Source: Amazon.com
Will the tech behind Amazon Go redefine convenience at retail?
The reports that Amazon.com was working on a new type of convenience store have proven true with the opening of the first Amazon Go location in downtown Seattle. The big question now is what the format will mean for Amazon’s business and rivals in the convenience channel and beyond.
The 1,800-square-foot store, which operates without checkouts, will initially serve Amazon’s customers in a beta testing phase before opening to the public sometime early next year.
Shoppers scan their Amazon Go mobile app as they enter the store. Anything they take from the store’s shelves are automatically added to their virtual shopping cart. If they put an item back, it is removed from their cart in the same fashion. When customers leave the store, Amazon automatically bills their accounts and sends a receipt to the app.
In a video, Amazon says it uses “computer vision, deep learning algorithms and sensor fusion, much like you’d find in self-driving cars” to make the Go concept work. It calls the combination “Just Walk Out Technology.”
Amazon Go features ready-to-eat meals and snacks made fresh by on-site chefs and local suppliers, in addition to essentials such as bread and milk. Customers can also pick up Amazon Meal Kits with all the ingredients needed to make a meal for two in about half-an-hour.
Although new, Amazon Go raises many questions:
- How quickly will Amazon ramp up the concept and how many stores will it open?
- How long will it take rivals to catch up with Amazon Go’s tech?
- Will Go’s tech work in other retail formats?
- Will eliminating checkout labor drop to the bottom line or will labor be deployed elsewhere? If stores are able to eliminate cashiers, what will this mean for the larger labor picture nationwide?
- Will the consumer insights Amazon draws from Go affect its off- and online efforts in food and other categories?
- How will Go’s emphasis on fresh foods and local suppliers affect the relationship between the company and large CPG brands?
- Introducing Amazon Go and the world’s most advanced shopping technology – YouTube
- Amazon Go – Amazon.com
- Amazon unveils smart convenience store sans checkouts, cashiers – The Seattle Times (tiered sub.)
- Will Amazon give new meaning to convenience stores? – RetailWire
- Will Amazon drive-up grocery stores disrupt food retailing? – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: What do you think are the most interesting questions raised by the launch of Amazon Go for Amazon.com and its competition? What do you think are the answers to those questions?
Poll
BrainTrust
Dick Seesel
Principal, Retailing In Focus LLC
Steve Montgomery
President, b2b Solutions, LLC
The most interesting question is, will the technology work? Will customers have bills that are 99.9 percent accurate? If they do then Amazon has redefined convenience and small grocery stores, particularly for Millennials.
Absolutely. Anybody who has stood behind people in a checkout line or experienced self-checkout will welcome the true, technology-enabled checkout. I look forward to seeing lots of this at NRF. The pinch point is product labeling but RFID-printable inks are moving forward quickly and cost-effectively. Self checkout respects consumers’ time.
Amazon has redefined convenience in every category they have entered (starting with their original business of shipping books). The company has raised customers’ expectations for speedy execution and has raised the bar for all of its competitors at the same time. Whether Amazon Go works or not is almost beside the point, because the company can afford to fail — but Amazon appears committed to bringing its vaunted tech-driven efficiency to brick-and-mortar retail models that haven’t advanced much beyond the UPC code. (If Amazon Go works … watch out!)
Amazon has a habit of announcing technology and services sometimes long before they’re actually delivered. They do a really nice job of creating a buzz within the marketplace and showing investors they’re still innovating all at the same time.
Will the brick-and-mortar shopper settle for virtual purchases? That’s the key question. A novel idea that won’t work. Shoppers will buy stuff on Amazon and wait for shipment. But they certainly won’t travel to a store and settle for anything less than immediate gratification. If Amazon can deliver it before they get home … well, it’s a winner.
For the incredibly tech-aware it looks perfect as they understand everything quickly. The devil is in the details with more SKUs and payment options for wide-scale adoption. Clearly once retail innovators experience it they will bring elements to more retailers quicker, but I doubt publicly using Amazon’s branded technology.
Much of the technology they are using is already in place with many retailers — especially the shelf technology. All they are doing is installing a larger version of self-checkout deeper in the store space. Millennials will love it for a few months and then hop back to stores where the assortment is broader. I estimate that this is a no-margin or negative-margin marketing gig for Amazon. For sure not a threat for the retail norms.
