Is Amazon Go heading for a hard stop?

Discussion
Photo: Getty Images/Seastock
Sep 12, 2019
Matthew Stern

From the public relations push that followed the 2018 launch of Amazon Go, one might have surmised that it was only a matter of time until Just Walk Out technology supplanted all other forms of checkout in brick-and-mortar retail. This impression was bolstered by a report later that year that Amazon.com wanted to have some 3,000 Go stores in operation by 2021. A recent report indicates, however, that Amazon Go’s footprint is not expanding at anywhere near the pace once anticipated.

Amazon had planned to open 56 Go locations by the end of 2019 and 156 by the end of 2020, according to a story originally broken by The Information and discussed on The Verge. Amazon has in fact opened only 15 Go stores, all located in major metropolitan areas.

The apparent slowdown in expansion could be the result of numerous factors such as, among other possibilities, the cost of deployment, difficulty scaling the technology to handle more foot traffic and larger locations or concerns about low rates of shopper adoption outside of city centers.

Other retailers beyond Amazon may share concerns about the feasibility of deploying the technology at scale. There has been a wave of experimentation in Just Walk Out technology since the e-tailing giant announced its checkout-free concept. Some grocers and convenience stores have partnered with tech vendors to roll out similar solutions, while some vendors have launched their own standalone brick-and-mortar locations to compete directly with Amazon Go.

Further, speculation that Amazon’s Just Walk Out technology would eventually end up in Whole Foods has not yet come to fruition. This despite Amazon attempting to make Just Walk Out technology work in larger physical locations in Seattle, according to The Wall Street Journal. 

Amazon, meanwhile, has been piloting new enhanced checkout solutions in Whole Foods based on biometric data — computer vision-enabled scans of customers’ hands — rather than Just Walk Out technology.

DISCUSSION QUESTIONS: To what factor or factors do you attribute the slower-than-expected expansion of Amazon Go? What might this say about the feasibility of Just Walk Out technology at scale?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"While cost and complexity play a part, I think the factor that matters most is Amazon is disrupting a retail process that dates back to the beginning of documented human time."
"Most likely the cost to deploy hardened systems in diverse locations is a big factor in a slow if not soon to be abandoned rollout."
"I’ll echo the others and add another thought. It’s impersonal. Walking in, taking things and walking out seems furtive and odd."

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21 Comments on "Is Amazon Go heading for a hard stop?"


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Mark Ryski
BrainTrust

The key factor is the amount and cost of technology required to deliver the Just Walk Out experience. As noted when the first Amazon Go store launched – it required hundreds of sensors and cameras to support. It was in essence, a supercomputer disguised as a convenience store. The capital requirement to not only build out but also to maintain a store with this amount of complex technology is prohibitive for most retailers — maybe even for Amazon too. I do believe there is a future for Just Walk Out as a service option for some types of retailers – but the technology will need to become much more affordable and reliable before it happens.

Bob Amster
BrainTrust

Yes, folks, let us not forget that anything you install has to be maintained. This set-up has many parts that can break and have to be repaired immediately in order for the system to work as advertised.

Paula Rosenblum
BrainTrust

I never thought Amazon Go was going anywhere. It’s too expensive, too complicated, doesn’t satisfy the desire for “frictionless” in-store experience and, most importantly, is way too hard to maintain on a day-to-day basis.

Anyone who has ever managed POS systems knows how hard it is to get someone in a store to troubleshoot a POS problem. Expecting them to care for and feed all the tech required for Amazon Go was always a fool’s errand.

Bob Amster
BrainTrust

Echo Mark. It is the cost of equipment and deployment, combined with the possible factor that the technology, as designed today, does not work well enough to commit 56 stores to it. Maybe Amazon is finding and trying to fix the hurdles, and taking its time to do to right (if it is, in fact, doable).

David Naumann
BrainTrust

I have always been skeptical since Amazon’s announcement of plans for 3,000 Amazon Go stores by 2021. The cost to equip the stores has to far outweigh the cost savings of reduced staff. They still need staff to stock shelves and keep the store clean and orderly.

In the near-term, I think the model of customers’ mobile self-scan, pay and go is the most realistic strategy.

Dick Seesel
BrainTrust

I think Amazon has the patience and deep pockets needed to address the tech challenges that Mark Ryski mentions. The bigger challenge may be the “early adoption” question: Are there enough shoppers willing to install the app on their phones, and willing to accept the entire concept? Most people’s instinct is to pay for something (even at self-checkout) before walking out of a store, so this may be a tough concept for shoppers to grasp.

Jeff Sward
BrainTrust

The article mentions “a wave if experimentation” in this technology since the announcement. Why rush if there might a new breakthrough in this new shopping paradigm? And it sounds like there very well may be. Amazon may be taking their foot off the gas pedal just to be students of the competition. Or they themselves have a new gizmo in the works. Amazon is already first. They just don’t want to get ahead of themselves. Sometimes cautious is smart.

Cathy Hotka
BrainTrust

I’ll echo the others and add another thought. It’s impersonal. Walking in, taking things and walking out seems furtive and odd. Clearly Amazon hasn’t experienced the volume of sales necessary to keep this experiment afloat.

Neil Saunders
BrainTrust

There are three main barriers to expansion. First, the cost of the set-up which is expensive. Second, the cost of the locations – which, as most of these stores are in high-profile urban areas, is also expensive. Third, the highly competitive grocery market which makes gaining sales and share difficult. When you put those three things together you get very weak return on investment. On top of this, I think Amazon has more work to do in terms of the proposition of the stores.

However, I still believe that Amazon is on to something with this technology. Reducing friction at the checkout and reducing the cost and space devoted to registers is smart and over the long term something more grocers will try and move towards.

