DIpil Das
Introduction
What’s the Story? London’s Holborn district has become a hub for checkout-free stores, helped by the multitude of tech-savvy, busy officegoers nearby as well as it being home to the headquarters of both Amazon UK and Sainsbury’s. Alongside “just-walk-out” stores from those two companies, Holborn has also seen a similar venture from UK grocery sector leader Tesco. These checkout-free stores combine motion sensors and artificial intelligence (AI)-assisted cameras to track people and products in real-time. Afterward, the order total is automatically deducted via a payment function in each shop’s respective app. This report presents key observations from our store visits to Amazon Fresh, Sainsbury’s Smartshop Pick & Go and Tesco GetGo in Holborn.Why It Matters
Automated checkout is one of the most significant changes in retail since the advent of e-commerce. Checkout-free stores promise a simpler, faster and more convenient shopping experience for shoppers—and reduced labor costs, streamlined inventory and restocking, greater access to customer data and enhanced advertising opportunities for retailers. During the pandemic, the technology gained prominence as customers sought ways to avoid queues and interactions with cashiers. According to Juniper Research, the total value of transactions processed by checkout-free technologies will reach $387 billion globally by 2025, compared to just $2 billion in 2020. Amazon has made significant moves in the automated checkout space in the UK, opening 12 ”Just Walk Out” convenience stores in 2021, opening the first in March of that year. The company is reportedly planning to open more than 260 similar stores in the UK by the end of 2024. While Amazon is undoubtedly ahead of the curve, it is not the only company that has entered the checkout-free space. In October 2021, Tesco opened its first just-walk-out store, GetGo, while Sainsbury’s launched a similar store, Smartshop Pick & Go, one month later. Meanwhile, Morrisons is currently testing a staff-only, cashierless store at its Bradford headquarters in partnership with retail technology startup AiFi, with plans to expand the format to the public soon. Aldi UK also jumped on the bandwagon, launching its first checkout-free store Aldi Shop&Go in January 2022 in Greenwich, London.UK Checkout-Free Store Visits: Coresight Research Observations
The Coresight Research team visited Amazon Fresh, Sainsbury’s SmartShop Pick & Go and Tesco GetGo checkout-free stores in Holborn. We provide key observations of the three stores and feature images from our trip. 1. Amazon Fresh Amazon Fresh opened its Holborn location on November 4, 2021, powered by its proprietary ”Just Walk Out” technology. The 2,500-square-foot store is located on the corner of High Holborn and Chancery Lane. [caption id="attachment_145623" align="aligncenter" width="700"]
The exterior of the Amazon Fresh at High Holborn and Chancery Lane Source: Coresight Research [/caption] Store Observations
- When checking in at the store, shoppers open the standard Amazon shopping app and scan a QR code. Once their shopping is complete, shoppers can easily and directly exit the store. Amazon automatically deducts the total cost of purchases from the primary payment method associated with the shopper’s account. This is a similar experience to Amazon Go in the US, albeit without using a standalone app.
- Compared to Amazon Go (Amazon Fresh’s US counterpart), which mainly stocks to-go food items, Amazon Fresh offers a much fuller range of food and drink options, including a self-service coffee bar, substantial cupboard essentials and strong food-for-later and food-for-now ranges, catering to lunchtime shoppers and commuters looking for same-day options.
Self-service coffee bar at Amazon Fresh Source: Coresight Research [/caption]
- The store stocks a considerable amount of Amazon private-label items, including selections from the “by Amazon” and Happy Belly labels. Some products from Booths and Morrisons, two UK supermarket chains, are also available. Amazon has pre-existing ties with both supermarket chains. The company signed a wholesale supply deal with Morrisons in February 2016, allowing Amazon’s customers access to a range of the supermarket chain’s fresh and frozen products. Amazon entered a similar supply arrangement with Booths in October 2017.
Left: Amazon private-label items for sale at Amazon Fresh; Right: Booths items for sale at Amazon Fresh Source: Coresight Research [/caption]
- The store also features an Amazon Hub counter, where shoppers can arrange to pick up or return items purchased through Amazon.
Amazon Hub counter inside Amazon Fresh store Source: Coresight Research [/caption] 2. Tesco GetGo Tesco opened its first checkout-free store, Tesco GetGo, in Holborn on October 19, 2021. The company retrofitted the existing Tesco Express with technology provided by Israel-based, automated technology startup Trigo. The roll-out of GetGo followed a trial at a staff store on the retailer’s campus in Welwyn Garden City, which has been in operation since 2019. [caption id="attachment_145638" align="aligncenter" width="701"]
The exterior of the Tesco GetGo in Holborn Source: Coresight Research [/caption] Store Observations
- When entering the Tesco GetGo store, customers open the main Tesco shopping app and check in by scanning a QR code generated on the smartphone.
