Amazon Go Outsmarts the ‘Carrot Trick’

Coles and Woolies have both had a tough year.

They not only faced increased competition from German discounter Aldi, but a price war as well. And as if these weren’t enough to worry about, there is one more threat to their earnings: swipers.

Swipers are people who steal at supermarkets by using a DIY checkout to pay for their groceries. Australian National University criminologist Emmeline Taylor coined the term. According to Taylor, one third of customers regularly steal when using a DIY checkout.

And the most common way to do it? The ‘carrot trick’. That is, swiping a pre-packaged carrot bag instead of a more expensive item.

According to the Sydney Morning Herald: ‘Coles and Woolworths won’t discuss the scale of losses through their self-scan service tills but Dr Taylor’s research reveals how carrots uncovered just how many shoppers were underpaying for fresh produce.

Coles and Woolies may be unwilling to discuss their losses, but Professor Larry Neale, from Queensland University of Technology, estimates they could number in the billions of dollars each year.

The gig came to light when an Australian supermarket noticed they were selling more bags of carrots than what they had in stock. And supermarkets thought those self-checkout machines would save them money…

Yet there is one retailer that is not worried about swipers: Amazon.

They have just unveiled their first ‘Amazon Go’, a new brick and mortar grocery store. The big deal about Amazon Go: no cash registers.

That’s right; customers can just pick up the items they want from the store and leave.

No waiting, no queues…no carrot trick.

The way it works is shoppers scan their Amazon app when walking into the store. Once in the store, they get tracked as they pick up purchases, and the virtual basket adds the items up. Once they finish shopping, they can just leave the store. The technology adds up the items and bills them through their Amazon account.

Amazon is expected to land in Australia next year, and the impact on the Australian retail landscape could be huge. The company is set to launch an online supermarket and bricks-and-mortar stores. Could Amazon Go be part of its strategy?

Having such an effortless payment system, like Uber, could give Amazon a significant lead in the retail sector.

In the US, Amazon holds 50% of the country’s online retail market share, and is on track to have 10% of the overall US retail market in 10 years.

Australian retailers are already making preparations for the arrival of Amazon. Earlier this month, Wesfarmers Managing Director Richard Goyder told The Australian Financial Review that unless Australian retailers reduced costs — and improved stores, distribution and fulfilment — new players such as Amazon would have a significant impact on profitability.

In March last year, Goyder warned that ‘Amazon would eat all our breakfasts, lunches and dinners.’

According to Citi analyst Craig Woodford, Amazon could reach $3.5–4 billion in revenue, which would represent around 14% of all online sales and 1.1% of all Australian retailing.

One thing is for sure: the Australian retail landscape may look a lot different next year.

Swipers beware — your days are numbered.


Selva Freigedo,
Contributing Editor, Money Morning

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Selva Freigedo is an analyst at Money Morning. She has a background in financial economics, but what makes Selva´s experiences different to many are the places she has lived and worked. Born in Argentina, she has also lived in Brazil, the US, Spain, and now Australia. She has seen up close many of the economic phenomena that worry Fat Tail Investment Research readers, like hyperinflation, bank bail-ins and governments burdened with so much debt it cannot possibly be repaid.

Every week, she goes through each article, research note and recommendation produced by our experts around the world to give you information on how to build and protect your wealth. Selva packages the week’s best ideas into one easy to read report: Port Phillip Insider Extra.

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