John Karolefski
BrainTrust

There are several factors: It’s too expensive, there is a lack of shopper interest/enthusiasm, and it is inappropriate for very large baskets.

Bethany Allee
BrainTrust

While cost and complexity play a part, I think the factor that matters most is Amazon is disrupting a retail process that dates back to the beginning of documented human time. It took Uber a solid six years before they gained traction nationwide, and there are still areas where there is no Uber service — and we’ve been using taxis for less than century. People have connected with other people to transact and trade for much longer. And while it’s technically the same process, it looks and feels different. Walking into a store, taking items, and not having the feeling of paying for those items is an unnatural feeling. Disruptive change like Just Walk Out technology takes time.

Ken Lonyai
BrainTrust

Most likely the cost to deploy hardened systems in diverse locations is a big factor in a slow if not soon to be abandoned rollout. Breakage, downtime, and troubleshooting means a skilled support team needs to be on call and ready to travel at a moments notice, or expensive teams will need to be deployed in every market.

Additionally, like I’ve stated many times, these systems are not hard to subvert intentionally or accidentally, so undoubtedly there is a sizeable profit-eating shrinkage problem.

All in all, pick and go systems are cool tech, but not necessarily business savvy, save for one factor: here again, we’re focusing on Amazon, giving them ink and … nervous competitors may be following them down the rabbit hole in an Amazon subterfuge strategy.

David Dorf
BrainTrust

In China, i-Store and Buy-and-Go stores, which are very similar to Amazon Go stores, are closing. And their technology is much less expensive than Amazon’s. I’m guessing this format is not as profitable as they had hoped.

Andrew Blatherwick
BrainTrust
RFID has been around for a long time. It was going to be THE game changer in retail technology but has still not become commercially viable and practical even though recent advances in tag reading technology are very effective. The problem is that the number of customer and product movements is very large and fast moving in grocery and related channels. Is it worth the massive investment in development? Would the technology transform customers’ satisfaction and change their allegiance to a retail brand or do customers enjoy some form of contact in-store? Self-service checkouts have proved popular in smaller stores and even for smaller baskets in larger stores but have not replaced the checkout. RFID will move this process forward once the cost of tags enables their use in lower price grocery items but where next? I recently used a self-checkout at my local grocery store only to find it still open from the last customer. The retail assistant simply said “oh that’s another one who has walked off without paying.” I for one am… Read more »
RICHARD HERNANDEZ
Guest
Andrew, you are right on the money. I remember some years back reading an article of a foreign chain (non-U.S.) that was testing a scan unit where all products had RFID tags and all you had to do was to put the entire basket in the scan chamber and the system would scan each item and come up with a total for the basket. I thought that was pretty cool technology but then I never heard anything again about it. There is a labor component to consider, RFID adoption by vendors, and tech investment (both hardware and software). RFID is still a viable option but how long until there is sufficient traction for it to make a noticeable difference? By the way, most self-checkouts I have seen have a overseer that has a screen where they can see all the terminals at the same time. I am guessing that this was something the store at which you did self-checkout did not have? If that is the case, that might explain why several chains have removed… Read more »
Kai Clarke
BrainTrust

Yes. We are not ready for this technology at retail, and there really isn’t a need for this solution. This is the classic “solution looking for a problem.” It is not a big deal to walk through a self-check area and spend a few minutes more concluding your shopping experience. This minimizes costs compared to the Amazon Go technology — it reduces overall costs at store level, keeps product prices lower, and can still enhance the customer experience.

Rich Duprey
Guest

There is also the groundswell of opposition by local and state governments to cash-less stores which contends that going cash-less discriminates against the poor and unbanked. New Jersey and Philadelphia passed laws banning most cash-less stores, joining Massachusetts in limiting their proliferation. Other states and localities are also exploring prohibitions.

So beyond the daunting technological and financial requirements of a Go store, you have Luddites in government standing athwart innovation.

Steve Montgomery
BrainTrust

I echo everyone’s sentiments regarding the cost of the locations, the technology and its maintenance. Another limiting factor is that you still need to have a way to handle age restricted sales, whether it be nicotine delivery systems or alcoholic beverages. These two categories still account for a significant portion of convenience retailer sales.

Karl Haller
Guest

Technology and entrenched consumer behavior are both barriers in the next 1-3 years, but both will be overcome. I actually think the store concept itself is flawed, and needs to be split into:

  • Grab and go food (and drinks) – a la Pret A Manger
  • Small format grocery – a la Trader Joe’s
  • C-Store/G-Store

And each one needs to be merchandised for those specific consumers/journeys. Right now, it’s too much of a hybrid. But who wouldn’t love to have a Trader Joe’s where you could “Just Walk Out”?

Craig Sundstrom
Guest

I think it’s telling that of the first four words Matt’s post, two are “public relations”: as is often the case with Amazon, whether a given project succeeds or not is often almost incidental … the publicity gained is — as an ad once said — “priceless.”

Manish Chowdhary
Guest

Honestly, I think the biggest thing is that they don’t really incentivize customers to try the store as much as typical Amazon launches. Like offering free 2-day prime shipping is a huge incentive for customers to abandon their offline stores AND other online stores that charge for shipping. If they want to create a big buzz and bolster the number of users to get people used to the concept, they should do major discounts on popular items. This might be an unpopular opinion, but isn’t that what unicorn hopefuls are doing?

wpDiscuz
Braintrust
"While cost and complexity play a part, I think the factor that matters most is Amazon is disrupting a retail process that dates back to the beginning of documented human time."
"Most likely the cost to deploy hardened systems in diverse locations is a big factor in a slow if not soon to be abandoned rollout."
"I’ll echo the others and add another thought. It’s impersonal. Walking in, taking things and walking out seems furtive and odd."

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