- Compared to Amazon Fresh, the store stocked a higher quantity of loose items, including fresh fruits and vegetables—likely to be a more challenging area for cameras to track what consumers have put in their baskets (i.e., how many bananas did a shopper take?).
- Reflecting its retrofitted origin, this store is an elevation of Tesco’s existing format that will be familiar to many UK shoppers—the fundamental offering of the store is that of a regular Tesco Express store.
Large selection of loose fruits and vegetables at Tesco GetGo Source: Coresight Research [/caption]
- Tesco GetGo includes a partitioned-off section for age-restricted products, such as tobacco and alcohol. Once in this section, shoppers cannot return to the main shopping area; they must use a separate store exit, where staff is present to check customer IDs. Amazon Fresh includes a similar alcohol section with a staff member checking IDs, although the area is not partitioned-off and shoppers can return to the main shopping area after picking up their alcohol.
Sign marking the entrance to the partitioned-off, age-restricted section in Tesco GetGo Source: Coresight Research [/caption]
- Tesco has its regular “Clubcard Price” offers displayed on GetGo shelves—savings are applied automatically if a Clubcard account is linked in the app.
Clubcard Price offers displayed on Tesco GetGo shelves Source: Coresight Research [/caption] 3. Sainsbury’s SmartShop Pick & Go Sainsbury’s opened its first checkout-free store, SmartShop Pick & Go, in Holborn on November 29, 2021. The store opened three years after Sainsbury’s first attempt at a till-free location, which debuted in April 2019—that first trial relied on shoppers self-scanning items via an app. However, the supermarket chain ended the trial after just three months due to customers complaining that they found the shopping experience too challenging. SmartShop Pick & Go is powered by Amazon’s “Just Walk Out” technology—the first time the technology has been used by a third party outside the US and the first time it has been retrofitted to an existing store. [caption id="attachment_145633" align="aligncenter" width="700"]
The exterior of the Sainsbury’s SmartShop Pick & Go in Holborn Source: Coresight Research [/caption] Store observations
- The check-in and out experience was less convenient at SmartShop Pick & Go for three reasons:
- First, shoppers need to use a separate Sainsbury’s app (not its main grocery app) and reenter their preferred payment method, address and other details.
- Second, when visiting, customers need to select the specific store from a list of locations to generate the QR code to enter. For Amazon Fresh and Tesco GetGo, shoppers can simply open the respective app and generate a QR code, regardless of the store.
- Finally, to exit, SmartShop Pick & Go customers need to generate another QR code. At Amazon Fresh and Tesco GetGo, customers can exit the stores directly.
- The store is smaller than both neighboring checkout-free stores and typical c-stores, consisting of only two aisles.
The two aisles of Sainsbury’s SmartShop Pick & Go in Holborn Source: Coresight Research [/caption]
- Similar to Tesco GetGo, there is a partitioned-off section of the store for age-restricted products at SmartShop Pick & Go.
Partitioned-off section of the store for age-restricted products at SmartShop Pick & Go Source: Coresight Research [/caption]
What We Think
- On our store visits, we were most impressed with Amazon’s convenience store. Amazon Fresh in Holborn is an appealing store with substantial fresh convenience ranges, robust private-label offerings, a solid grocery basics selection and add-ons such as a fresh coffee station and parcel collection service. This is a remarkable format from a retailer best known for more functional shopping experiences and with a still-limited history in grocery retailing.
- Tesco GetGo is also an impressive store, albeit on the tech side. In terms of store experience, the format was highly similar to Tesco’s regular Express convenience stores—functional, well-ranged and price-competitive, but not known for offering a standout shopping experience. GetGo is an elevation of Tesco’s existing format and is likely to appeal to shoppers familiar with the banner but seeking added convenience.
- These stores remain a drop in the ocean of convenience retailing in the UK. Tesco alone has 1,966 Express convenience stores in the UK (plus 695 One Stop convenience stores). The entire UK c-store sector has over 24,000 stores, per Euromonitor—and many of those will be in lower-traffic areas.
- Amazon’s ambitions are the one to watch, given incumbents such as Tesco and Sainsbury’s already have substantial convenience estates. However, it would take a considerable effort for the e-commerce giant to capture a meaningful share of the overall grocery market. As we noted in late-2021, when media reports suggested Amazon was targeting 260 UK convenience stores by the end of 2024, even that achievement would leave Amazon trailing incumbent rivals. If Amazon could reach 260 UK stores and turn over an average of around £3 million ($4 million) per store—£3 million is our estimated sales-per-store average for Tesco Express, Sainsbury’s Local and The Co-op—that would result in sales of £780 million ($1.05 billion) per year. We estimate that would give Amazon a 0.4% share of total UK food retailers’ projected sales in 2025 (assuming its stores reach full maturity rapidly), a tiny percentage of the market—but a springboard from which to aim for a greater share of everyday retail spend and shopper loyalty.
Source for all Euromonitor data: Euromonitor International Limited 2022 © All rights reserved