What would 3,000 AmazonGo stores do to the U.S. retail landscape?

Discussion
Photo: Getty Images
Sep 20, 2018
George Anderson

Amazon.com has taken a slow and steady approach to rolling out its AmazonGo cashier-less stores since opening the first location in Seattle back in January. That may soon change, however, if Amazon CEO Jeff Bezos gives the go-ahead to a plan to open 3,000 Go locations by 2021, according to sources familiar with the situation that spoke with Bloomberg.

Mr. Bezos believes that AmazonGo can be the brick and mortar answer to end “meal-time logjams” in cities across the country, according to Bloomberg’s reporting. Rapid expansion of the concept seems both implausible and obtainable at the same time considering Amazon is behind it.

Amazon conducted nearly 14 months of live testing with its own employees before opening its first cashier-less store in Seattle to the public earlier this. Since then it has opened two additional Go stores in Seattle, along with another this week in Chicago. Additional locations are in the works for New York and San Francisco with Amazon looking to have 10 stores operating by the end of the year. Amazon has set a target of having 50 stores operating in major metropolitan areas by the end of 2019.

The concept continues to be a work in progress. Amazon is deciding whether Go locations will work better as places where consumers go to pick up salads, sandwiches and snacks for quick meals or if they should be more akin to convenience stores that offer prepared foods along with small grocery sections.

While AmazonGo stores are small — typically only a couple thousand square feet — the cost of opening each location is relatively high because of the technology required to make the cashier-less concept work.  Narrowing the concept to just grab and go meal options, for example, could help reduce operating costs as would concentrating a number of stores in an area, served by central commissaries and/or distribution centers.

As has been the case in the past with Amazon’s Whole Foods and PillPack acquisitions, retail rivals saw their share prices drop after Bloomberg’s reporting went public. CVS, Kroger, Target, Walgreens and Walmart all moved lower on the news Amazon was considering a major ramp up of Go.

Amazon refused to comment on the report.

DISCUSSION QUESTIONS: What do you see as the biggest challenges facing Amazon and its competitors if Bloomberg’s reporting proves true?  Do you expect AmazonGo to develop as a grab and go meal concept or more similar to traditional convenience stores?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"I have looked at this concept six ways from Sunday and I STILL don't see how it even breaks even, what to speak of increasing the bottom line."
"If the dinner “logjam” fix is 3,000 Amazon Go outlets, kudos too Bezos for being big and bold enough to go after it!"
"Huh? There’s nothing that indicates so glorious a value as “ending meal-time logjams” or even what those are."

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33 Comments on "What would 3,000 AmazonGo stores do to the U.S. retail landscape?"


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Brandon Rael
BrainTrust

It could be more fuel for Amazon’s publicity, but these sound like extremely ambitious and aggressive plans by the e-commerce giant. Amazon Go has experienced plenty of mentions and started many discussions and debates about the future of retail. Yet I believe this only applies to the grab and go segment. If the rumors are true then expect plenty of disruption in the convenience segment.

There’s plenty of room for experiential retail, especially in segments where consumers appreciate a story, outstanding customer experiences and a place to connect with their community. Convenience, automation and efficiencies have their place. Yet we the public will always aspire to be entertained and appreciated.

Mark Ryski
BrainTrust

About a year ago, I wrote an article called “Amazon Go a No-go for most retailers.” My primary concern about Amazon Go was the cost and complexity of the technology required to make the Go store work. My position hasn’t changed — Amazon Go-esque stores are still a bridge too far for most retailers based on currently available technology. However, Amazon announcing plans for 3,000 Amazon Go stores is remarkable. If they actually do rollout 3,000 it would be one of the largest retail rollouts ever — it would also send a clear message to the 7-Eleven and other similar convenience/grocery players: Amazon is very serious about disrupting your category.

Implementing Amazon Go across 3,000 stores would be a huge challenge for anyone, including Amazon. But with a $1 trillion market cap and the the desire/vision of Bezos, anything is possible.

