On the heels of Amazon’s announcement that they will expand Amazon Go stores in Seattle and may add as many as 3,000 doors in other major cities, the retail world is abuzz about whether checkout-free, cashier-less stores will become the industry standard. A step beyond self-service checkout, shoppers can use the Amazon Go app to enter the store, grab their goods, and simply waltz out without pausing to pay. Meanwhile, tools such as “computer vision,” in which an army of cameras recognizes and understands the objects it tracks, and “sensor fusion,” in which a computer detects from when and where an item is removed, to capture their purchases and charge their credit cards accordingly.
Stocked with a selection of groceries and Amazon Meal Kits, Amazon Go stores may signal a change in the way retailers (particularly grocers and convenience stores) do business. Although The New York Times calls Amazon Go “a store of the future,” other sources are not so sure. Tempering the excitement, Harvard Business Review warns that retailers “shouldn’t rip out their registers just yet.” Given the mixed messaging, let’s take a look the five biggest misconceptions about Amazon Go, and what they mean for the future of retail.
Misconception #1: Amazon Go Technology Replaces Human Workers
Despite removing cashiers from the shopping experience, leadership at Amazon is careful to assure the public that Amazon Go locations are not bereft of the human touch. Gianna Puerini, the executive in charge of Amazon Go, tells The New York Times that Amazon’s technology puts associates (who would otherwise be ringing up sales) on other tasks that add value to the customer experience, such as restocking shelves and helping shoppers troubleshoot tech obstacles.
It’s hard to tell, however, what impact Amazon Go associates are having on customers if they aren’t necessarily interacting face-to-face. And, if they are actually interacting with customers, what kind of customer service they really offer. Furthermore, any retail manager will tell you that stock associates and sales associates tend to have different personalities traits and strengths as employees. Amazon may be assuming that sociable employees, who would otherwise be engaging to sell and ringing up purchases, are equally happy refilling shelves. Likewise, those who engage in physical tasks may be less likely to sing the selling points of a boxed lunch to a curious shopper. That’s not to say that some team members can’t do both, but they’re likely a bit harder to find and certainly harder to retain.
And while e-commerce sales continue to gain a growing share of total retail sales, the numbers don’t lie. Despite the abundance of options for online food delivery, the vast majority of grocery shopping still takes place in a traditional brick-and-mortar environment. According to Forbes, about 98% of grocery sales take place in stores in 2018. In fact, the majority of e-commerce sales are for products that can be digitally delivered, like music and books. While online sales will continue to grow across the board, shoppers are still flocking to physical retail spaces. So Amazon is making a gamble to digitize the shopping experience, particularly in such an overt way, and the benefits of doing so remain unclear.
Misconception #2: Amazon Go Technology Will Cut Costs for Retailers
Although Amazon Go may cut costs associated with human cashiers, it’s still staggeringly expensive to implement. According to Time, the high cost of implementing Amazon Go is a major obstacle for Amazon. With its complex network of cameras and sensors, the original Seattle location cost Amazon over $1 million to build.
That said, Amazon’s competitors are working to replicate the technology’s capabilities for less money. Reuters writes that Microsoft is trying to make checkout-free technology cheap enough so as to “not eviscerate grocers’ already thin profit margins.” While Amazon may be able to tolerate such high expenses— the increasingly high volume of Prime shipments alone cost Amazon $5 billion in 2017, according to GeekWire— other retailers will be less eager to do so.
And with so many options for automation (like self-service checkout or even robotic shopping carts), retailers can select from a wide range of cost-effective technology solutions with more proven track records.
Misconception #3: Amazon Go Technology Combats Theft
Theft-related loss is a challenge for all brick-and-mortar retailers, especially when customers ring up their own goods at self-service checkouts. You might think that Amazon’s complex network of sensors and cameras would eliminate that problem. While The New York Times suggests that shoplifting is not easy at Amazon Go stores, other sources beg to differ. CNBC correspondent Deirdre Bosa reports that she was accidentally not charged for a cup of Siggi’s yogurt that she took from the store. While Amazon was happy to let her walk away with the snack on the house, the incident reveals that theft is something engineers who seek to replicate Amazon’s technology will want to keep an eye on. On another note, the story reveals that Amazon isn’t drawing the line between accidental and deliberate shoplifting, which raises some questions in terms of what happens when someone actually intends to steal.
Misconception #4: Amazon Go Makes Shopping Easier
Sure, anyone who’s been hit with the lunch hour traffic jam at their favorite grab-and-go chain will be excited to pick up a quick lunch without waiting in line. This will be particularly intriguing for workers in the busy cities in which Amazon Go is planned to arrive. But other aspects of shopping at Amazon Go may prove obstacles for some shoppers.
First, anyone who wants to shop at an Amazon Go store needs an Amazon account. While a whopping 64% of American households have Amazon Prime accounts, it’s unclear whether users will be deterred by the need to download the Amazon Go app just to buy lunch. Amazon customers love that Amazon is readily stocked with hard-to-find items that may or may not be in stock at a physical store, and that Amazon often offers the best prices for those items. But it’s yet to be seen whether the checkout-free function will actually win out once the novelty wears off. Another possible drawback? Amazon Go shoppers can only use the payment method on file, so your cash is useless there.
Misconception #5: Amazon Go is the Future of Retail
From the opening of the first store, to the announcement of expansion, and the latest announcement that Amazon plans to roll out thousands of stores by 2021, Amazon Go is getting a lot of buzz. But Harvard Business Review reminds readers to temper expectations, writing that “retail is littered with promising technologies introduced to great fanfare that didn’t become mainstream because they didn’t sufficiently benefit either the retailers or the customer.” For players other than Amazon, the risk of theft and the cost of installation are serious deterrents. Likewise, it’s unclear that Amazon Go offers sufficient value for shoppers to inspire a retail revolution.
So Amazon Go may be a mainstay, but it’s not necessarily the future of retail. That said, the future of retail belongs to those looking for innovative ways to use technology to benefit the bottom line. In an interview on the Convenience Matters podcast, Dr. Oliver Schlake of University of Maryland Robert H. Smith School of Business reminds retailers that disruption takes place from the bottom. In that vein, consider asking your floor teams what technological tools they need to more efficiently do their jobs and satisfy their customers. They’re likely to respond that they want tools that help them better understand their customers’ preferences and allow them to be more targeted in knowing who their customers are. Perhaps they want better access to sales data to provide a more customized assortment that would benefit their local clientele. These technologies are already out there and fit easily in with your existing systems. In the meantime, it will be interesting to see whether customers continue to return to Amazon Go stores after the chatter subsides. And, with thousands of stores potentially arriving in cities across the country, you may soon be able to visit one to make a judgment for yourself.
If you’re curious about how to use AI more effectively as a retailer, then check out what CB4 can do for you.
