Amazon’s new checkout-free convenience store has created an experience that is currently unmatched in store-based retail.
Set to open to the public in 2017, the store utilises sensor technology where shoppers scan a designated app upon entrance, collect their items from store shelves and walk out the door – automatically charging their Amazon accounts.
The 1,800 sq ft shop, which is currently only open to Amazon employees for testing, stocks “grocery essentials”, major branded goods, locally sourced consumables, ready-to-eat options, Amazon Meal Kits, and some Amazon Go exclusives.
While the industry has been discussing a faster checkout experience for years, it has taken an online retailer to push forward that possibility in a store-based environment.
But Amazon was well positioned to move into this channel and raise consumers’ convenience expectations for a variety of reasons.
First, despite trialling bricks and mortar retailing with book stores and pop-up shops, this was Amazon’s first effort at more traditional stores, meaning there was no legacy store network in need of updating.
The etail titan already has a high number of existing identified users due to its success as an online marketplace and its popular Prime programme.
This makes the Amazon Go store, which requires the user be identified throughout the shopping process, more viable for Amazon than other retailers.
Furthermore, Amazon members are typically digitally savvy and are more likely to be keen adopters of the Amazon Go experience.
And, as a company, Amazon has always been willing to pilot unprofitable but popular initiatives, so long as they drive greater use of its ecommerce platform.
As usual, this initiative will likely be evaluated on its ability to create value in the Amazon ecosystem, not just the profitability of the store.
Growing insights and ecosystem
The sensor technology that Amazon will use to determine shoppers’ selections will also allow for collection of shopper behaviour data.
Detailed statistics on shopper dwell time, the items they look at, what they select and what they put back is difficult for retailers to gather.
When this data is matched via the associated Amazon account to online behaviour, the etailer will have comprehensive shopper behaviour data sets that will be unmatched in the industry.
What’s more, the bricks-and-mortar venture will drive more consumers to Amazon, since membership is required for entry to the store.
Don’t be surprised if Prime members receive benefits in-store, either though lower prices or exclusive items, as Amazon works to expand the Prime membership.
Pricing and execution
Despite the obvious positives, a few questions hang over Amazon’s move.
The etailer’s book stores currently offer Prime members the dynamic online price of the items, while non-Prime members are offered a static and often more expensive price.
Price parity to Amazon’s online dynamic prices in the Amazon Go store will be a first for the grocery industry – but will Amazon opt for this strategy?
The accuracy of the technology also raises questions.
Amazon likely uses a combination of cameras and sensors embedded in the shelves that interface with the shopper’s smartphone, with artificial intelligence making sense of all the inputs.
But how does this system handle a crowded store, when a shopper might be reaching to grab something off the shelf in front of someone else?
Would these items be accurately attributed to the shopper?
And what happens if a shopper turns off their phone after entering the store?
The tracking technology utilised by the stores may also be seen as invasive by some consumers.
Amazon is fortunate its shopper is more likely than most to accept this level of tracking for the sake of convenience.
But more traditional retailers that require no personal information on shoppers would almost certainly face resistance from their customer bases if they employed similar technology.
Proudly stating that the Amazon Go store utilises ‘Just Walk Out’ shopping technology, it seems uncharacteristic of Amazon to so prominently brand technology that it only plans to use internally.
For that reason, we believe Amazon has aspirations to partner with other retailers by providing this technology, earning a fee on sales while collecting valuable data, much like FBA, Amazon Payments, Amazon Lockers, Amazon Fresh, and Amazon Prime Now.
Amazon cares about user growth more than product sales and will reap the benefits of intermediating more orders, even if they are working alongside a retail competitor.
However, with drive formats on the near horizon and more grocery store rumours circulating, expect Amazon to employ several different formats in its quest to reach shoppers.
- Doug Koontz is head of content at Planet Retail
- John O’Leary is an analyst at Planet Retail