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Amazon Go: Let's Get (More) Physical

We recently noted that among the latest e-tail trends is the expansion of once exclusively online retail operations into physical store locations. In-store sales continue to dominate over online sales, with the U.S. Census Bureau reporting that online sales in the third quarter of 2016 accounted for only about 7.7% of all retail sales (which was true also for the first quarter of 2016). Breaking the comparison down into categories of sales, online purchases comprise only 4% of all food and beverage sales. This may be due, in part, to the fact that 80% of all Americans live within close (less than 2.5 miles) proximity to a supermarket. Whatever the reason, Amazon is paying attention and its confidence in the staying power of brick and mortar food shops is evidenced by its latest venture – Amazon Go.

Amazon Go locations (currently just one location – in Seattle, of course) will offer prepared foods, beverages and other grocery items to customers. The difference? No need to check out and, thus, no lines. Amazon’s so-called “Just Walk Out Technology” – a combination of computer vision, sensor fusion and deep learning, apparently similar to the technology used in self-driving cars – enables customers, who gain access to the store (through electronic turnstiles similar to those used in many subway stations) through use of an app, to select what they want and simply walk out of the store. Customers are charged based on what they pick up off the shelf (the price will be adjusted down for any items that are put back) without the need to wait in line to make a purchase with a cashier. No cashiers means substantially fewer employees, though someone will have to be there to restock the shelves and answer the inevitable questions about the process. And there will also be chefs on-site preparing many of the meals and snacks offered at the store. The first and only Amazon Go location is currently open exclusively to Amazon employees – it is housed within the ground floor of one of Amazon’s Seattle office towers – but Amazon plans to open the store to the public in early 2017. Presumably, Amazon will rollout additional stores after it irons out the kinks at the Seattle location.

Time will tell whether other retailers will similarly move in the direction of technology-based (as opposed to salesperson-based) sales, and what the overall impact on retail, as well as employment rates, will be. In discussing whether Amazon is destroying retail or merely reshaping it, Forbes recently took the position that the latter is the case and boldly stated that “Amazon is doing more than most store-based retailers to try to define what a store should truly be in the future.” The ultimate success of Amazon Go, not to mention the ability of other retailers to afford to purchase and implement technology similar to Amazon’s patented Just Walk Out Technology, will determine whether this latest Amazon endeavor will actually reshape retail or if it is only a fad. Regardless of its long-term implications, we think it’s pretty cool [cue the Jetsons theme song].

Related topics: Retail, Retail Sales