Amazon and Walmart are fighting to dominate the frictionless shopping experience. And Amazon will win, running away.

Last month we blogged about the growth of Amazon GO, Amazon’s chain of brick-and-mortar grocery stores where customers can purchase goods and sail out the door without needing to use a check-out line or interact with a cashier. Since then, both Amazon and Walmart have stepped up their efforts to develop stores without cashiers:

  • Sam’s Club – Walmart’s members-only retail store – opened Sam’s Club Now in Dallas, which emulates Amazon GO’s cashier-free approach. Like Amazon GO, the pilot Sam’s Club Now relies on an app that customers use to create shopping lists, enter the store, and track purchases without needing to use a cashier. Unlike Amazon GO, though, Sam’s Club Now will require human intervention in the form of employees who do a final scan of purchases at check-out. In addition, Sam’s Club Now will offer the option of customers placing orders remotely and picking them up (something that Amazon GO does not offer) as well as the promise of augmented reality. As Jamie Iannone, chief executive officer, and executive vice president of membership and technology, wrote in a blog post, “We’ll bring items to life in the club by sharing new ways to use them, and we’ll work to integrate stories that highlight cool features, including how items are sourced. We also have plans to use augmented reality to transform members’ digital carts into pirate ships. Or maybe you’d prefer a rocket? More on that soon!”
  • The Wall Street Journal reported that Amazon is testing the Amazon GO approach with bigger stores. According to the Wall Street Journal, Amazon is testing the Amazon GO concept in a larger space in Seattle to see how the frictionless approach will work in an area with higher ceilings and more inventory to choose from (which would require a bigger investment into cameras and sensors). The report triggered speculation that Amazon will roll out frictionless shopping across its Whole Foods network of stores, purchased in 2017. As Sarah Perez of TechCrunch noted, “[I]f the system were perfected, it could allow Amazon to cut or repurpose store staff at Whole Foods, as well as get a better handle on inventory levels for its delivery business. One of the challenges with ordering groceries today from places like Instacart or Shipt is that the stock levels in the app don’t match what’s actually on store shelves. Longer-term, solutions like Amazon’s Go technology could improve that. Meanwhile, a system for grocery shopping without waiting in a checkout line could save people time.”

Amazon and Walmart both possess advantages. Walmart continues to master the mobile shopping experience and is surprisingly nimble for a business its size. But Amazon has the most important advantages.

  • A far more relevant brand. Amazon is one of North America’s most lovable and relevant brands in both Prophet’s Brand Relevance Index and Interbrand’s Best Global Brands 2018 Top 100. In Prophet’s view, the most relevant brands are customer obsessed, pragmatic, inspired, and innovative. They win customers and keep them. Amazon is a Top 5 brand in both rankings and Walmart (or Sam’s Club) is nowhere to be found on either list.
  • A proven ability to innovate and create new successful businesses in adjacent industry verticals. Amazon’s ability to create interconnected and reinforcing businesses spawned from its core .com marketplace makes Amazon far more profitable and dangerous as a competitor than any other standalone retail business. Amazon is a hub for cross-industry disruption and domination, including retail, entertainment, web services (i.e. B2B cloud computing), consumer products (e.g. Alexa, Fire, and Kindle), and, its latest target, advertising. Amazon can apply its renowned data mining skills to tap into its base of shoppers and cross-sell services effectively. With Sam’s Club Now, Walmart can lead only one industry, retail, while Amazon outflanks the entire industry.

Being the best retailer it can be makes Walmart stores (and Sam’s Club stores) places where people want to shop. But Amazon is a lovable brand that can transfer that consumer loyalty to the retail industry through Amazon GO and Whole Foods. Lovable, relevant brands build loyalty. A convenient and even enjoyable retail shopping experience is nothing compared to a lovable and relevant brand experience.

Grocery retailers such as Kroger and Target might be tempted launch their own Amazon GO models now. But they should avoid playing this dangerous game. They’ll simply chase Walmart and spend more money in the process. Kroger and Target, like Walmart, should aspire not for retail dominance but for brand relevance. They’ll need to connect with consumers in ways that may not have anything to do with retail, especially with digital experiences, as the thriving Chinese marketplaces such as Alibaba do.

Walmart may win some battles to lead retail. But Amazon has already won the far more important wars of brand relevance and business innovation.

Saul Delage

Saul Delage

VP Growth