Art Suriano
BrainTrust

First what I find interesting is with all the buzz about how retail brick-and-mortar stores are doomed because it’s all e-commerce, here is yet another e-commerce company continuing to open more stores. Stores are here to stay and, although they’re going through many changes, it is clear that brick-and-mortar is far from doomed. Concerning Amazon Go, I would caution Amazon not to move too quickly. The Amazon Go concept has potential but when relying so much on technology too much can go wrong because we are still very much in the development stage. Moreover, if Amazon admittedly isn’t sure themselves about their concept as to what will be successful, then all the more reason they should open stores slowly and test their ideas before opening many new locations. Lastly, Amazon Go will find heavy competition especially if they make their stores more of a c-store business, so it’s imperative Amazon provide a clear vision of their brand and provide customers something that is different and worth their time shopping.

Neil Saunders
BrainTrust

With a few exceptions, convenience retail is not done well in the U.S. — especially in urban areas. I think there is an opportunity for any player to make more of an impact here. That includes Amazon which, because of its technology, has a model that could prove to be more disruptive than a traditional player making a move on the market.

I see this as a threat to both convenience retail players like 7-Eleven and the drugstores. It is also something of a threat to outlets like Pret a Manger — although because consumers tend to vary their lunchtime purchases, there is less scope to become a dominant force in this part of the market.

The challenge for Amazon will be securing all of the sites and rolling out the technology. Three-thousand stores (which seems like a number grabbed out of thin air) will be a tall order. However, numbers aside, there’s no doubt that Amazon is going to grow this and it will have an impact.

Dr. Stephen Needel
BrainTrust

Curating content and keeping food fresh is probably their biggest challenge. As to who is affected, probably not the usual store – maybe restaurants/small mom and pops that serve food. As the article says, this is a work in progress, which is Amazon code for we don’t know what we’re doing but we’re trying to get there.

Dave Bruno
BrainTrust

I just don’t think Amazon’s camera-driven model is scalable. The immense infrastructure and technology costs make me wonder if the model can profitably scale to 100 stores, let alone 3,000. We are working with partners who are exploring other ways to minimize friction (and cashiers, when appropriate) that require far less infrastructure than the Amazon Go stores. I think RFID, in particular, has great potential to supersede Amazon’s camera-heavy model as a much more cost-efficient, repeatable and scalable path to frictionless checkout.

Paula Rosenblum
BrainTrust

I have looked at this concept six ways from Sunday, and I STILL don’t see how it even breaks even, what to speak of increasing the bottom line. It’s not like you have 40 people manning a c-store in the first place, more like one, maybe two. So one of them has to become technically proficient enough to fix the stuff, and then be really good at shrugging their shoulders when company management comes to them and says “Our shrink is through the roof.”

Let Amazon do it. It still doesn’t do a thing for me, either as a consumer, a former practitioner or a current tech analyst. As Mark said below, it’s a “no-go.”

Now, having said that, the way Bezos controls the media is masterful. We aren’t talking about Bernie Sanders’ BEZOS bill anymore, are we?

Rich Kizer
BrainTrust

Paula, your comments are interesting. We will be visiting the Amazon stores in Seattle this coming month, and will be asking questions. Will let you know what type of operational magic Bezos will create (and I believe he will!).

Lee Kent
BrainTrust

Yes, Paula, I share your thoughts on this one. Not only will they need to have staff on hand for their cashier-less operation, the staff will have to be highly qualified which means more bucks. Unless they can figure out how to reduce the technology while improve efficiency, this sounds cost prohibitive to me. For my 2 cents.

Kai Clarke
BrainTrust

Technology and the acceptance of this technology at a reasonable price will be one of the key hurdles for Amazon in its cashierless Amazon Go stores. One of the keys will be getting the stores’ format correct. Sticking to just food puts Amazon in an odd space, since even Starbucks offers some products in addition to food. Otherwise Amazon Go competes with McDonald’s, Taco Bell and other food-only QSRs that have a key brand and food focus (i.e. burgers, tacos, etc.) which Amazon Go does not. Amazon would be better served to roll this concept out as a convenience store model with limited products and key focus on a limited selection of categories. Less is more, especially once the “cool” technology appeal wears off.

