How Amazon Go will revolutionize retail convenience

Eight retail experts weigh in on Amazon’s checkout-free grocery store and what it means for the future of brick and mortar.

Amazon Go stopped the world in its tracks. The Dec. 5 introduction of Amazon’s revolutionary convenience store looms among the most surprising and compelling retail announcements in recent memory: The Seattle pilot location — which Amazon describes as "roughly 1,800 square feet of retail space that is conveniently compact, so busy customers can get in and out fast" — advances far beyond existing self-checkout systems by eliminating the checkout process entirely. The idea leverages technologies previously synonymous with self-driving cars, including computer vision, sensor fusion and deep learning.

Amazon Go offers c-store staples like milk and bread, along with meals and snacks made by on-site chefs and local suppliers, as well as Amazon Meal Kits. Shoppers (a segment currently comprised exclusively of Amazon employees) scan a QR-code based mobile application upon entering the store. The e-commerce giant’s Just Walk Out technology then detects when items are removed from or returned to store shelves, tracking purchases in a virtual cart, and totals the final cost when customers exit the premises. The app automatically bills the card saved in the customer’s Amazon account and generates a digital receipt.

Amazon formally introduced Go via the following video:

The announcement generated headlines throughout the mainstream media, prompted a deluge of think pieces across the tech landscape and captured the imagination of a range of retail experts and analysts. Retail futurist Doug Stephens, author of the forthcoming book "Reengineering Retail: The Future of Selling in a Post-Digital World," told Retail Dive that he already envisioned a world where even self-checkout terminals ultimately give way to "no checkout in the future ... [Amazon Go] now supports the position."

But many questions remain. For starters, where does Amazon Go fit within the company’s larger brick-and-mortar retail ambitions? How quickly will it scale? How might the core Just Walk Out technology work across other formats? What does the elimination of checkout processes mean for store cashiers and other traditional grocery staff positions? And how do rival retailers compete?

In the wake of the Amazon Go announcement, discussion forum RetailWire asked its BrainTrust panel of retail experts the following questions:

  • What do you think are the most interesting questions raised by the launch of Amazon Go for Amazon and its competition?

  • What do you think are the answers to those questions?

Here are eight of the most provocative and insightful comments from that discussion. Comments have been edited by Retail Dive for length and clarity.

1. Rewards trump risks

Mark Ryski, Founder, CEO and Author, HeadCount Corporation: This is what the future of convenience/self-serve retailing looks like. Transaction friction caused by long checkout lines or malfunctioning self-checkout technology is the bane of shoppers — Amazon Go has the potential to truly solve this problem.

However, like all technology, there are concerns. How accurate is the technology? No data capture system is perfect, so understanding accuracy is important. Also, what does it cost to deploy and maintain this technology? And finally, how secure is it — can the system be hacked or subverted? While many questions will be raised, I believe the benefits to consumers of a system like this will far outweigh risks.

2. Fact vs. friction

Chuck Palmer, Vice President of Strategy, JohnRyan: Amazon Go is nothing less than a game changer. Not because of the reduction of friction at the checkout. That is awesome and one of the reasons consumers will try it, sign in to the app (see Uber) and come back. It’s sort of a red herring.

The game-changing and far-reaching implications are in this statement: “Computer vision, deep learning algorithms and sensor fusion.” This is not one functional technology. It is a combination working in concert to get Amazon what they want: More data on physical spending behavior. Information they don’t have about us.

Think about the possibilities of physical stores being as aware as websites. That web-like data is enormously valuable, and Amazon is far ahead of the game.

Don’t fool yourself into thinking this is subject to the rules of retail as we know it, and don’t think for a minute that this isn’t going to be rolled out. The logistics, margins and operational issues will all be worked out and when they strike on the right combination of product, location and tech, you’ll see these scale fast and show up in all the right places.

Then Amazon can really start honing the offer to the store and its customers and wallow in all the data that goes along with it.

3. Time for reflection

Martin Mehalchin, Partner, Lenati, LLC: I believe that Amazon Go shows the company’s commitment to reinventing physical retail in categories like grocery where the potential of pure-play e-commerce is limited. While some in the industry saw the potential for app-enabled shopping several years ago, Amazon actually put in the four years of work to bring the concept to life.

