retail news in context, analysis with attitude

The Brick Meets Click consultancy is out with a new analysis of the Amazon Go stores, concluding that:

• “Amazon has designed a store that maximizes customer throughput and sales to produce exceptional results. In fact, AmazonGo stores produce more sales per square foot than virtually any other retailer except Apple and a few other specialty stores.” Brick Meets Click put the annual sales per square foot of the selling area number at $2,700, and says it expects the number to increase.

• “AmazonGo also outperforms on inventory turns … we estimate that the Seatle AmazonGo store is generating about 50 inventory turns per year – 4 to 5 times what’s typical in other retail operations. Expect inventory turns to increase also as more customers shop the store.”

• “The exceptionally high performance of both of these retail productivity metrics makes it clear that Amazon has succeeded in disrupting the established self-service model by developing a model that makes much more efficient use of inventory and the retail footprint … Since there’s nothing similar operating at the same level in the US, Amazon is now free to roll these stores out with no direct competition – and that’s exactly what Amazon looks for and needs to continue to drive the very rapid growth of their enterprise.”
KC's View:
I’ve read some analysis of these numbers from outside sources that suggest that because the Amazon Go is coming at the shopping experience from a different angle than traditional supermarkets, these stores should not feel threatened by Amazon Go at this time and that it is not likely a head-on competitor to grocery stores.

Which strikes me as a fundamental lack of understanding of what Amazon Go is and does.

Sure, Amazon Go is at this point a very specific kind of store offering a very specific kind of shopping experience. But the model is mostly exciting/threatening/unnerving/ as an idea and for all its potential … and to suggest that any retailer should not be worried about it is to commit a kind of punditry malpractice.

I’m not even sure that the most disruptive thing about Amazon Go is the possibility that some 3,000 of them could be opened in the next few years around the country - a number that has been floated by outside analysts, not by Amazon.

(I confess to having been mildly skeptical about this number, saying that I thought have as many stores would still be a colossal achievement. But then an MNB reader pointed out to me just how many college campuses there are in the US, and that just one on each of them - which would be great targeting, by the way - would get Amazon a long way toward that 3,000 number. Plus, Dollar General has gone on record as saying that it wants to increase its store count from 15,000 to 28,000 in the next few years, which is a helluva lot more than is being speculated about Amazon Go’s growth. So I withdraw my mild speculation.)

The point of Amazon - and this kind of technology - is not that it comes at you head-on with an apples-to-apples equivalent shopping experience. (It isn’t even apples-to-oranges … it isn’t even in the produce family.)

The point is that Amazon has the ability to short-circuit traditional thinking and behavior and presents shoppers with options they didn’t know they had, which turn - sometimes with amazing velocity - into options that they don’t how how they lived without.

Amazon Go doesn’t have to compete directly with the traditional grocery shopping experience in order to have a profound impact on traditional grocers. All it has to do is change the perception of what is possible, which raises the bar for consumer expectations in a way that many retailers can compete against. And all it has to do is steal a little bit of market share here and little bit of business there, seducing shoppers deeper and deeper into its ecosystem until severe and lasting damage has been done to traditional models.

And, by the way, it isn’t just Amazon … it is companies like Walmart and Target and Kroger and some progressive and ambitious independents and regionals that are rising up to meet the challenge to varying degrees and with a variety of different approaches, sometimes enabled by tech companies that also are changing the shape of the landscape.

Not creating head-on competition to traditional retailers? Give me a break.