Lauren Goldberg
BrainTrust

After spending a few years in the convenience sector, food service has been a significant part of the mix, but the quality needs to be there. Think Wawa vs. 7-Eleven. To focus on just grab and go consumables, the quality needs to be stellar. However, one of the largest drivers in the convenience channel is fuel and that should offer a layer of protection for many players — until Amazon considers entry there. This is an industry that is ripe for innovation. The best part of Amazon entering (or even considering entering) a market, is that it forces existing players to step up their games. In that case, the customer ultimately wins.

Ron Margulis
BrainTrust

The key for Amazon Go will be pricing. Sure, convenience and the newness of the concept will get shoppers in the doors, as will a decent assortment. But only good pricing will keep them coming back. When I was in the Amazon Go store in Seattle a few months ago, I wasn’t all that impressed with the pricing. Beverages seemed well above average and even the sandwiches and salads were higher than similar retail outlets. Of course you pay for convenience. But not too much.

Ricardo Belmar
BrainTrust
The biggest challenge for retail competitors is what we saw in the market yesterday — panicked investors causing the value of Amazon competitors to drop based simply on rumors. I don’t believe this Amazon Go-esque technology is viable for most retailers given the high cost to implement. I’m also not sure shoppers want this type of cashierless experience across all retail segments. It makes the most sense in the convenience store space and variations of that as discussed in the article with a focus on grab and go meals vs. full c-store format. Apart from that, grocery seems to me to be the next logical fit but I am not sure this is proven technology in a larger format store like most grocers are. Regarding the VERY aggressive rollout, while Amazon may have the wherewithal and resources to pull it off, this is completely new territory for them to build out thousands of stores in such a short time. If they intend to have 50 stores by 2019, that leaves them two years to open… Read more »
Jeff Sward
Guest

So we know the “how” — cashierless. Got it. Now let’s hear more about the “what.” What product categories? And then who is really more at risk, Target or 7-Eleven? The nearest CVS or grocery store? Amazon is now competing in the brick-and-mortar world. Target is a formidable competitor here. It’s great that Amazon is raising the competitive bar — again. But the outcome here is not a foregone conclusion.

Rich Kizer
BrainTrust

I read that Jeff Bezos once said that nothing is an experiment when everyone knows how it will work out. The big challenges for the lofty goal of 3,000 stores is certainly real estate and, secondly and I think most importantly, customizing the stores to local markets. No cookie cutters here! With the “customized by location” stores, I believe they will be positioned as convenience concept stores with every opportunity of grab and go implemented. Three-thousand stores? That is a lofty goal that I think is extremely difficult but, again, we’re talking about Amazon — and Jeff Bezos!

Bob Phibbs
BrainTrust

This just reeks of a PR machine. How in the world would 3,000 stores make them money with all the upkeep of technology and exposure to theft? Plus this is just another version of IoT looking for a reason to exist. I don’t think there is a clamor for the need to check in via smartphone and walk out — certainly not multiple times more than at 7-Eleven, that’s for sure.

Adrian Weidmann
BrainTrust

When Amazon Go first went public about a year ago, my first reaction was that the future of brick-and-mortar retail was revealed. Amazon Go shows that technology can eliminate the tedious, time-consuming obstacles that we all dislike about the shopping experience. Technology and its implementation will always get better and cheaper making a scaled execution possible. Convenience stores are ideally suited for this enablement. Small square footage combined with a defined inventory and the ability to stay open 24/7 would align nicely with the Amazon Go concept.

Shep Hyken
BrainTrust

This is a big decision. I’m sure the rollout will start slow. There will be time to confirm the business model works. Then, look out. Amazon has the cash to roll out a lot of locations. They are smart about what they do and will abandon a concept if it isn’t working. If it’s a meal concept, quality and freshness has to be there. I’m sure it will be or their model won’t work. This is all about convenience, and therefore traditional convenience stores will be direct competition in many areas. And to add a level of convenience, the concept of just picking up items and walking out the door makes the store an extension of the pantry and refrigerator in a consumer’s home. It’s just not in the kitchen. Amazon continues to push and raise the bar on retail and convenience.

