Q&A: AWS retail chief Tom Litchford looks to bring grocery into the cloud

Tom Litchford serves as head of worldwide retail at Amazon Web Services (AWS), an Amazon.com Inc. subsidiary and the global market-share leader in cloud computing services and solutions. Before joining AWS in his current role in November 2017, he was vice president of retail technologies at the National Retail Federation (NRF). That followed more than 13 years at Microsoft and 18 years at NCR. 

AWS has thousands of retailers as customers around the globe and serves every retail segment, including food and grocery. Its AWS Retail arm describes itself as “the only cloud born from retail and built for retailers.” Said Litchford, “We provide the broadest and deepest cloud platform out there. We have over 175 services today, across just about any meaningful workload that you can think of.”

With many retailers rethinking their businesses to adapt to a “new normal” — more so today amid the COVID-19 crisis — AWS aims to drive cloud adoption in data and IT migration and modernization, artificial intelligence (AI) and machine learning (ML), and digital transformation. In an interview with Supermarket News Senior Editor Russell Redman, Litchford said a cloud-native approach can help grocery and other retailers optimize channels (brick-and-mortar and digital), reinvent supply chains and better anticipate and respond to changing customer behaviors, as well as improve efficiency and rein in costs for overall operations. Here are edited excerpts of the discussion.

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SUPERMARKET NEWS: What are retailers looking for when they go to a cloud platform or a cloud-based architecture? Are there certain things they’re looking to accomplish?

TOM LITCHFORD: Great question. The easy one is to come back and say cost savings. If you look at on-prem [on-premises] data centers today, as you shift that stuff into the cloud, what we typically see across my customers around the world is anywhere from 30% to 50% cost savings. But when you really start looking at what retailers are doing with cloud technologies, I think they would tell you the No. 1 answer is agility. They see how fast that Amazon consumer services is able to innovate and solve customers’ problems. And they say, ‘How do you do that?’ The ability to get that agility to respond to what your customers are asking for, I think, is the No. 1 reason that they’re going to cloud, and then closely followed by the cost savings.

A third I would put in, elasticity, is a big one. As an example, just think of web or e-commerce platforms. I don’t think there’s a retailer out there — at least not one that I’ve met — that knows how to provision e-commerce in a data center to where it’s not sitting there idle nine months of the year and then overtaxed during the holidays. And you can just imagine from a grocer’s perspective back in March, when this pandemic hit and their online web use went through the roof, right? So most of these systems are sitting there idle until you’re wasting money, and then they’re overtaxed when you actually need them. The elasticity that the cloud provides is one of the key benefits there because it auto-scales. As the volume comes in, the cloud can scale up the amount of resources to address the volume. And then when the volume goes away, it scales it back down, and you’re only paying for those services while they’re running.

Related:Amazon Fresh ‘built to outlast’ other grocery retailers, says Brick Meets Click

The last one is innovation. When you look at cloud technologies today, there’s this whole concept of changing your culture. I kind of grew up in a culture where if you screwed up, you got fired, right? I will tell you, at Amazon, it’s a 180-degree switch. It’s all very customer-obsessed, and they want you experimenting. And we want this culture, and we want our customers to adopt this culture where you’re able to experiment, try things, and if they work great, let’s get it rolled out into the mainstream. If it doesn’t work, let’s shut it down and collect the data and the learnings and move on. The cloud is ideal for being able to do that in terms of driving innovation, because rather than taking six, seven, eight or 12 months to order hardware and software and provision and get everything set up, you can literally have stuff up in the cloud in minutes or an hour and be testing things. So whether that’s voice or machine vision technologies, AR/VR [augmented reality/virtual reality], IoT [Internet of Things], robotics — all these things you can be playing with today.

Amazon Go Grocery cashierless stores use Amazon's “Just Walk Out” technology, which employ overhead cameras, weight sensors and deep learning technology to detect items that shoppers take from or return to shelves and keep track of the items selected.

SN: How can AWS cloud technologies help grocery retailers, in particular? I was thinking about this and came up with better knowing and serving your customers, new business models and innovation, more insight into the supply chain, and more efficient front- and back-end operations.

LITCHFORD: We talked about migration and modernization and the benefits of that in terms of cost savings, agility and elasticity. But once you move out of those areas and start getting into the business, another sweet spot for us is the 20 years of leadership that we have in AI/ML [artificial intelligence/machine learning]. So how do we help these retailers get a more consistent retail data strategy, get rid of all these silos of application data that they have all over the place and get it into a single source of the truth, to where they can get better customer insights and better operational insights and really start applying ML to that data, as opposed to doing traditional analytics and rules-based engines?

