November 16, 2018

Is Amazon Go the Future of Retail?

Written by Garret Weigel | Connected Facility

Amazon GO is the latest innovation in the master plan of CEO Jeff Bezos to compete in the brick-and-mortar retail business. The new chain’s gimmick? No checkout, no lines, just shop and go! If it sounds like a 3D version of Amazon.com, that’s intentional. The concept of the new chain is touted by Bezos as ‘revolutionary” in its use of smartphone and geofencing technologies to streamline the customer experience.

 

Certainly, Amazon GO’s technology is state-of-the art and unprecedented in the food service industry. Nevertheless, the “cashierless concept” has been in use for years at Apple stores for products priced less than $100. Neither is the technology itself new but derived from self-driving cars. So, if not all that revolutionary in conception, with Bezos behind it, the GO concept could very well disrupt the economics of retail if the chain massively expands or its model is appropriated by Amazon’s competitors.

 

So, the question remains: is Amazon GO the future of shopping?

 

The New Retail Experience: “Just Walk Out Shopping”

The Amazon GO experience is described on the company website as “Just Walk Out Shopping.” That may be true, but it’s a rather big “just.” To participate requires a recent-generation iPhone or Android phone, the Amazon GO app (free), and an Amazon Prime account. This establishment is not for the general public. In fact, you need the Amazon GO app to be allowed entrance to the store: curiosity seekers beware!

 

The app also lets you to take the products you want so they can be charged to your Amazon account. What is truly new, unlike Apple’s scan-and-go process, is that you don’t need to use your phone to make purchases. Browse as you would at any store, with no need to scan QR codes or snap photos.

 

Amazon GO takes advantage of self-driving car technologies: computer vision, sensor fusion, and deep learning. The software is quite sophisticated; it can differentiate lemon from lime soda water by their labels and packaging design, based on a unique pattern of circles and diamonds. Weight sensors on each shelf know when you've removed something, and when you've changed your mind and put it back.

 

When you’re done shopping, just walk out with your goodies. No waiting in line to check out and pay. As you exit the turnstile, Amazon bills your credit card. Soon after, you’ll get a receipt detailing what you’ve bought, what you paid, and even how long you spent inside the store. If the store made a mistake, it will process a refund. Amazon GO allows customers to return merchandise by simply clicking the return option in the app. They don’t even have to haul the items back to the store.

 

The Pros of Amazon GO

From the point of view of Jeff Bezos, Amazon GO is all pros and no cons. In addition to his acquisition of Whole Foods to compete with other major supermarket chains, GO allows Amazon to also compete with convenience stores and fast casual restaurants. If the chain succeeds, the benefits could be enormous:

  • Labor cost savings: Although the GO stores do employ some humans to prep ready-to-eat foods and answer customer questions, the GO model drastically reduces the cost of labor compared to a traditional retailer.
  • Real-time inventory management: The sophisticated automated system makes ordering and restocking highly efficient, given that cameras can track inventory in real-time.
  • Space saving: Removal of cash registers opens up floor space for inventory or lets retailers save money by renting smaller spaces.
  • Crime prevention: According to the National Retail Federation, shoplifting costs retailers $47 billion annually – a practice virtually impossible at Amazon GO.
  • Customer profile data: With cameras, scanners, and sensors tracking each customer’s shopping habits, Amazon GO can offer customized specials and discounts – not to mention sell all that valuable data to interested third parties.

 

From the point of view of consumers, the primary benefit of GO is the same as Amazon.com: convenience. Similar to the website, the store knows an awful lot about you, as it can recommend products and lead you directly to their shelf location. The products available in stock are typical to the urban consumer’s needs:

  • Food, beverages, and nonfood items (ie. batteries, over-the-counter medications) typical in conveniences stores
  • Specialty items such as artisan cheeses and locally made chocolates
  • Ready-to-eat breakfast, lunch, dinner, and snack options made by the company’s chefs, local kitchens, and bakeries
  • Chef-designed Amazon Meal Kits, which the company claims can make a meal for two in about 30 minutes.

 

The Cons of Amazon GO

At this early stage of development, there doesn’t seem to be any serious downside for Amazon GO. Sure, there may be an occasional glitch. For instance, roll-out of the prototype store in Seattle was delayed due to sensor issues with unplanned complexity, such as children moving items from one shelf to another or customers with similar body builds. In another example, because the system functionality is optimal for a limited number of shoppers, sometimes customers must stand in line to enter the store – which undercuts the benefit of no lines at checkout. But these kinks will most likely be ironed out with time.

 

Customers, however, will continue to face the same ethical issues that come with any virtual shopping experience that relies on the collection of personal and financial data. Consumers without a smartphone, credit card, or Amazon account are out of luck. Amazon GO is clearly catering to a younger, affluent, tech-savvy population.

 

For this demographic, the biggest concern will be the privacy and securing of their data. As on Amazon.com, customers will need to be comfortable with trading privacy for convenience. “Big Brother” technology is literally photographing your every move and your physical appearance to collect as much information as possible about your shopping habits: what you buy, when you buy, and in what quantity. Not to mention what you look at and don’t buy, and how long you spent inside the store.

 

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Amazon claims that it keeps customer data just long enough to provide an accurate receipt but does admit that a subset of the information might be retained to train the algorithms for undisclosed, future purposes. That could be a plus: the store’s sensors may see you as a loyal customer who religiously buys yogurt and so offers you a 20% discount on a more expensive brand. It could also be a minus: the store might identify you as affluent based on your zip code, recognize that you’re in a rush, and charge you more on the spot because you’ll pay it. In fact, based on real-time demand, prices might fluctuate day to day or even minute to minute, preventing any way to plan with certainty to stay within a budget.

 

The Future of Shopping?

Currently, Amazon GO has three locations in Seattle, two in Chicago, and one in San Francisco. According to Bloomberg, Amazon. is considering a plan to open as many as 3,000 new GO stores in the next few years, although Bezos has yet to publicly confirm that projection. Independent experts say it's hard to predict exactly when the technology will go mainstream – depending on when the technology becomes economically viable, it could take as many as two decades.

 

Outfitting a full-size supermarket can cost millions of dollars. The original Amazon Go in downtown Seattle required more than $1 million in hardware alone. Amazon currently has no plans to convert its Whole Foods chain with the technology, which suggests how expensive it might be for a big-box retailer.

 

Nevertheless, Walmart announced a partnership with Microsoft in July to build an experimental “Sam’s Club Now” store in Texas to compete with Amazon GO. Just this month, 7-Eleven began piloting a new mobile check-out process called “Scan & Pay” in fourteen Dallas stores.

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