Mohamed Amer
BrainTrust
Strategy’s trenches are chock full of those guilty of “fighting the last war.” They’ve prepared and optimized to win the last battle rather than preparing with urgency for a different future. The latest reporting on Amazon’s aggressive growth of up to 3,000 cashierless stores by 2021 is part strategic signaling to competitors and suppliers and part creating a bold and audacious goal to energize and focus employee efforts. On the external front, it raises the stakes necessary to play in the retail arena through additional fixed investments and embedding of artificial intelligence into future store operations and the entire value chain from supplier to consumption (and enjoyment) by consumer. The prospect is that many new formats and types of stores will become another growth vector for consumer goods companies which in turn will keep them interested in maintaining strong relationships and be in step with Amazon’s plans as retailer and platform. On the internal front, Amazon does a solid job of communicating what the company stands for and the values cherished by Jeff Bezos. Such… Read more »
Jeff Sward
Guest

Great reminders about their internal agenda. They might not give much of a hoot about what the rest of the world thinks.

Mohamed Amer
BrainTrust

That’s right Jeff. Amazon’s culture is a great example of what Denise Yohn calls Fusion. The external brand and the internal culture create a virtuous circle of influence. The more these two elements are in harmony, the stronger the brand will be.

I don’t believe Jeff Bezos is concerned about how the rest of the world grades their multi-pronged strategy. People sometimes forget that Amazon survived the dot.com boom/bust and had not shown a full year profit for its first seven years as a public company.

As an aside, the real test for Amazon will happen along two fronts and an uncertain time horizon:
1. Political and regulatory pressure as the company continues to grow and disrupt adjacent industries
2. Surviving the leadership transition once Jeff Bezos decides to focus elsewhere

Anne Howe
BrainTrust

Bezos is like a bloodhound when it comes to sniffing out “broken retail” issues that the industry ignores. Then, he finds a fix and becomes the “hated disruptor.” Except to the shoppers, who love that he simplified something that needed it! If the dinner “logjam” fix is 3,000 Amazon Go outlets, kudos too Bezos for being big and bold enough to go after it!

Lee Peterson
BrainTrust

First of all, to be a fly on the wall of the CEO of 7-Eleven’s office when this news came out! yikes! Aside from that, I think Bloomberg’s right; the grab and go portion of the inventory should be the driver, but I do think they can fill the “quick hit” grocery needs as well. This will be a big consumer win IMO and typical of Amazon it is spot-on in terms of what that industry segment really needs to improve.

Remember that the perennial consumer sticking point with most grocers and c-stores is slow checkout and there is none at Go — wow. Look out. Again, check the stock hits that CVS, 7-Eleven, Target, etc. took yesterday and you can see where the wager is at the big casino on Wall Street. I’m with them.

Ananda Chakravarty
BrainTrust

Hi Lee — I would argue checkout at c-stores lines is much faster than any grocery and usually not such a big sticking point. Mainly because basket sizes are small. Amazon will definitely be an interesting addition to the mix.

Ray Riley
BrainTrust

The question is which firm that took a haircut yesterday is getting purchased at a discount by Amazon. Amazon didn’t build grocery stores; they bought Whole Foods. They won’t be building 3,000 c-stores.

Ananda Chakravarty
BrainTrust

Most of the folks on this thread have covered this topic well, but here’s another 2 cents:

Costs are high per store, but that won’t be the challenge. The tech will be outstripped with new, lower cost tech over time anyway. I also doubt fast food, QSRs or c-stores will be replaced by this kind of tech anytime soon. But it sets in motion something that is very much Amazon-like — a longer-term view. For this to take hold, it will require major shifts in customer behavior — in how people shop — and that’s where Amazon has some notches on their belt. Amazon captured customer sentiment in the past, this time they need to induce it. Novelty is not enough.

Liz Adamson
BrainTrust

We’ve already seen many retailers, especially grocery stores, adopt a simpler version of the cashierless store with self checkout, which are quite popular in busy stores with customers who just have a couple items to purchase. There is a demand for a quicker checkout process that eliminates long lines and AmazonGo is taking this to the next level and attempting to disrupt another industry. We know customers value convenience, this model offers the ultimate convenience in a retail environment — no lines, no fishing for wallets and credit cards, no waiting.