Most interesting? How long can Amazon survive in their style — negative-margin stores?
As long as they can grow by 30 percent each year. 🙂
Absolutely. Many of Amazon’s endeavors start out at a loss so that they can gain control of that market in the long run. For example, Amazon originally sold Kindles at a loss to gain control of the e-book market. And it worked. Not sure if Amazon Go is operating at a loss or not, but we can bet that there is a long-term plan behind it.
Always remember Jeff Bezos’ Golden Rule: Automate every possible process — invest expensive human capital in only the most complex tasks. And remember the implied “Rule #2” of the Amazon business model — only seek profitability after superior consumer experience yields scale. With the resources at his disposal and the discipline with which he marshals them, I never count Bezos out.
I think that Amazon Go is no less than a game-changer for the entire retail industry, well beyond the FMCG sector.
Avoiding checkout lines without inconvenient and error-prone usage of handheld scanners is likely to be a welcome improvement in the eyes of shoppers and retailers alike. The technology is proprietary and non-trivial to implement, putting competitors far behind Amazon.
Last month, Amazon opened a football field-sized showroom in central Beijing that allows Chinese customers to order items online by scanning bar codes with their phones. No in-store inventory. I expect that the next step by Amazon would be opening a similar department store-like concept in the U.S.
Well done! I think that the industry needs THAT kind of vision.
This is what the future of convenience/self-serve retailing looks like. Transaction friction caused by long checkout lines or malfunctioning self-checkout technology is the bane of shoppers – Amazon Go has the potential to truly solve this problem. However, like all technology, there are concerns. Beyond the list of good questions listed I would add, how accurate is the technology? No data capture system is perfect, so understanding accuracy is important. Also, what does it cost to deploy and maintain this technology? And finally, how secure is it — can the system be hacked or subverted? While many questions will be raised, I believe the benefits to consumers of a system like this will far outweigh risks.
Amazon Go’s technology is brilliant PR. Reading the headlines, it has masked the far more substantive story — that Amazon is doubling down on physical retail. Clearly, Amazon is envisioning more of a physical store future than expected between Amazon Go and the bookstores I nicknamed “Barnes & Amazon” after visiting the one they opened near me.
The technology is certainly interesting. Time will tell whether it’s as big a deal as they want us to believe. I simply recommend a watch and wait approach on the technology — but pay attention to Amazon’s need for physical retail.
Let’s face it. Amazon Go will quickly migrate from fresh food to any and all retail goods (CPG, electronics, fashion, furniture, you name it). It introduces many paradigm shifts that retailers will all need to jump on fast.
Amazon Go is based on technology to make it work. No doubt we will see RFID and other IoT technologies helping retailers mimic Amazon’s capabilities. Beyond that we also need to start thinking about retail technology that acts as a centralized system of record for the customer, tracking purchases, orders (when they don’t pickup in person), likelihood of returning items, etc.
Do you see the end of loyalty cards and apps? For premium customers, might the system flag other items of interest? Are we one step closer to the retail and marketing world of Minority Report? Exciting times!
Not to be too grinchy here, but am I the only one who notices that Amazon makes provocative announcements during the holiday seasons (that ultimately never happen)? Great free PR. One year it was drones on 60 Minutes, one year the company took a storefront on 34th Street in Manhattan and did nothing with it after we all discussed it for weeks.
So I’m calling “baloney!” We’ve given too much free press to too many.
Great reminder Paula!
The drones aren’t dead, Paula.
Retail is a consignment business! Amazon Go IS the future (the very near future) of brick-and-mortar retail. Full stop! The technology exists today to implement this workflow. I have been working with a technology and business process startup that has developed an in-store merchandising solution that enables a brand (and retailer) to conduct a consignment business with 100 percent accuracy and transparency.
In order for the physical store to remain relevant, the store needs to consistently and regularly feature new products that are being introduced by many new, small companies. The only way to make this feasible is to present these options to shoppers through a consignment arrangement. It’s good for both the retailer (real estate) and the brand (access to an audience). This approach also addresses all of the costs and challenges with inventory and supply chain management. Most retailers expect the brands to police this themselves anyway.
