How fast is too fast for Amazon Go to expand?
Hot on the heels of the January debut of the first Amazon Go store in Seattle, the e-tailer is reportedly planning to open six more stores over the course of 2018.
It's a surprising show of confidence from Amazon, which only opened the doors to its Seattle store after internal employee tests reportedly challenged the premise that the store's cameras and mobile technology could keep up with the crowds. And when Amazon Go finally did open to the public, early news coverage depicted the line-busting store simply moved its lines outside, as eager Amazon shoppers flocked to the store but had to wait their turn to step inside.
More shoppers may soon get the opportunity to try Amazon's new model, and it's clear that the timing will be key if Amazon is to demonstrate that its cashierless store concept is more than a novelty. It may seem fast for Amazon to already be picking out new locations — according to Recode, the stores are likely to open in Seattle, as well as Los Angeles at billionaire developer Rick Caruso’s 600,000-square-foot outdoor shopping center, The Grove — but Amazon has to move fast to fight off a growing wave of copycats and skeptics.
Whose line-free store is it anyway?
Even if the Go concept is a hit among Amazon employees and Seattle's tech-savvy shoppers, that doesn't mean it could succeed anywhere else. Mobile and digital payments tend to have trouble building a mainstream market, instead finding only pockets of success such as commuters and Starbucks patrons.
When Amazon opened its first Go store a month ago, many people were wowed by the technology that enabled shoppers to walk in and out without having to go through the checkout process, but there was some skepticism of the potential scalability given the complexities of the enabling technology, described by Amazon as “made possible by the same types of technologies used in self-driving cars: computer vision, sensor fusion, and deep learning.”
Shoppers entering the store scan a mobile app at a glass-gate turnstile, much like entering a subway. Cameras and other sensors detect which items shoppers pick up and carry out of the store, after which the purchase gets charged to whatever payment method the shopper has on file with Amazon.
If the first store was a proof of concept, then Amazon may have quickly determined that this model is viable and potentially ready for prime time. Amazon did not immediately return a request for comment on the report of its expansion plans.
Admittedly, expanding to a reported six stores isn’t going to give rival retail chains immediate headaches, but it does telegraph that the company's plans are moving ahead to up the ante on the retail experience.
“It would appear that the concept is achieving their objectives and that the customer experience is robust and stable enough to move forward,” said Thad Peterson, senior analyst at Aite Group.
Further, pushing the stores to different locations with different demographic customer profiles allows for fine-tuning local idiosyncrasies in terms of product preferences and, more importantly, attitudes to a cashierless store.
Can two retail models coexist under one company?
It should also be noted that the impact of expansion to cashierless stores may clash with the message Amazon is sending to Whole Foods shoppers.
Since buying Whole Foods in June 2017, Amazon has let its branding and electronic products seep in, as well as adjusted some prices for Prime members, but has not made any major overhauls to the Whole Foods model. Amazon's latest move of expanding its cobranded credit card rewards to Whole Foods stores suggests that traditional plastic cards aren't due to be phased out in the near future.
It's also noteworthy that the reported plan for Go is to build new stores rather than retrofit Whole Foods locations. Whole Foods has 89,000 employees who may feel that their days are numbered, but the strategy for Amazon Go hasn't fully encroached on their turf just yet.
The continued march toward automated checkouts by Amazon is unlikely to placate cashiers in Whole Foods, and indeed, the estimated 3.4 million in many other comparable retail settings in the U.S. As with all industries, as technology marches forward, there will need to be a balance between compassion and compensation.
But even if Amazon exercises some restraint, its rivals are pushing ahead.
Activant Capital recently was the lead on a $50 million investment in NewStore, a mobile retail platform. Another Activant portfolio company is RetailNext, which has roots in casino cameras and is extending its sensor technology for in-store use.
There's also Standard Cognition, which is also building no-cashier sensor technology to enable product and shopper recognition, along with payments.
These upstarts may be the biggest motivation Amazon has for its reported expansion plans — the Amazon Go concept has opened a Pandora's Box of automated checkout technologies, and Amazon must be aggressive if it doesn't want to lose the fight it started.
John Adams contributed to this story.