Why Amazon Go is a Mixed Bag for Retailers

More than two years ago I wrote an article called Retailers provides Amazon experiences in the store. Little did I know that Amazon then were working on a concept that would take their own online experiences to the real world.

After four years of development, Amazon launched its latest game-changer last week. They refer to Amazon Go as “the world’s most advanced shopping technology.” It marks a new step in combining digital and physical shopping. The 1,800 square foot main Amazon Go store in Seattle will open to the public in early 2017 (it’s currently in beta for Amazon workers). Following the launch, the company aims to open 2,000 click-and-mortar stores throughout the U.S.

Grocery has been important to Amazon for a while now, with services like Amazon Fresh and Prime Pantry. However, online grocery shopping accounts for only about 1% of total e-commerce sales and is expected to stay low at around 5% by 2021. Because of this, retailers like Target and Marks & Spencer are looking for extra revenue through options like click-and-mortar or click-and-collect. The Amazon Go model appears to be a logical next step.

PlanetRetail observed, “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.” When the company opened its first brick and mortar (book) store, they saw firsthand that many customers prefer to go to a place to find and buy products.

Amazon Go is a way to address that desire. The company also says it’s an attempt to upend the grocery industry (as they have others).

How does “Just Walk Out Technology” work?

Just Walk Out Technology accelerates the shopping journey for the customer and eliminates operational costs (like paychecks) for the retailer. To do this, Amazon is tapping into technologies used in self-driving cars, including Artificial Intelligence, deep learning, computer vision and sensor fusion. Here’s the simplest explanation:

• For the Store – Integrated cameras throughout the shopping environment record what people take off (or return to) shelves. That camera data feeds real-time inventory updates, so the store can stock and predict with speed and accuracy.
• For the Customer – The shopper opens their Amazon Go app and enters the store through a set of sensors. As they select items, the data (from store cameras) populates a mobile e-shopping cart (adjusting if the shopper returns something to a shelf). When they have finished shopping, the customer just walks out of the store through the sensors. The app charges the card they have on file and produces their receipt.

What’s new? Total independence. More, and more relaxed, time to wander the store in search of interesting things. The freedom to zip in and out of the store quickly. What’s missing? Checkout areas. The friction caused by having to stand in line (even for self-check out kiosks). A personal connection with a store employee who asks if you found everything you needed or what you’re cooking with those interesting ingredients. Incremental revenue gained from impulse buys set up in payment areas.

The upsides and downsides of Amazon Go.

While this technology seems somewhat inevitable based on how rapidly omnichannel shopping has progressed in the very recent past, even Amazon seems to acknowledge that this might still be too good to be true. (Their tag line is “No lines. No checkout. No, seriously.”)

The statement likely is a witty attempt to imply consumers will be incredulous because the offering is amazing. But from the standpoint of working with a company that has spent more than 30 years pioneering innovations in customer journey technologies and insights, I also see “no, seriously” as an admission that the solution might have some issues.

Amazon Go is a tremendous innovation. I love the fact that we are on the cusp of a major bricks and mortar retail innovation, the latest being self-service stores by Piggly Wiggly. It offers efficiency and operational savings in retail environments where there is little need for personalized advice or service, like grocery stores. And it is a possible solution to the in-store customer journey data gap that plagues retailers. Amazon Go offers a source of in-store statistics like consideration time or what items shoppers consider, ignore, put back, and select. Reading those insights against online data promises to generate customer behavior intelligence currently only dreamed of by retailers.

A prevailing concern seems to be around what this will do to the retail workforce.

Already, it’s being called ‘the next big job killer.’ The technology eliminates checkout employees – and probably not just in grocery stores. And these people probably won’t be moved to the store floor to be helpful staff assistants. The jobs simply will go away. (It’s fair to note that this kind of fearful chatter often comes up when new technologies are introduced, but it’s easy to see how this scenario could happen.) There is nothing any politician in the world can do about this – it’s simply human progress.

I don’t believe that Amazon Go will completely upend the retail industry, and here’s why.

Retail is about people and how products/experience make them feel. The ones that succeed best are those that connect people with the right service and resource – when and where they need it. And that takes a special set of resources.

Amazon go is addressing a limited retail context

In retail scenarios, such as for example home electronics stores, sport goods stores, department stores, home improvements stores, consumers are looking for an experience and still rely on getting professional advice from store associates. But many retailers are still failing to address the purchase friction challenges in these situations. This is a much more complex challenge where there is a need for solutions that – just like Amazon go – eliminates waiting and lines.

Numerous solutions, including click-and-collect, mobile virtual queuing, and scheduling app solutions already accomplish much of what Amazon is trying to do – but in service intensive environments.

As these components work together in an integrated enterprise customer journey ecosystem, they help retailers reduce friction points for customers, move them from online to in-store environments quickly and smoothly, and add value by engaging staff in the process – rather than removing them from it. More importantly it addresses the friction challenges in the store when it comes to reduce wait time and connect every consumer to the best available store associate.

For example, in my home country Sweden, ICA grocery stores engage a click-and-collect solution to manage every step from the website to the moment the customer arrives. It offers a simple way for the customer to place an order, schedule pick up, check in with their mobile, collect their goods, and confirm the purchase. Throughout the process, the customer and the staff receive clear messages about the order, helping to keep everyone prepared so that the interactions are productive and enjoyable.

Numerous other examples exist of solutions available to make the in-store experience fast and frictionless, to give the customer a sense of control, and to engage business intelligence in the in-store experience. In each of these cases, the customer is in and out as quickly as they want to be, and the employee has a role to play in creating a fulfilling brick and mortar experience.

Where do we (Amazon) Go from here?

Amazon has always been willing to test initiatives, risking profit to drive increased use of the e-commerce platform. Amazon Go is a bit different. Presuming it goes well, it’s more likely to drive greater use of its app and real world environments, and actually get people off its e-commerce platform for grocery shopping. And in that case, it’s presumed that the company will sell the technology to other retail brands. This pose a real threat to technology providers that focus on checkout technologies.

There are amazing technology solutions already available and wide-spread that deserves similar attention as Amazon go. Solutions that everyday significantly reduce purchase friction and increase shopping reward. I hope that retailers being inspired by Amazon also recognize the importance of addressing more situations than self-service and checkouts. Nothing is more important in the age of the customer than getting all the engagement points right.

In my work I regard bad service, disconnected journeys and friction in bricks and mortar stores as my arch enemies. I welcome Amazon to my world and are looking forward to being part of the same eco-system and in the future maybe join forces to attack a larger context of retail challenges.

Image courtesy: Amazon