Story Of The Week

JUST WALK OUT – AMAZON’S NEW SPIN ON CONVENIENCE STORES

Imagine a grocery store with no lines and no worries, sounds too good to be true right? But that’s exactly what Amazon has come up with in its “Just Walk Out” technology in its newest Amazon Go store in Seattle, United States.

What is the “Just Walk out” Technology?

The Just Walk out technology automatically detects where products are taken from or returned to the shelves and it tracks those items in a virtual cart. Amazon will then charge the customers on their Amazon account shortly afterwards and send them the receipt for their purchases. However, the customer needs to have an Amazon Go account. The store is Amazon’s first physical grocery store and the technology the store uses includes cameras and sensors to follow customer’s every step.  However, the technology still needs to be seen in practice and if people find a loophole in the process they could use it to their advantage resulting in huge losses for the store.

Amazon going offline for groceries

While Amazon may be the king of the e-commerce jungle, it controls only 1 per cent of the US food and beverage market which is valued at around $800 billion by offering grocery delivery services such as Amazon Fresh, and Prime Now.

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John Blackledge who is an analyst at Cowen and Company wrote “Although an increasing number of people are buying and willing to buy groceries online in the future, we acknowledge some people may never be comfortable with the idea” and  according to him physical locations makes sense as it removes a friction point between customers and Amazon.

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Online grocery sales are only $23 billion and account for a measly 3.4% of total grocery sales and while online grocery sales expected to increase by 4 times to $100 billion by 2019, most customers are still hesitant to purchase groceries online as there is a “feel the product factor involved”  while purchasing offline. Also online grocery delivery does come with its own costs. Employees have to pick out the product, package it and deliver it.  This is less profitable as shoppers can do the same work at a physical store. 

End of Cashier Jobs – The war between automation and unemployment

As per the Bureau of Labor Statistics, About 3.5 million jobs in the United States are of cashiers. Several people have already raised concerns that while Amazon’s technology is a game changer this could mean the end of cashier jobs. Even Karl Marx had observed that automation could lead to severe unemployment.

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But James Bessen, an economist, differs and has stated that automation leads to reduction of cost and that leads to cheaper prices. Hence automation would lead to an increased demand and in turn result in increase in employment. If Amazon Go increases its business and variety due to an increase in demand, the employment may not decrease.

 The technology will not eliminate retail workers however as the technology still needs people to restock the shelves, provide customer service and make sure people provide payment information before entering the store. However, eliminating one of the most common jobs of the last century will certainly create an impact.

The Edge of Amazon Go

The advantages of this technology are:

  • Customers need not stand in checkout lines or worry about money in their wallets to pay for their groceries.
  • Amazon could save up to 15% of running costs by automation of the checkout process.
  • Shoplifting will be virtually eliminated in stores as it detects actual items come off the shelves and not a bar code or RFID Tag. So people cannot steal by removing or altering tags.
  • Analytical data could be collected and based on the data collected by the retailer, it could integrate the findings into the shopper’s Amazon account and deliver better offers. This data can help Amazon not only in its offline experience but online as well.
  • With the growing number of people going online it was a concern that retail centres will have a decline in customers but if all the big stores were like Amazon Go without any checkout queues, people would come to buy products and be less stressed about it and would therefore be willing to stay longer in public spaces. Therefore they might also avail other services.

Future implications on the world of retail

The introduction of Amazon Go will hit retail king Wal-Mart hard and a lot other convenient stores stocks are also at stake. Stores such as Casey’s General Stores, MUSA and CST Brands and a few drug store chains like Walgreens Boots Alliance are likely to get hit by this introduction. There will also be a creation of price pressure on sensitive grocery store chains like The Kroger Co. or Ingles Markets. The growth of these companies might get severely impacted unless there is a huge makeover in their business models.Traditional convenience stores face a severe threat in form of Amazon Go in the coming years.

Conclusion

The prototype is currently in Seattle and will be available to the public in early 2017 and about 2000 of these stores are planned by 2018.

With Amazon’s new invention one thing is clear that customer is the king. Although technology plays a key role in enhancing a customer’s experience but the basic elements of an amazing shopping experience i.e. innovative store design, executional excellence, variety to choose from and exceptional service will never change. With convenience and technology being essential in today’s world, Amazon might have a game changer in Amazon Go’s Technology but we need to see if the technology can change Amazon’s future in the grocery market.

References:

https://www.ft.com/content/88399c00-bb03-11e6-8b45-b8b81dd5d080

http://amigobulls.com/news/are-traditional-convenience-stores-threatened-by-amazon-go

https://www.theguardian.com/sustainable-business/2016/dec/09/amazon-go-means-more-than-just-job-losses-it-will-restructure-the-economy

http://money.cnn.com/2016/12/05/technology/amazon-go-store/

https://www.bloomberg.com/news/articles/2016-12-05/amazon-opening-store-that-will-eliminate-checkout-and-lines

http://www.ecommercetimes.com/story/84141.html

http://www.livemint.com/Companies/Gk2aBLxJIiujEzxjAESfXL/Checkouts-to-become-history-at-Amazon-Go.html

http://blogs.wsj.com/cio/2016/12/06/the-morning-download-amazon-go-store-makes-retail-check-out-thing-of-the-past/

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Categories: Story Of The Week