Amazon Go's biggest challenge is scale
Even as Amazon has expanded its cashierless Amazon Go stores to new cities, it has been careful to limit the size of each store as a concession to the limits of its technology. That constraint may soon be a thing of the past.
In order to have the promised game-changing impact, cashierless checkout will need to work at much larger stores, and at the scale that can handle a supermarket or big box chain. That’s why a lot of retailers will be closely watching Amazon’s reported test of a larger version of Amazon Go.
While the Amazon Go locations have been around 2,500 square feet, Amazon is testing in a larger space in its Seattle headquarters, reports MarketWatch, adding the mix of computer vision and AI that supports Go does not work as well in larger venues. Amazon would not comment on the tests, saying it does not respond to rumors, but the e-commerce giant wants to ensure the technology can work at larger stores, according to The Wall Street Journal. Amazon is also reportedly seeking retail space for larger “Go” stores in the U.K.
Amazon has opened or is close to opening about a half-dozen Go outlets, mostly in San Francisco, Seattle, Chicago and New York. It plans to open about 3,000 Go locations over the next few years. Amazon did not give a specific timetable, though it’s likely the e-commerce company would have to increase its pace and size to support a network that large in that time frame — and to tap into its network of Whole Foods grocery stores, which have so far seen little benefit from Amazon technology.
In order for cashierless technology to mature in larger venues, the technology needs to be tailored for the space, rather than building the space around the innovation, contends Evan Shiue, director of strategy and growth for Standard Cognition, which develops autonomous checkout technology. “Some of the world’s largest retailers operate in large-store formats, so for autonomous checkout to really become mainstream it has to work in that environment,” Shiue said. “And that means designing lighter footprint systems that fit in existing stores.”
The technology that supports cashierless technology varies among developers, and is generally tightly guarded. But it usually involves cameras and machine learning to check in consumers, recognize items and automatically scan those items to the consumers’ e-commerce account. In Amazon's model, consumers check in by scanning a mobile app at a turnstile, after which cameras and sensors track the shopper and any items picked up before that shopper leaves.
Most of the challenges involve getting the technology to work in crowds or across distances, in which there may be people or other devices blocking the cameras. Amazon Go’s initial deployment in 2017 was reportedly delayed due to issues with handling crowds. When the store finally opened to the public, Amazon asked patrons to line up outside so as not to crowd the store's interior.
“Security gates, shelf sensors and shelf cameras severely limit store layouts and retailers’ ability to quickly locate items for specials or sales,” Shiue said, advocating ceiling cameras. There has been some progress. Amazon’s technology was recently able to prevent “fake crooks” from robbing an Amazon Go store.
Because Amazon Go's model relies in part on special codes printed on product packaging, it may not work for grocery stores' produce departments, said Raymond Pucci, director of merchant services at Mercator Advisory Group.
“With enough time and money, which Amazon has, this is probably doable. But will the average big box retailer be able to invest in this expensive technology over many stores?” Pucci said. “My feeling is that Amazon Go could work well in limited, zoned-off areas in bigger stores. Which is why we still think that Whole Foods would be a prime grocer to feature an Amazon Go store within a store.”
The cost may be more of a challenge than the technology, according to Krishna Motukuri, founder and CEO of Zippin, which recently opened a cashierless store in San Francisco.
“The technology challenges are not that difficult to address” Motukuri said. “If we don’t see checkout-free technology in 50,000-square-foot stores, it’s primarily because of deployment. The hardware cost is proportionate to the floor size of the shoppable area.”
That may leave the big-box no-cashier race between the largest companies with the biggest IT budgets, while the alternative fintechs support smaller neighborhood stores. It’s probably not a coincidence that Amazon is ramping up testing to scale Go at the same time Walmart is pouring more investment into new retail technology. Walmart recently opened innovation labs on Long Island and near Dallas. A full menu of retail technology will be on tap at these locations, such as augmented reality, AI and a variety of cashierless checkout options.
“I think that there might be easier use cases for the launch of Amazon Go than grocery, such as specialty retail and casual dining,” said Thad Peterson, a senior analyst at Aite Group. “In both cases, inventory is limited and the size of the space would probably be much lower. If they can make it work in grocery, though, it would be a big deal, reducing queues at checkout and lessening the friction of grocery shopping.”