This is simply another extension of Amazon’s customer-serving/delivery options. At the end of the day, Amazon is a fine-tuned distribution company, constantly experimenting with new delivery methods. Amazon Go is the Uber equivalent for food retail shopping. Obviously, all food retailing channels need to take notice, including the c-store channel whose hold on convenience shopping is being challenged.
“All supermarkets are just C-stores, with big long floppy tails!”
This made the news this morning and my wife reacted positively. “Positively” is an understatement. If this works, she is in. Her words, “I hate standing on the checkout line and I hate checking out. I have more important things to do.”
This is one of those technologies that if we can do it, why wouldn’t we? With the caveat of it being as accurate as a human checker, it is a “no-brainer.”
I believe that Amazon Go shows the company’s commitment to reinventing physical retail in categories like grocery where the potential of pure-play e-commerce is limited. While some in the industry saw the potential for app-enabled shopping several years ago, Amazon actually put in the four years of work to bring the concept to life.
Amazon Go is a great example of what CX professionals call an “effortless experience” and now that Amazon has once again claimed first-mover advantage, other retail executives should look in the mirror and ask themselves what they have been doing for the last four years.
Here’s a link to the blog posted this morning that expands on my comments.
Martin … great point on CX! This concept is the epitome of what we call “the frictionless and seamless” customer experience.
We did a checkout study and reviewed this exact scenario with over 1600 consumers across the U.S. and it ranked very high, especially among young people. However older customers, Boomers in particular, were not so keen on the idea.
So if you’re Target or Walmart, you better go slow in this neighborhood. But if you’re Apple or Urban Brands, test it now.
There are more than 150,000 convenience stores in the U.S. today. For Amazon stores to make any significant change in the c-store landscape would require a larger store format with a broader selection, an extremely sizable investment and a long time.
The largest impact on c-store or any retail Amazon (or someone else) can have is if they prove out the technology. This is dependent on many factors one of which is, how do you prevent shoplifting? I am sure the manufacturers of POS systems will watch this test very carefully.
All these questions are interesting but the most strategic and impactful of these is around speed: both around Amazon’s ability to ramp up the concept and for rivals’ ability to catch up.
I view the Amazon Go concept as a logical and predictable extension of Amazon’s disruptive strategy. The company has consistently looked for ways to eliminate friction and non-value adding processes in retail, and from a consumer perspective the biggest bugaboo in grocery shopping is the checkout line — so off it goes.
By investing in technology not only as a means to drive speed and efficiencies but to truly re-imagine and redefine the customer experience, Amazon dares to consider what others would be unwilling to consider or would be ridiculed for suggesting. For those reasons, I expect Amazon to go pedal-to-the-metal on ramping up the concept in a green field operation while legacy grocery operators work to introduce new ideas in existing brown field stores.
Amazon is a risk-taking, market-share devouring technology company at its core with an obsessive focus on delivering differentiated experiences to their customers. With their irreverence to legacy processes and conventions, Amazon is disrupting retail by completely redefining the competitive elements in the industry. They are changing the game and the rules of the game simultaneously.
Amazon has always raised the bar in terms of satisfying customers. The trust consumers feel with the Amazon brand is practically unrivaled. What rivals already have that Amazon does not is the store operation experience; some have already begun using stores as a fulfillment network. When Amazon innovated with its marketplace model, virtually no competitors followed. Now Amazon is a Goliath. Walmart has finally launched its marketplace and put real effort behind the strategy — and it paid off over the Black Friday/Cyber Monday period. What rivals should do is address this Amazon threat early.
I am not saying this as a prediction, I am saying this as a statement. This technology is a major game-changer and it is going to be a major disruption in a lot of industry besides those that hire a lot of hourly employees. How fast it is implemented will be determined by the cost compared to the labor savings and side benefits of inventory control and the reduction of theft.
One-click to no click — purely friction-less.
If it works, it’s breakthrough technology and will revolutionize self checkout. I assume Amazon would use the labor savings to keep prices in check or apply it to the loss from a tech failure.
This is a no brainer for convenience stores or retailers with a limited number of SKUs. I don’t see this exact format working in a conventional supermarket or a retail store with multiple departments or thousands of SKUs. This is working in a controlled experiment, but how do you balance shoppers who don’t want this approach or want specialized items like lottery tickets? Do you send them to the competition?
