How Sainsbury's cashier-free store differs from Amazon Go

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Sainsbury’s has launched the U.K.’s first mobile-only checkout-free grocery store, inviting comparisons to what Amazon Go is doing in the U.S. But their models are far from identical.

Like Amazon Go, the U.K. supermarket chain’s Holborn Circus Local convenience store in central London targets busy office workers who want pre-packaged meals without having to queue to pay. Unlike Amazon Go, Sainsbury's asks customers to scan items with their smartphone to pay.

“The model of mobile payments in till-free stores lends itself to retailers experiencing high footfall levels, with shoppers making routine trips they want to complete quickly,” said David Nicholls, Fujitsu U.K.’s CTO for retail and hospitality. “Sainsbury’s is an example of traditional retailers responding to the digital disruption from Amazon Go.”

Retailers aren't the only ones responding. In the U.S., Amazon has been caught up in a backlash against cashless stores, which are seen as potentially discriminating against underbanked consumers. Its most recent location, opened Tuesday in New York, accepts cash. In the U.K., there have been calls to safeguard underbanked consumers’ access to cash, as payments become increasingly digital. A report published by the Access to Cash Review, an independent enquiry which is sponsored by the LINK ATM network, warned that 17% of the population would struggle to cope in a cashless society.

Sainsbury’s seems to have learned from Amazon's mistakes. Its Holborn Circus store isn’t cash-free, as people can pay with cash or cards at a helpdesk, if they are prepared to queue. Currently, 82% of transactions at the store are cashless.

The three-month pilot "is an experiment rather than a new format for us,” said Clodagh Moriarty, Sainsbury’s group chief digital officer. “We want to understand how our customers respond to the experience. Over the coming months, we’ll be iterating based on their feedback before deciding if, how, and where we make this experience more widely available.”

Sainsbury’s has also rolled out SmartShop Scan, Pay & Go in eight London convenience stores, following a trial in August 2018. However, these stores retain checkout tills and self-service terminals.

SmartShop enables customers to scan groceries, pay in-app via Apple Pay or Google Pay, and scan a QR code to confirm payment before leaving. In 100 Sainsbury’s stores that haven’t enabled SmartShop in-app payments, customers can use SmartShop to pay for scanned purchases at designated self-service terminals.

“Holborn Circus, the store Sainsbury’s has chosen, is popular amongst early adopter shoppers and influencer shoppers, so the technology is more likely to be used than if it had been rolled out elsewhere,” said Vanessa Henry, shopper insight manager at U.K. consultancy IGD. “Our research found that only a small proportion of U.K. shoppers currently use smartphones to pay for groceries. But 85% of survey respondents are open to using technology to help them with their grocery shopping.”

Two other U.K. supermarket chains, the Co-op and Tesco, are piloting mobile scanning and payment, but other U.K. supermarket chains have yet to test the technology.

Since June 2018, Tesco has been testing its Scan Pay Go app with 100 staff at a Tesco Express convenience store in its Welwyn Garden City headquarters. Tesco has yet to trial the technology with consumers.

The Co-op is testing its Pay in Aisle app, which was developed with Mastercard’s Masterpass technology, in one store with customers and in the staff store at its Manchester support center. Hundreds have signed up to use Pay in Aisle, according to Co-op press officer Andrew Torr.

Food, furniture and clothing retailer Marks & Spencer’s allows shoppers in six London stores to scan and pay for prepared meals using its Mobile, Pay, Go app.

“Since introducing Mobile, Pay, Go in October 2018, almost half our active users make at least two transactions per week,” M&S product manager David Howell wrote in a blog post. “After launching on iOS, the next step was rollout to Android devices, with over a third of our mobile visits coming from Android users.”

According to Howell, using Mobile, Pay, Go, customers can buy their lunch in under 40 seconds.

Mikael Sedera, customer success director at U.K.-based Form3 Financial Cloud, said that, in addition to convenience for shoppers, mobile payments could lead to cost-savings for retailers if they embrace open payments.

“PSD2 combined with instant payments, where payments are sent directly to retailers’ bank accounts from customers’ accounts, removes card acceptance costs for retailers,” he said. “This involves third-party payment service providers or retailers initiating payments via APIs from shoppers’ bank accounts over Faster Payments instead of card network rails.”

Mobile shopping is unlikely to become widespread in the U.K. for some time, despite the U.K.’s embrace of contactless cards. According to U.K. Finance, 63% of U.K. cardholders use contactless payments.

“There’s some way to go before widespread adoption of frictionless checkouts,” said Andrea Dunlop, Paysafe’s CEO for merchant acquiring Europe. “Paysafe research in April 2018 revealed that only 9% of U.K. consumers would ‘definitely use’ Amazon Go. Also, 13% of U.K. survey respondents had made a purchase in-person using a mobile wallet in the previous month, and 10% had made an in-app purchase in the previous month.”

There is, perhaps, one advantage Amazon Go has over its imitators. Since Amazon's model was designed from the ground up to use sensors and cameras to track customers, it won't run the risk of people skipping out on paying, according to Richard Crone, principal of Crone Consulting.

"Amazon Go started with a clean slate with autonomous checkout, inventing a merchandising formula that eliminates exceptions: Premium Prepared and Groceries,” he said. “So I advise traditional retailers to focus on enhancing their ‘order and pay ahead’ capabilities within their mobile app before developing scan-and-go capabilities.”

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Retailers Mobile payments U.K.
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