In July, reports surfaced from Axios that Amazon soon plans to open its new Amazon Fresh grocery concept in four locations across the Twin Cities. Lucky shoppers in Coon Rapids, Eagan, Arden Hills, and Burnsville will reportedly be the first in line to sample Amazon’s latest and greatest retail innovation.
Amazon Fresh had its beginnings in January 2018, when Amazon opened its first Amazon Go store in Seattle, which showcased its now-famous “Just Walk Out” technology.
The tech, from a consumer standpoint, is about as simple to understand as it gets.
Consumers take out their mobile phones, scan a barcode to enter the store (much like you would when boarding an airplane), and simply walk in, take whatever they want off the shelves, and “just walk out.” Payment is then made electronically upon exiting the store, similar to paying for an Uber or a Lyft.
The first Amazon Go store was small, only 3,000 square feet, and roughly the size of a convenience store. But over time, Amazon slowly and smartly began experimenting with bigger-sized retail boxes to make sure the technology could accommodate more shoppers and handle more extensive retail operations with more product categories.
What began as a 3,000 square foot experiment in 2018 soon became an almost 10,000 square foot iteration in 2020 and then morphed into a full-scale 25,000 square foot grocery concept called Amazon Fresh in 2021.
And now Amazon Fresh is likely coming to the Twin Cities in its full “Just Walk Out” glory, and, as a result, Minnesota grocery shopping may never be the same again.
Here are five key things Minnesota shoppers and businesses need to know about what Amazon grocery stores in the Twin Cities could mean for the future:
1. THE TECHNOLOGY IS GREAT
“Just Walk Out” technology is no easy feat. It comes from what is called Artificial Intelligence Computer Vision or AICV, for short.
AICV leverages fixed cameras in the ceilings of every Amazon Fresh store, combined with weight sensors in the shelving, to track the movement of people and products within a space at all times.
It is very much the same technology that companies like Tesla use to power autonomous driving; only grocery shopping carries far less risk than driving. If AICV doesn’t work in a car, for example, people can die. If it doesn’t work within a grocery store, well, about the worst that can happen is an apple gets confused for an orange.
However, confusing apples for oranges does matter for shoppers. For this reason, Amazon spent over three years working out the kinks on its technology to give shoppers the confidence that they can shop an Amazon Fresh store worry-free and never have to wait in a line to checkout ever again.
2. PRICES WILL LIKELY BE UNBEATABLE
One interesting and often underreported aspect of an Amazon Fresh grocery store is that it utilizes electronic shelf labels for on-shelf pricing. This practice means that Amazon can change its prices in-store with much greater ease and flexibility than competitor grocers, as many of them use paper signs that require scheduled labor and large print jobs one to two weeks in advance to make any changes.
Amazon has essentially done away with all that lag time and instead can bring to market its best prices at all times on every product within its store by way of electronic shelf labels.
This practice could give Amazon a tremendous long-term advantage when it comes to price perception with Minnesota shoppers.
3. AMAZON FRESH IS MORE THAN A GROCERY STORE
Another critical aspect of the Amazon Fresh store design is its built-in counter for Amazon order pickups and returns.
Amazon first began understanding the nation’s desire to return Amazon online purchases to a physical store through a parasitic relationship with Kohl’s that started in 2019.
That year the Wisconsin-based retailer made the silly decision to let Amazon see how many people nationwide would return Amazon products to Kohl’s stores. For two years, Kohl’s CEO Michelle Gass would tell Wall Street in nearly every earnings call how pleased she was about the traffic that the partnership was bringing into Kohl’s.
Then, just this past August, Amazon announced that it too would be opening up its own version of a department store, likely built off the strength of the data it gleaned from the Kohl’s relationship.
I bring this example up for two reasons.
One, Amazon isn’t someone to ever take lightly. Two, and even more importantly, returning Amazon online purchases is a major hassle for many people. The Amazon Fresh store enables shoppers to kill two birds with one stone during their weekly grocery trips, ticking another box on the convenience ledger in Amazon’s favor.
4. TARGET, CUB, AND LUNDS & BYERLYS ARE ON NOTICE
Read back over what I just wrote, and several important points are now clear.
First, Amazon Fresh’s prices will be great.
Second, from a convenience standpoint, Amazon Fresh offers two aspects to its experience that the other retailers in the Twin Cities cannot -- the ability to return Amazon products to a physical location and the idea that no one ever has to wait in line again.
Now, some of you might be thinking -- how big of a deal is waiting in line, really? Well, for many consumers who value time and great prices over everything else, it is a game-changer.
Having tried Amazon’s “Just Walk Out” technology in Seattle and New York, I can honestly tell you once you “Just Walk Out,” you never go back. It makes no sense that grocery shoppers spend a large proportion of their time standing in line to pay or, worse, battling the self-checkout, scanner with every “unfamiliar item in the bagging area.”
5. ALL OF RETAIL IS WOEFULLY BEHIND
The scariest part of Amazon Fresh is what it could mean for the entire grocery industry. I just spent an umpteenth number of paragraphs extolling its virtues, and for a good reason.
Because making it happen is hard.
Not only is the technology that underlies it great, but it is also supremely challenging to pull off. It takes years and years of testing to perfect the system, which Amazon has been unafraid to do.
But here’s the kicker.
Want to know the total of major U.S. or regional grocers that have launched a similar “Just Walk Out” grocery concept since 2018?
A big fat zero.
Outside of a few small-scale convenience store experiments, U.S. retailers have been asleep at the wheel. And, yet, here Amazon is now slated to open four Amazon Fresh stores in the Twin Cities.
The negligence that Target, Cub, and Lunds & Byerlys, let alone nearly every other retailer out there, has shown in investing in artificial intelligence computer vision technology is almost criminal.
Implications
If and when Amazon does bring Amazon Fresh to Minnesota, it will be a momentous occasion. Minnesota shoppers will have to make a choice – will they choose the low prices, checkout-free experience, and easy returns offered by Amazon Fresh, or will they continue to patronize the local grocery store that they have known for years.
Old habits are hard to break. As the nation gets younger and more time-starved, the value propositions of Amazon Fresh will be hard to beat, especially when you consider the extent to which Amazon already has its claws in so many other aspects of commerce beyond grocery shopping.
Who will win, and who will remain?
Target, with its one-stop-shop setup, will ride out the storm, while the regional grocers, the Cubs and the Lunds & Byerlys of the world, who play to an older demographic already, might not be much longer for this world.
As hard as it is to say, the threat of an Amazon grocery store is real, so now is the time for retailers to play fast catch up on the retail technology front and for Minnesota consumers to pay the idea of “Buy Local” far more than lip service.
About the Author
Chris Walton is a leading expert and influencer in omnichannel retailing. An accomplished Senior Executive, Chris has high-level executive experience across nearly every discipline within retail. Currently he is the Co-Founder and Editor-in-Chief of Omni Talk, one of the fastest growing blogs in retail. He is a Senior Contributor for Forbes, where his work was read by over 3 million people last year, a regular keynote speaker, and he also sits on the Advisory Boards for Sezzle, Delivery Solutions, and Xenia Retail. Prior to starting Omni Talk, Chris worked for Target, where he was the Vice President of the retailer’s Store of the Future project and also the Vice President of Merchandising for Home Furnishings on Target.com. Chris began his career at Gap, Inc. and holds a BA in Economics and History from Stanford University, and an MBA from the Harvard Business School.
