retail news in context, analysis with attitude


MNB reported yesterday that Amazon announced that it will open a new 1,800 square foot convenience store format in Seattle early next year called Amazon Go that will allow consumers to enter the store using a mobile application, choose the items they want, and then leave - without having to go through a checkout lane.

You can see the video at left.

As might be expected, there has been a lot of coverage of this new format, and the potential implications...

Bloomberg writes:

"The speedy checkout technology matters because retailers have been trying to crack the checkout process for decades. If Amazon can solve one of brick-and-mortar retail's biggest sources of friction, then that could be a harbinger of how else the company might turn physical retail on its head. 

"Walmart once said it could save $12 million for every second it cuts from the checkout process in the U.S. This belief drove a Walmart smartphone app that let customers scan items as they shopped. The app flopped after customers said it took too long to individually scan carts full of items."

MarketWatch writes:

"The ability to build its biggest push into physical retail from scratch with this type of automatic technology could be the ticket to further disruption of traditional brick-and-mortar retailers like Wal-Mart Stores Inc. and Target Corp. Grocery shopping for fresh food has long been a difficult but enticing arena for tech startups, which have put forth efforts like Webvan during the dot-com boom and now Instacart and its rivals, which offer grocery shopping as a service. Stores have even developed their own online options, such as Safeway.com, but Amazon has a good chance to crack into traditional grocery shopping with this hybrid effort, which addresses many of the issues consumers have with online grocery shopping."

And, some context from Bloomberg:

"Amazon's move to the physical realm is no surprise. It has already started building bookstores on college campuses and in shopping malls. Mall operator General Growth Properties's CEO revealed last February that Amazon could open as many as 400 bookstores."

The Financial Times adds:

"Amazon is also putting the finishing touches on two new drive-in grocery stores in Seattle. Planning documents indicate those stores would function more like hubs that allow a customer to order groceries on their app, then pick them up kerbside while remaining in their car. Amazon has not made any public comment about the two locations."

Bloomberg also tries to find a silver lining for traditional retailers:

"All hope is not lost for traditional retailers. There's actually an upside to Amazon entering the physical retail realm: Operating in the daylight of physical stores -- as opposed to behind secretive, online algorithms -- will give traditional retail rivals such as Walmart and Target a front-row seat to Amazon's practices.

"Being able to walk right into Amazon's stores, to see how they operate and to talk to customers, gives other retailers a chance to quickly match Amazon's best ideas. For smart competitors, this scary moment could be an opportunity."

MarketWatch sees a potential downside:

"Despite the work already put into the effort, this could be a costly experiment for Amazon, with the different range of store formats planned, physical retail locations to acquire or rent, technology systems to install and maintain, more employees to hire and, of course, keeping inventory stocked. The cost of Amazon’s vast physical warehouse infrastructure build-out over the past few years has only been eclipsed in cost by the money its spends on shipping products to customers of its Amazon Prime service, which includes free shipping."

KC's View:
Obviously we're not going to know whether this actually works until the store opens, but I think it is likely that this is going to be, as Michael Sansolo wrote above, an enormous game changer. And not just for food retailing ... potentially, this technology could change the face of virtually every kind of retailing. And Amazon has an enormous head start on this.

One thing. There are folks out there who as recently as last Friday were writing that Amazon's food stores wouldn't disrupt the grocery business and might not even succeed, and then yesterday decided that Amazon Go was the future of food retailing.

I think I've been a little more consistent than that in my view of Amazon's approach to food retailing, but I would also suggest the following caution. It is critical to remember that this is just one element in the ecosystem that Amazon is creating ... it is obviously not the first big idea that Amazon has had, and certainly not the last one. And here's the thing that everybody needs to remember - it isn't even the biggest.

Amazon's unique advantage is its ability to see every day as "day one" in its development. No legacies, no boundaries, and no such thing as reduced expectations. Very few companies can compete with that. Every company has to try.

And let me repeat something I wrote yesterday. For now, watch the video, and think about what it means to your business. (If the answer is "nothing," then think again.)