Amazon Go – Retail revolution or just simple evolution?
News of the Amazon Go checkout-free store abounds in the mainstream press, but is it the start of a revolution or just Amazon flexing its financial clout by making another statement of intent to the retail world?
Ironically, as retailers struggle and give up retail space in a mad rush to cut overheads and champion online initiatives, E-Commerce superstore Amazon looks to be moving the other way. Perhaps this move isn’t that surprising, as one could argue that they have the online shopping experience somewhat wrapped up so need to diversify to continue growth. Amazon clearly sees food, and especially grocery, as a predominately offline experience in the main, so the Amazon Go format is firmly in that arena.
The acquisition of Whole Foods and the popping up of various format Amazon stores and concessions has set the tone for a concerted move into bricks and mortar, but Amazon was never going to be happy to be just another traditional grocer. We can see the early and unsurprising signs of the direction they are heading.
It’s all about cost reduction with Amazon; you don’t necessarily need to be the best at anything if you can consistently offer lower prices. Walmart showed the way by taking out swathes of stores across the USA by aggressive pricing, leading to the demise of traditional store retailing in small town America. Technical innovation isn’t a prosaic dalliance for Amazon – it’s a means to an end, and that end is to have the lowest overheads on the block. When looking at the, not inconsiderable, costs of your typical physical store, many are largely fixed and difficult to impact, e.g. rent and rates. However, staff costs are a significant cost especially as labour costs are forecast to grow due to minimum wages and shortages in supply. Step forward AI, or at least technology, in its many guises.
But is this truly revolution or simple evolution? Cash and cheques give way to credit cards; self-checkout makes a clumsy appearance but evolves and is now adopted more widely; contactless, and Apple Pay offer new ways to pay. All elements are evolution of the physical shopping experience, so is this step to a “checkout-less” store really that great a step? I’d suggest not, as the checkout hasn’t truly disappeared; yes, the method of checkout has changed and if it works it should be less intrusive and quicker (bagging goods aside!). Crucially, for Amazon, if successful it should mean less staff and a key cost reduction whilst also championing their image as an innovator, whilst driving that seemingly important physical presence, most notably in the grocery sector.
What is interesting is the technology behind this innovation, as it’s not where most others were seemingly heading – for some time RFID was seen to be the key technology. By simply incorporating passive tags into your goods packaging (and the cost is fractions of a penny due to advancements in printing) you can track inventory throughout the supply chain and crucially read the tags in a basket or trolley of goods at “check-out”. This involves passing through a gate and an instant read and charge is applied to an account or whatever payment method is preferred. No, or at least fewer, staff, no wait and in theory 100% accuracy.
RFID technology has existed for some time and mock stores using this have popped up at various shows so why haven’t we seen it used beyond that ubiquitous security tag alert on clothing and alcohol? Customer resistance, cost of implementation, worries about data protection and tracking, technical challenges and ultimately the ROI all play their part. Interestingly, all these would seem to apply equally to Amazons cameras and algorithm approach too – in fact in some respects the costs and limitations seem even more significant as it relies heavily on shelf position. Early reports suggest some significant teething problems; it’s already a year late and has been five years in development. Indeed, Amazon themselves report that it’s going to be a limited format solution, mainly around small range and size convenience which seems odd given the origins of the concept.
Whatever the outcome one thing is for sure this isn’t remotely the end product, just another step in the quest for the seamless shopping experience at the lowest cost. Who else is better placed financially and culturally than Amazon to see this through to your local high street?