: Lidl is dramatically scaling back its growth this year