Some great examples are specifically in grocery. Just look how they got caught by COVID-19. Their demand forecasting and their allocation just went out the window. And even today, they haven’t necessarily recovered. I think they’ve overindexed on SKU rationalization to where now the toilet paper and paper towels are in stock, but a lot of the niche products are out of stock. And those niche products still represent billions of dollars of business, right? So they still are struggling with demand forecasting and how to allocate to the stores that need the merchandise. 

And then the third area is around digital transformation. Especially now with COVID-19, look at grocery. The move to online has just gone through the roof. From a consumer behavior perspective, there are two main things: I’m very risk-averse now, relative to my health, and I’m probably having some financial issues, whether that’s just trying to pay my rent, put food on the table. So the retailer has to come back in there and say, it’s not about getting my stores open or operating, but how do I convince these people that it’s safe to do business with me? And when you do do business with me, I’m going to provide you the products that you want when you need them. 

Specifically in grocery, you're seeing this massive shift to buy online, pick up at curb. As retailers try to figure that out, they’re not going to have multiple chances at winning [customers] over, right? It’s like, ‘My habits have changed, and I’m giving you a chance no, because I can’t go to what I’ve always wanted to in the past. But I’m online, you look good and I’m going to try you.’ And you’ve got that one chance to impress them. And as soon as you put friction back into that experience, they’re going to move on to the next retailer.

Just from a cloud technology perspective, I talked about online pickup at curb, that’s another thing that we pioneered with a company called Amazon Fresh. If you look at the different business units across Amazon, Amazon Fresh was the online grocer, at the time. AWS worked with them, as a customer of ours, and developed the technologies to do buy online, pick up at curb. Customers would order their groceries online, and then when they came to pick them up, they just drove into the parking lot and parked. They didn’t have to do anything. We recognized that they were there and issued the event to an associate to grab their order and bring it out to their car and put it in their trunk. The whole process is frictionless, and in this COVID world now it’s completely contactless.

SN: Would you be able to give some examples of grocery retailers currently using AWS either as their preferred cloud platform or a hybrid cloud platform? I looked at the slides you sent me, and some of the companies in grocery I saw were HelloFresh, Instacart, Sainsbury and, obviously, Amazon.

LITCHFORD: I would argue that as retailers are starting their journey into the cloud, everybody’s going to be hybrid. Hybrid is more of, ‘I’m still running things in a data center on-prem as well as using cloud technologies.’ 

But, specific to your question, HelloFresh from the meal kits [market] is a great all-in AWS story. Instacart is a big AWS [user]. Ocado is a great one. If you’re familiar with Ocado, out of the U.K., here in the U.S. they have the exclusive agreement with Kroger to run their online fulfillment. Ocado, I like to talk about them because of using AWS robotics technology. You’ve probably seen videos on YouTube of Amazon fulfillment centers and all the robotics and things like that. Ocado is even cooler than what Amazon’s doing. That ability to pick fresh items and still get them safely delivered to you without affecting temperatures is pretty important. 

Sainsbury’s is another huge one. I mentioned e-commerce. The first thing they did was get their WebSphere Commerce into the cloud. They also retired an Oracle rack system. And basically, just some numbers from Sainsbury’s, it was 30% less infrastructure. Based on what they had provisioned on-prem to what they had to put in the cloud, they saw a 70% to 80% improvement in performance. And from a WebSphere Commerce perspective, they went from five to six releases per year to multiple daily. So, again, it gets back to that capability to respond to your customer almost in real time. 

You probably saw More Retail Ltd. from India. That’s about a 650-store chain grocer throughout India. We came in and worked with them post-COVID [outbreak] around demand forecasting, and they were seeing some pretty phenomenal accuracy. They saw a 3% reduction in stock-outs. It sounds small to say 3%. But knowing grocery, you know that’s a huge number. Parkland is also a recent customer. If you’re familiar with Parkland out of Canada, they’re convenience [retail], so a subset of grocery. They’re all in on AWS. They’re just starting their [cloud] journey, but they picked AWS as their preferred cloud provider.

SN: What about on the consumer end? How does the AWS cloud platform help retailers improve the shopping experience across brick-and-mortar, online and mobile channels? Areas that jump out at me are personalization and new services and conveniences.

LITCHFORD: That’s a great example because a lot of [retailers] I talk to … I almost call it ‘shiny object syndrome,’ because they’re always thinking, ‘I have to do something that’s customer-facing.’ Personalization is big. That’s one of the top-requested first-use cases for applying AI/ML: How do I get better at personalization and campaign and promotion management? But there’s lots of stuff you can be doing behind the scenes to impact that consumer experience. Just get back to the demand forecasting and allocation we talked about. And then don’t forget the Amazon Fresh story I told. As you have customers moving online, there’s a huge risk now that you don’t satisfy them or you cause friction in that experience when they come to pick it up at the store or at the curb. So if you're not able to integrate that entire shopping experience, then you’re in trouble. I think the cloud platforms are making it to where you can respond a whole lot faster and get some of these systems out there faster to do things like that.