Amazon Go is a great example of what CX professionals call an “effortless experience” and now that Amazon has once again claimed first-mover advantage, other retail executives should look in the mirror and ask themselves what they have been doing for the last four years.

4. Security insecurities

Tony Orlando, Owner, Tony O's Supermarket and Catering: This is another very cool concept, but I have some questions. Watching the video made it seem so easy, and if you change your mind and do not put the item back exactly where it should be, then you will be charged for it. What about those pesky hackers, who will find a way to get you into the store, and with a push of the button, they walk out with a ton of stuff for free, as they figured out how to bypass the checkout on their phone? Maybe I’m wrong, but I see this happening more frequently with technology, and hopefully Amazon has a very secure system to prevent this.

One more thing … what about pricing of the food? Is it going to be on the Whole Foods level, or more in line with conventional supermarket pricing, as yes, price is still a factor, if you want repeat sales for most folks. If in fact the pricing is higher, it had better be super-fresh and delicious, or risk a one and done. I’m sure these stores will all be in high-income areas, and they will be well received.

All we need is a replicator from “Star Trek,” and we’ll never have to leave the house.

5. Creative destruction

Herb Sorensen, Scientific Advisor, Kantar Retail; Adjunct, Ehrenberg-Bass; Shopper Scientist LLC: Groceries, because of traffic, drove Wal-Mart to the No. 1 global retailing business. Many things that Amazon does in bricks, other bricks retailers think, “Oh, we can do that — if we want to.” But aside from the fact that Amazon is increasingly the clear leader in bricks retail (not volume, but concept, which will drive volume later,) Amazon is already NOW the driver of retail innovation.

Our merchant warehouseman bricks retailers would require brain transplants to even pretend to compete with the coming onslaught from Amazon. Amazon sells ITEMS to individual shoppers, while the merchant warehouseman makes CATEGORIES available to the unpaid stock-pickers (a.k.a. shoppers). Notice also that Amazon will deploy tablets on the shelves, extending the long tail of the store indefinitely, without adding footage/inventory to the store.

The last time we had a disaster/opportunity of this magnitude was 100 years ago, when the U.S. went from a half-million stores to something like 50,000. Joseph Schumpeter described it as creative destruction. Sounds about right as a description of what is going on today.

6. Convenience truths

Steve Montgomery, President, b2b Solutions, LLC: There are more than 150,000 convenience stores in the U.S. today. For Amazon stores to make any significant change in the c-store landscape would require a larger store format with a broader selection, an extremely sizable investment and a long time.

The largest impact on c-store or any retail Amazon (or someone else) can have is if they prove out the technology. This is dependent on many factors, one of which is, how do you prevent shoplifting? I am sure the manufacturers of POS systems will watch this test very carefully.

7. Know the rules

Ben Ball, Senior Vice President, Dechert-Hampe: Always remember [Amazon founder and CEO] Jeff Bezos’ Golden Rule: Automate every possible process — invest expensive human capital in only the most complex tasks. And remember the implied “Rule No. 2” of the Amazon business model — only seek profitability after superior consumer experience yields scale. With the resources at his disposal and the discipline with which he marshals them, I never count Bezos out.

8. The need for speed

Mohamed Amer, Global Head of Strategic Communications, Consumer Industries, SAP: All these questions are interesting, but the most strategic and impactful of these is around speed — both around Amazon’s ability to ramp up the concept, and for rivals’ ability to catch up.

I view the Amazon Go concept as a logical and predictable extension of Amazon’s disruptive strategy. The company has consistently looked for ways to eliminate friction and non-value adding processes in retail, and from a consumer perspective the biggest bugaboo in grocery shopping is the checkout line — so off it goes.

By investing in technology not only as a means to drive speed and efficiencies but to truly re-imagine and redefine the customer experience, Amazon dares to consider what others would be unwilling to consider or would be ridiculed for suggesting. For those reasons, I expect Amazon to go pedal-to-the-metal on ramping up the concept in a green field operation while legacy grocery operators work to introduce new ideas in existing brown field stores.

Amazon is a risk-taking, marketshare-devouring technology company at its core, with an obsessive focus on delivering differentiated experiences to their customers. With their irreverence to legacy processes and conventions, Amazon is disrupting retail by completely redefining the competitive elements in the industry. They are changing the game and the rules of the game simultaneously.

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Top image credit: Amazon