Convenience will be at the center of how retailers answer Amazon Go
Amazon Go once again captured headlines a couple of weeks ago on a rumor that the e-commerce king is preparing to build more Go stores in Seattle and one in Los Angeles.
While the company publicly refuted a Recode report, the idea that Amazon might expand Go outside its home base shouldn’t surprise anyone given the buzz the concept has generated in the past year.
And Amazon already has a framework for how it opens physical stores. It opened its first physical bookstore in Seattle almost three years ago. The chain has spread to 13 locations and counting, with two locations each in the Boston area and New York City.
Amazon has been down this road before. But Go is a different animal.
Go isn’t necessarily a new concept, but Amazon’s take on cashierless shopping brings with it questions about the future of retail, and changes the way consumers buy goods.
In turn, traditional retailers are thinking about how to combat one of Amazon Go’s most attractive features: convenience.
The answer to that likely doesn’t lie in Amazon Go clones, but the ability for retailers to fight convenience with convenience with the smartphone at center of it all.
“The cumulative experience has been that Amazon Go is evidence that Amazon is going to try and break into the physical world with customer convenience as their competitive edge,” Will Hogben, CEO of a mobile software provider FutureProof Retail, told Mobile Payments Today in an interview.
Before Amazon Go, FutureProof was one of several technology providers that dabbled in cashierless shopping, along with companies such as Diebold, NCR and Scandit, to name a few.
The biggest difference between FutureProof and the aforementioned companies is that New York City-based FutureProof offered, at the time, what it claimed to be the first start-to-finish, secure self-checkout mobile app.
Grocery stores that deployed the white-label product did not need to install a special kiosk for customers to complete their orders because the app handles the entire shopping process.
To use FutureProof’s Mobile Checkout, consumers download a participating grocer’s app from either the Apple App Store or Google Play and enter an email address to create an account. The app then prompts the user to take a selfie as a visual form of identification for the grocer. A user adds a payment mechanism (a debit or credit card) near the end of their first checkout experience with the grocer.
Mobile Payments Today first spoke to FutureProof two years ago about its product at the National Retail Federation’s annual Big Show in New York City. At first, the company admittedly had problems helping retailers see its vision.
Amazon Go changed that.
“I think what [Amazon Go] did for us was it really legitimized the concept,” Hogben said. “People realized that when Amazon started doing this, that this was the future, that it was not speculative.”
But that doesn’t mean Amazon Go Lite will arise at Home Depot or Target.
“I think the cautionary tale here is that [Amazon Go] doesn’t make sense for every type of retailer,” Michelle Evans, the global head of digital consumer research at Euromonitor International, told Mobile Payments Today in an interview. “It works for certain types of outlets where you’re selling certain types of products and services. I think a convenience store is most likely your best fit.”
Which is why it makes little sense for Amazon to shoehorn Go into something like Whole Foods, which Amazon purchased last year to much fanfare.
Some retail industry analysts speculated Amazon could deploy the Go concept at Whole Foods, but such an undertaking could be costly.
Amazon Go in Seattle uses hundreds of small cameras throughout an 1,800 square foot space. While Amazon hasn’t said much about how the camera technology works, it told the New York Times “it involves sophisticated computer vision and machine learning software.”
A typical Whole Foods location has some 39,000 in gross square footage, according to an analysis from Statista.
Amazon took months to perfect Go in a much smaller space. Even when the Seattle location officially opened, Amazon only admitted a select number of shoppers at once into the store because that was what the camera technology could handle at the time.
The future of convenience stores
As Evans mentioned earlier, convenience stores likely provide the best setting for an Amazon Go-type concept.
However Amazon will not be the only company to test that market.
Bank of America Merchant Services and Philadelphia-based Stuzo showcased at Money20/20 last year a future convenience store concept with no checkout lanes, physical point-of-sale devices or cashiers. It’s a different interpretation of what Amazon has with Amazon Go and what Walmart rolled out last year with Scan and Go, a mobile app that enables shoppers to scan and pay for items without the need to wait in line.
“Retailers are going to have to transform the customer experience in order to compete and remain relevant in a world that’s going to be massively disrupted by new technologies,” Aaron McLean, Stuzo chief operating officer, told Mobile Payments Today at the Money20/20 event.
“What we wanted to do [at Money20/20] was showcase a future concept of what urban convenience stores can look like with tech that is being developed and piloted today and has become hardened and ready for mass commercialization.”
Stuzo at the time had tested the concept in two pilots. But here’s the catch: McLean told Mobile Payments Today that consumers won’t start to see these connected storefronts until the year 2025.
The issue at hand isn’t necessarily the technology, but retailers building these types of stores from scratch rather than retrofitting them into existing locations.
“It’s most likely that the retailers that understand this vision will adopt the tech and start with a prototype store,” McLean said. “And then they’ll have to build a store from the ground up, which is designed with these particular technologies and experiences in mind.”
China, not surprisingly, has already given us an idea of what that could look like in the U.S.
Euromonitor’s Evans pointed Mobile Payments Today to a company called called BingoBox.
The startup’s concept involves an unmanned, cashless convenience store where shoppers use an app to scan and purchase products. A user even needs to scan a QR code to get inside the store. Consumers checkout via WeChat.
For now, BingoBox uses RFID tags on its goods but plans to move to the technology found in Amazon stores.
“I think it’s funny that Amazon gets all the headlines on these things, whereas it certainly seems it’s gotten more traction in China than here,” Evans said. “There have been active scenarios unfolding there.”
She also pointed to what Alibaba has accomplished in the country.
Alibaba last year opened the self-service Tao Café, a 200-square-meter store offering beverages, fast food and snacks. The café uses a similar system to Amazon Go.
Alibaba also has cashierless shopping throughout supermarkets called Hema.
Consumers use a Hemma app that acts much in the same way as Walmart’s Scan & Go. They then visit a self-checkout kiosk to bag their groceries and pay via Alipay.
It’s difficult to ascertain how retailers might respond to Amazon Go because, well, they’re not talking about it publicly.
Mobile Payments Today reached out to six different retailers to comment for this story. All declined. At least two retailers cited competitive reasons for not wanting to speak on the record about Amazon Go.
But make no mistake, retailers are monitoring Amazon’s plans with the Go.
“I’ve talked to tech vendors and they said after Amazon Go made headlines, they got bombarded [with requests from retailers] wanting to know how they could move to an unmanned setting,” Evans said.
FutureProof’s Hogben has been as overwhelmed, and it’s not just supermarkets that are reaching out to him about his company’s concept.
“From a retailer’s perspective, it’s great to offer the customer that cashierless experience,” he said. “I think they all know that they will have to because ultimately the thing that is hurting retail right now is convenience of online.
“Convenience is the battleground that they have to fight on to keep their [in-store] traffic.”
Photo courtesy of Amazon