When COVID-19 hit, in less than two days, Morrisons was able to scale its call center using Amazon Connect, which enabled the U.K. grocer to remote its call agents as people started having to work from home.

SN: Are cloud platforms and solutions only for large retailers? Is this something that independent grocery retailers can consider?

LITCHFORD: Absolutely. I wouldn’t look at it necessarily as the size of the retailer by revenue. I would look at it in terms of what are their capabilities from an IT perspective. When you get up to the enterprise retailers, typically they’ll have large IT groups. They like to build their own stuff, for the most part. And, obviously, we do really well at that. But when you come down the chain into the SMB [small- and medium-sized business] space, you have less IT capabilities; you’re looking more for partners. Working with our partner ecosystem — SaaS providers, software as a solution — they provide everything in terms of infrastructure and everything to run, whatever it is you need, whether it’s your POS, warehouse management solution or order management system.

AWS has the largest partner ecosystem of all the cloud providers to bring these types of solutions to you. And we try to make it easy. There’s a feature called AWS Marketplace where it’s almost just click and click and play. You go in and say, ‘I need this POS system’ and click on it, say it was Aptos plus the ISP that provided it. It’s all downloaded, configured and ready to go for you. So we try to take a lot of the complexity out of running some of these solutions. To answer the question, I would say there’s no limit to who can use it, whether you’re an individual mom-and-pop all the way up to the largest retailers in the world.

SN: You touched on the COVID-19 outbreak. I presume you’ve seen heightened demand for solutions since then. What were retailers — in particular, food retailers — asking for? What were their needs?

LITCHFORD: One of the coolest examples was Morrisons, a grocer out of the U.K. Using Amazon Connect, they were able to scale their call center in less than two days and remote their call agents as people started having to work from home. As you can imagine, with COVID, the volume of calls exponentially skyrocketed. Using Amazon Connect, which is one of those learnings from Amazon consumer services, they were able to then train literally thousands of people, either corporate or store people, to where they can all start taking calls. They didn’t have to be in an actual call center in some room in corporate headquarters. You could be working at a store and have some idle time, and you could have these associates start taking calls. Or it could be corporate employees working from home now stepping in to take the call. It was easy to train them on how to use Amazon Connect because they were already employees of Morrisons. They knew the business. So they were creating candidates to be customer-facing.

With another grocer that’s not public, it was a similar thing. We set up a call center for them in two days. This particular grocer was getting 36,000 calls a week on their call center. The first week of the pandemic, in one day, they got over 600,000 calls. Their agents just couldn’t handle the volume. What we were able to do for them is, not only supplement the agents like we did with Morrisons, but we set up some automated bots for them. And one of the things they wanted right away was a program for their high-risk customers. Think of their elderly customers that couldn’t get out of their homes or were scared to come to the stores. Using bots, they self-registered over 150,000 at-risk customers in the first five days that now could get home delivery. This particular [retailer] came back and said that, without the bot, it would have taken them 76 days to do that. And with the bot, it was just 5% of the cost of having a human to it. Right. These are the types of things that we can bring to bear.

That’s typically where retailers have lagged somewhat, really understanding what the consumer is doing. What technologies are they using and how is it going to change their shopping behavior? And COVID just accelerated all of that. Again, there’s this whole move to online and what [customer] expectations are going to be around picking up in-store. And how did that break the fulfillment process now? Am I using human pickers in the stores, or am I able to automate that through a micro-fulfillment center? This is where you see some growth, saying we’re just going to shut some stores down and make them dark stores, and they became micro-fulfillment centers for that local area. How are you applying technology to do things like that? Because we just don’t have enough associates to be doing this stuff manually.

SN: I don’t need to tell you the competition is pretty intense among the cloud computing players. As AWS targets retailer customers, how do you address any concerns about your parent company, Amazon, since it’s one of the world’s leading retailers?

LITCHFORD: We are a retail-hardened system. We are the largest cloud provider out there. I think some of that narrative that you’re hearing is really coming from just a few very vocal, very large retailers. The retailers that are working with us are the retailers that are listening to what their customers are asking for. And they’re much less focused on the competitive dynamics than they are on taking care of their own customers. When it comes down to taking care of those customers and the ability to go build what those customers are asking for, then they look to AWS for the superior technologies to do that. Based on the experience and innovation that we’re driving in the industry, there’s not a cloud provider that can compete with us.