Amazon is not commenting on the report.
Bloomberg reports that such an aggressive rollout plan - the company currently only has four Amazon Go units - three in Seattle and one in Chicago, and three of these have just been opened in the last few weeks - would have its challenges. Among them would be the issue of format specificity.
CEO-founder Jeff Bezos, the story says, “sees eliminating meal-time logjams in busy cities as the best way for Amazon to reinvent the brick-and-mortar shopping experience, where most spending still occurs. But he’s still experimenting with the best format: a convenience store that sells fresh prepared foods as well as a limited grocery selection similar to 7-Eleven franchises, or a place to simply pick up a quick bite to eat for people in a rush, similar to the U.K.-based chain Pret a Manger, one of the people said.”
In addition, “The challenge to Amazon’s plan is the high cost of opening each location. The original AmazonGo in downtown Seattle required more than $1 million in hardware alone, according to a person familiar with the matter. Narrowing the focus to prepared food-to-go would reduce the upfront cost of opening each store, because it would require fewer cameras and sensors.”
Some other excerpts from the Bloomberg story:
• “Such an expansion could put Amazon back into an investment cycle. Bezos is willing to lose money on long-term initiatives when he smells opportunity.” However, “Opening multiple locations in proximity, like it’s doing in Seattle, could also help Amazon reduce costs by centralizing food production in one kitchen serving many stores.”
• “Adding 3,000 convenience stores would make AmazonGo among the biggest chains in US … The U.S. currently has 155,000 convenience stores, with 122,500 of them combined with gas stations, according to industry group NACS.”
• The story also notes that Amazon seems to be “targeting dense urban areas with lots of young, busy, affluent residents willing to spend a little more than a typical fast-food experience for better quality food.”
- KC's View:
-
I happen to be in Seattle at the moment, and have had a chance to visit the second and third Amazon Go stores opened here. (You can see pictures at left.)
One is downtown, and the other is in the South Lake Union neighborhood where Amazon has been building its headquarters buildings. What they have in common is that they both seem small, even though they say the one in South lake union is the largest of the three.
I think this is because the original store has a visible food prep area, which distinguishes it from the others, which seem more focused on convenience foods.
The interesting thing to me about some of the analysis is that people seem to be assuming it is an either/or situation. I see no reason that Amazon Go stores can’t be customized to their specific locations and target demographics. In fact, I’d be surprised if they weren’t … especially because Amazon likely has more data than pretty much anyone else.
Three thousand stores is a lot. Half that number would be a lot. I tend to think that 3,000 is the high end of whatever estimates Amazon may be concocting, but I also believe that it will depend on real estate availabilities and the degree to which early store openings work out.
It isn’t an experiment, Jeff Bezos likes to say, if you know how it is going to turn out.
