Amazon designed its payment-free store to be a millennial magnet

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Amazon’s latest attempt to disrupt retail—a store that automatically handles the whole checkout and payment process via an app—is a concept that could have far-reaching effects as the millennial generation brings its digital expectations into the brick-and-mortar world.

With Amazon Go, the retail giant is introducing the “Just Walk Out” shopping experience in an 1,800-foot Seattle outlet about the size of a convenience store, where consumers who download the app can stroll through the store and pick up grocery items and walk about without having to scan or enter payment credentials. Amazon tallies purchases using a combination of sensors built into the store’s shelves, and charges the consumer’s Amazon account at the end of the shopping trip.

The concept essentially takes the Uber experience — particularly the invisible payment aspect — and applies it to a more complicated setting.

“With Amazon Go, Amazon is going to try to do to convenience stores what Uber did to taxis,” said Richard Crone, CEO of Crone Consulting LLC. “Convenience stores already have some of the highest traffic and highest margins of any stores, but instead of seeing hot dogs rolling on a grill that have been there all day, this concept could bring the kind of food and meals millennials increasingly are looking for at other outlets.”

Amazon is targeting more upscale, urban shoppers with a staples like bread and milk, artisan cheese, locally sourced chocolates and a mix of meals prepared on-site by chefs, according to a company blog post, which explains the idea has been in development for four years. Last year, it filed a U.S. patent application on the concept.

Though the first Amazon Go store is being tested only with employees, the concept could be a winner with younger, higher-income consumers when it expands to cities like New York and San Francisco, experts say.

Walmart, Target and Whole Foods already have invested millions in bringing smaller-format stores to urban areas, with mixed results, Crone points out. The push to higher-end, fast-casual restaurants supports the need for quick, high-quality foods, and convenient payments are at the heart of many of these experiences, he adds.

Convenience stores also typically haven’t leveraged a lot of data or loyalty programs, and Amazon Go could enhance a consumer’s experience by plowing its powerhouse shopper data into offerings at local stores, enabling consumers to order ahead or to alert them to special deals and seasonal offerings.

That approach could be particularly compelling for millennials.

"In high-density, urban environments where a lot of people are walking in from living and working nearby, they're going to attract the younger adults who already are adapted to paying with smartphones and have the recognition and confidence with using Amazon," Crone said.

The convenience store sector is ripe for development, he added. "Nobody has nailed down the concept in convenience stores where they’re combining the information they already have about a consumer plus preregistered payment data to deliver a concept tailored to that store, that neighborhood and that customer,” Crone said.

It's still too early to assess Amazon's success with brick-and-mortar retail; the company opened its first walk-in bookstore a year ago in Seattle and has not yet rolled the concept out broadly. Its Amazon Dash button enabling consumers to order basics like detergent by pushing a button inside their homes may soon fall out of favor as Amazon partners with more appliance makers to embed Dash technology during manufacturing.

But Amazon clearly has ambitions to bring its broader e-commerce and payments innovations to more traditional retail. Amazon plans to open 10 grocery stores a year, expanding from Seattle to San Francisco, Las Vegas, New York and Miami, Business Insider reported in late October.

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