I expect Amazon will use its existing customer behavior data to determine the ideal mix of products in their stores. I don’t think it will be just a grab and go meal concept, that would be too limiting. I see a mix of prepared meals and convenience items that customers commonly purchase together, i.e. a sandwich and and a pain reliever to help with a long day at the office.

Richard J. George, Ph.D.
BrainTrust

I see the biggest competitors as C-Stores & limited service restaurants. Its focus on urban markets with consumers who are looking for meal solutions makes sense given the size, convenience & planned assortments.

The market reactions to the more traditional food retailers is a reflection of the first mover advantages enjoyed by Amazon. However, it is also a warning to the more traditional players of the role of meal solutions & that technology in the form of speed & convenience are now considered the ante by customers.

Steve Montgomery
BrainTrust

This is a concept that may play well in an urban environment where there are offices and/or high household population density. The offer is limited and not something the will be competive with a well-stocked and managed c-store.

I agree with Paula; I don’t see how the economics work. The cost of the systems would have to come down considerably to be even close to break even.

Ken Morris
BrainTrust

The biggest challenge with expanding AmazonGo to 3,000 stores is the ROI of the cashier-less technology model. Based on the current technology investment required for each AmazonGo store, it is improbable to believe that they can be profitable. In addition to the technology, the stores still have some employees to staff shelves, so they aren’t eliminating all employee costs.

There needs to be more technology advancements that are more cost effective for companies to scale beyond cashier-less test stores. Today, they are still a novelty and a driver of massive publicity.

Doug Garnett
BrainTrust

Are we being trolled with this concept? Certainly I believe Amazon can only have a profitable enough future if they fully embrace bricks — so I’m not surprised by a brick based idea.

But this comment from Bezos? “Mr. Bezos believes that AmazonGo can be the brick and mortar answer to end “meal-time logjams” in cities across the country, according to Bloomberg’s reporting.”

Huh? There’s nothing that indicates so glorious a value as “ending meal-time logjams” or even what those are.

Are traditional stores log jammed at meal times? I certainly haven’t seen it. Is the log jam a “life” log jam? Feel free to reply to help me understand this.

Because, I’m beginning to think this is another Bezos sized mis-direct designed to panic the market.

James Tenser
BrainTrust
I know I’m kinda late to join this discussion, but think this through with me, please: Amazon’s announced goal of 3,000 store openings by 2021 would amount to 1.9% of the total C-Store store count of 155,000 nationally. Since 123,000 of these sell gasoline (NACS) and are located away from urban centers, Amazon Go’s walk-up or strip-center concept is more likely a competitor to the remaining 32,000 non-fuel convenience stores (20% of the total). Amazon Go doesn’t sell tobacco products, which account for 34% of inside sales at C-Stores. So Amazon is actually targeting a narrow slice of the C-Store industry, primarily its food service offerings in cities. Hardly an existential threat in the short term, but likely to spur some competitive response from entrenched players. In-town fast-service food outlets should properly see Amazon Go as a direct competitor, but any outlet with a drive-thru should feel little pain from this. The in-store sensing and “just-walk-out” technology may seem extravagant now, but like Fire tablets and Echo Dots the unit cost will inevitably decrease with… Read more »
gordon arnold
Guest

This a very advanced Brick & Mortar (B&M) concept and proving to be an expensive evolution for those with the momentum, savvy and revenue to get there. Fast foodies and the gas and go guys and gals seem to have the jump on this plan. The concept is designed to give relief to the high volume, low margin aspect of retail. The focus for development is to use real-time enterprise software like some of those in the rental industry. This software could be modulated to have fully automated checkout with relative ease and very low expense in terms of design and support.

wpDiscuz
Braintrust
"I have looked at this concept six ways from Sunday and I STILL don't see how it even breaks even, what to speak of increasing the bottom line."
"If the dinner “logjam” fix is 3,000 Amazon Go outlets, kudos too Bezos for being big and bold enough to go after it!"
"Huh? There’s nothing that indicates so glorious a value as “ending meal-time logjams” or even what those are."

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