I believe that someone will work out the details that would allow a shopper to carry bags to fill in larger formats as they shop, but someone smarter than me has that answer.
Groceries, because of traffic, drove Walmart to the #1 global retailing business. Many things that Amazon does in bricks, other bricks retailers think, “Oh, we can do that — if we want to.” But aside from the fact that Amazon is increasingly the CLEAR LEADER in bricks retail (not volume, but concept, which will drive volume later,) Amazon is already NOW the driver of retail innovation.
Our merchant warehouseman bricks retailers would require brain transplants to even pretend to compete with the coming onslaught from Amazon. Amazon sells ITEMS to individual shoppers, while the merchant warehouseman makes CATEGORIES available to the unpaid stock-pickers (AKA shoppers).
Notice also that Amazon will deploy tablets on the shelves, extending the long tail of the store indefinitely, without adding footage/inventory to the store.
The last time we had a disaster/opportunity of this magnitude was 100 years ago, when the US went from a half-million stores to something like 50,000. Joseph Schumpeter described it as creative destruction. Sounds about right as a description of what is going on today.
Would be interesting to see the billing accuracy rate for the customer and also the amount of shrink. I am assuming the basket size is rather small, but it is a limited assortment store. I can’t tell if this is basically a food service only C-store, which would make sense since it isn’t something you would order online and delivered. We will need more information, especially on how well it handles high shrink items like pharma.
There are three questions that were stimulated by Amazon Go: 1) Will consumers find this appealing? ABSOLUTELY. As previously stated, waiting in line to have the items scanned or doing it yourself and bagging items seems very archaic. 2) How will the workforce be affected? Honestly, the minimum wage increase is more of a threat and it may permit new skills to be developed such as at-shelf execution, in-store sampling, etc. 3) Will others follow suit? Not immediately — until such a time the acceptance is proven and the accuracy of prices (and risk of pilferage) have been overcome. But, eventually, it makes all the sense in the world.
The checkout, especially at the grocery store, is one of the biggest friction points to remove from the purchase process — so kudos to Amazon for freeing up 20 minutes of my Wednesday evenings and Saturdays. That said, I suspect it is one of many tactics on the slippery slope of convenience over price. Removing the checkout, removes the check & balance of “Wait, HOW much does that cost?” Great for retailers, not so good for shoppers on a budget. As retail winners already know, we’re quickly moving to a world beyond price, even in an era of unprecedented price transparency.
If the technology works as well as their promotional video suggests, I think this will be a game changer for the entire retail industry. There have been other attempts to allow customers to scan their items with their cell phone, and then have them charged directly to their account. However, those earlier attempts did not provide enough protection to the retailer against the potential for shoplifting. This technology seems to provide that protection to the retailer, while offering greater convenience to the consumer. Like others who have commented in this thread, the accuracy and efficiency of the technology will determine the ultimate success.
Hold onto your hat. Amazon Go is as profound as the first Wriggly gum scan. Let’s see, password protected personal bar code, item pick and scan (been doing this in warehouses for years, Stop & Shop as offered pick and scan for years) and scan your personal bar code on the way out or time out shopping to identify the end point. Link item RFID chip and you have security not being employed with shelf scan. Clean up a few areas and you have the Generation Y preferred shopping method. The only drawback is not everyone has a smart phone so they will not be target customers.
If I were Mastercard or Visa, this is the service I would provide retailers. This creates the true digital wallet in a smart phone. The firm that provides a complete solution will win the transaction challenge among Mastercard, Visa, Apple Pay, Samsung Pay, Discover, American Express and PayPal. Retailers have pricing systems, so all they have to do is provide a link to the software which can be varied by store. The road map has been drawn; from here on it will be only be winners and losers.
AmazonGo is aptly named — they’re helping shoppers “go” forward. Payment and the checkout process certainly have the most friction involved as far as most shoppers are concerned. Amazon has tackled this head-on with a maximum of automation and made mobile the customer-facing component. Unlike other mobile technologies searching for a problem to solve for shoppers (e.g. beacons) this is sure to be very well received. Even the less tech savvy need nothing more complex than downloading an app and launching it when they walk in the store. This is about as convenient as ordering products with Alexa via an Echo, but in-store. I don’t think there is any question consumers will flock to it. I expect we’ll see and hear much about this at NRF next month — and perhaps that is what Amazon’s real plan has been all along. They’ve succeeded at creating so much buzz we can’t help to talk about it.
