The future of retail sits at the intersection of e-commerce and brick and mortar. Amazon Go demonstrates that the two experiences can be fully integrated.
This month, the world tech giant Amazon announced the launch of Amazon Go, the very first checkout-free grocery store where customers can shop and walk out without waiting in lines. This is just a logical step in the streamlining of the shopping process.
Food retailing should be less labour intensive. This objective is not new. One century ago, shopping for groceries involved trips to multiple specialty shops, such as a greengrocer, butcher and bakery. Customers would indicate the product of their choice to merchant, who would pack and sell it from behind the counter.
Next, the concept of a self-service grocery store selling merchandise in individually wrapped consumer-sized packages removed the need to measure out and wrap the precise amount desired. In the seventies, barcodes were introduced to automate supermarket checkout systems, an innovation that at this point has become almost universal.
Nowadays, self-checkout systems allow the customer to assume the role of the cashier by scanning their items and applying payment themselves. Self-scanning is an alternative mechanism allowing clients to scan the products with a remote barcode reader while shopping. However, this system does not remove the necessity to queue to validate and pay the purchase.
With Amazon Go, the customer’s shopping process is now fully automated. There are no lines, no cashiers, no payment terminals and only one barcode to scan when entering the store. The technology uses a variety of sensors and automatically detects when products are taken from or returned to the shelves and keeps track of them in a virtual cart. When the customer walks out of the store, he is charged through his Amazon account and gets a digital receipt (Thomas, 2016).
Although, this innovation intends to please customers, the biggest advantages are for Amazon itself:
Having physical store is a requirement to gain market shares in the high revenue food business/sector. Despite the introduction of Amazon Fresh, this segment remained largely untapped by the company.
By tracking people, Amazon can collect valuable information on complex shopping acts. Aggregate data on how customers behave within stores and what they buy can help to forecast purchasing trends, rearrange shelving layouts, and improve marketing in store and online.
It is likely that Amazon will use its stores as a pickup location for items sold through its e-commerce. Besides saving in logistics, online sales will likely trigger physical sales and vice versa.
This inspiring new venture may also be a source of concern for incumbent groceries, retailers and ecommerce. The low-profit-margin grocery business is already extremely competitive. Supermarkets may struggle transforming their business operations due to legacy architectures but they should capitalize on customer loyalty. Melis et al. (2016) indicates that clients expand the share of grocery spending in chains that adopt an integrated multichannel strategy.
Neil Blumenthal points out that the future of retail sits at the intersection of e-commerce and brick and mortar (Shearman, 2016). Amazon Go demonstrates that the two experiences can be seamlessly integrated and complementary. The entire retail industry both online and in-store will be impacted as the “no checkout” store system pops up in the other segments (e.g. books, cosmetics, and electronics). The cashiers who are already facing the competition of self-scanning will once again be the first to feel the heat.
When the technology will reach the Benelux, it will radically transform the local economy. Retail remains one of the biggest sectors in terms of number of enterprises (150.000), persons employed (around 1 million) and turnover (€ 155 billion). However, the fact that it represents only a small fraction of the GDP shows that there are opportunities to reshuffle resources into more productive areas (Eurostat, 2006).
Amazon. (2016). Introducing Amazon Go https://www.amazon.com/b?node=16008589011
Shearman, S. (2016, July 7). Back to bricks and mortar: how e-commerce has embraced the real world. The Guardian. https://www.theguardian.com/media-network/2016/jul/07/bricks-and-mortar-ecommerce-retail-digital
Thoams, B. (2016, December 12). Amazon Go: The Power of clicks and bricks. Forbes. http://www.forbes.com/sites/bradthomas/2016/12/12/amazon-go-the-power-of-clicks-and-bricks/#1b85b79e4053
Melis, K., Campo, K., Lamey, L., & Breugelmans, E. (2016). A Bigger Slice of the Multichannel Grocery Pie: When Does Consumers’ Online Channel Use Expand Retailers’ Share of Wallet?. Journal of Retailing.
Eurostat. (2006). Retail trade and repair (NACE Division 52): main indicators. Structural business statistics.