Amazon wants to boss the neighborhood. It aims to do so by taking a lot of inconvenience out of the convenience store experience, though that will mean shoppers must say goodbye to the cashier.
The online retail giant has just shown real intent with the opening of the first checkout-less Amazon Go GroceryOpens a new window in Seattle’s Capitol Hill district. Yes, the company already has a couple dozen Amazon Go outlets up and running across America, but this one takes the automated store up a gear.
First, the new Amazon Go Grocery is big – at 10,400 square feet, five times the size of regular Amazon Go. Some 5,000 items sit on its shelves, ranging from fresh produce and ready-to-cook meals to bakery items. All visitors have to do to shop is log in with a dedicated smartphone app as they enter the store, make their selections, then walk straight out the door with their food. The purchases are automatically placed in a virtual cart, and Amazon sends the bill to the phone a few minutes later.
There’s little or no fuss to popping in to shop, and that’s down to Amazon’s highly accurate “Just Walk Out†technology that leans on computer vision as well as “sensor fusion†– the collection of individual data from multiple sensors – and deep learning to detect when products are taken from shelves. You won’t find cashiers at the Amazon Go Grocery, although the place still has staff to greet you and deal with questions, plus someone has to be on hand restock the shelves (at least until that function is presumably automated one day in the future).
Pursuing Dinner
It’s clear who Amazon’s target is. “Customers on their way home, customers by their home, what they want is groceries,†Cameron Janes, Amazon’s VP of physical stores, told CNNOpens a new window . “They want what’s for dinner tonight.â€
And Amazon thinks the new Seattle store, and future ones like it, are a way to pick up a decent share of the $850 billion US grocery market. Many believe the company can do that, too. When it was reported that Amazon was planning to move into grocery, stocks prices of Walmart, Costco and Sprouts Farmers Market, among others, took a dive.
Not that they and other supermarket chains are sitting on their hands regarding in-store innovation. It’s just that what they’re doing is less slick and less persuasive.
Take Walmart. It has one failure behind it with a “Scan & Go†app that allowed customers to scan items and pay for them directly using their smartphones. Shoppers found it hard to use, and Walmart scrapped it. The latest iteration is “Fast Lane,†currently undergoing beta-testing in Canada. Users can scan items via their My Walmart App and head to a dedicated checkout lane where they charge their purchases on credit card before showing the receipt on their phones to Fast Lane staff.
And Kroger has something akin to Fast Lane with “Scan, Bag, Go†where shoppers using either a phone app or in-store scanning device and the service requires employee verification at close.
Let’s be honest, Fast Lane and Scan, Bag, Go – they’re all clunky.
The Benefit of Cost
While Just Walk Out seems to have the edge, slick comes at a price. It’s estimated that the cost for an Amazon Go store tech fit-out comes in at around $1 million and presumably higher still for the new, larger Seattle grocery outlet.
But there’s impressive payback to be had. RBC Capital Markets calculatedOpens a new window Amazon Go’s average sales per square foot at $853, compared to $570 per square foot for a typical convenience store. And for those locations with the highest traffic, that corresponds to nearly $2 million per square foot a year in revenue.
McKinsey, for one, is bullish on Amazon Go, calling Amazon the “most prominent disruptor†in last year’s Automation in Retail reportOpens a new window . It believes Amazon Go can deliver via additional traffic from reduced wait times, as well as from the use of customer insights to personalize promotions.
In truth, the future of the neighborhood store could well be what Amazon determines it to be. The company rarely does things by halves and, as such, reportedly plans to open as many 3,000 Amazon Go stores by 2021. According to RBC math, that’s a $4 billion proposition.