The real question will be (once the store opens) how accurate is this system and will they make money with it or operate at a loss? We’ve seen examples of similar high-tech approaches to retail and shopping — remember Hointer? Other retailers who tried to adopt some of their tech were not successful, although arguably because they chose to implement pieces of the solution vs the whole. Speaking of Hointer — has anyone noticed they are promoting a similar approach to grocery stores both in the US and the UK?
AmazonGo is just the latest iteration of bringing Internet convenience (eshopping) to the C-store channel, but it doesn’t address the reason for C-stores … location! People want their Big Gulp or their cigarettes now, and it is the location which makes this a reality.
This is another very cool concept, but I have some questions. Watching the video made it seem so easy, and if you change your mind and do not put the item back exactly where it should be, than you will be charged for it. What about those pesky hackers, who will find a way to get you into the store, and with a push of the button, they walk out with a ton of stuff for free, as they figured out how to bypass the checkout on their phone? Maybe I’m wrong, but I see this happening more frequently with technology, and hopefully Amazon has a very secure system to prevent this.
One more thing … what about pricing of the food? Is it going to be on the Whole Foods level, or more in line with conventional supermarket pricing, as yes, price is still a factor, if you want repeat sales for most folks. If in fact the pricing is higher, it had better be super fresh and delicious, or risk a one and done. I’m sure these stores will all be in high income areas, and they will be well received.
All we need is a replicator from Star Trek, and we’ll never have to leave the house.
AmazonGo is nothing less than a game changer. Not because of the reduction of friction at the checkout. That is awesome and one of the reasons consumers will try it, sign in to the app (see Uber) and come back. It’s sort of a red herring.
The game changing and far reaching implications are in this statement: “computer vision, deep learning algorithms and sensor fusion.” This is not one functional technology, it is a combination working in concert to get Amazon what they want: more data on physical spending behavior. Information they don’t have about us.
Think about the possibilities of physical stores being as aware as websites. That web-like data is enormously valuable and Amazon is far ahead of the game.
Don’t fool yourself into thinking this is subject to the rules of retail as we know it and don’t think for a minute that this isn’t going to be rolled out. The logistics, margins and operational issues will all be worked out and when they strike on the the right combination of product, location and tech, you’ll see these scale fast and show up in all the right places.
Then Amazon can really start honing the offer to the store and its customers and wallow in all the data that goes along with it.
I find it interesting that we must hear about this concept from Amazon themselves. Really, there have been 0 other retailers to imagine this concept, test it and deliver press on it? To me, this is one of the newest initiatives for our own Epic Commerce platform. With the advent of RFID and geolocation consumers will come to expect product to be shopped, added to a physical cart, as well as their digital cart, and finally where consumers simply walk out with their products, and get charged directly for them upon leaving the store. RFID labels and smart sensors are becoming competitive on cost, and the efficiency/accuracy could be higher than with store clerks who cost a fortune. This will not happen with most retailers because they view this as showrooming, though this is the anti-showrooming equivalent. I’m guessing in 5 years this will easily be the preferred method to shop with stores acting as a self-serve market of products.
It’s sickening that Amazon gets the credit for inventing this. What are all the other retailers doing?
The biggest question regarding AmazonGo isn’t whether or not it will succeed, but what will be the long-term impact on retail? It will certainly affect the digital shopper journey and path to purchase for more traditional retailers. Shoppers will now expect this type of seamless customer experience everywhere they go. Retailers will have to rapidly build and deploy technology like never before. Cloud, predictive analytics, and machine learning will all have to play a part in automating decisions, systems, and processes at retail. This disruption will force every retailer to reconsider their customer engagement strategies for fear of being left behind and shoppers abandoning their brands that have this level of digitally enabled stores.
The question is not whether AmazonGo will succeed. It already has.
It has woken up retailers that might not be as mature in their investment in digitally empowered shopping experiences to get moving.