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Amazon’s Go Stores Set to Disrupt the Retail Market

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Amazon Go has the potential to impact the overall in-store customer experience. Retail CIOs should observe the pilot; however, consumer reception and mitigation of consumer data security concerns will determine the service’s fate.

On December 5 2016, Amazon announced the beta launch of its Amazon Go convenience-style grocery store. Amazon has opened one Go store in Seattle, Washington. It is only available to employees but a public launch date is set for early 2017.

Analysis

Amazon’s Go leverages a range of technologies, including mobile devices, deep-learning software and sensors, in lieu of the scanning and check-out process typical of traditional grocery stores. While none of these technologies is new, Amazon is the first to combine and utilize them to power its “Just Walk Out Shopping” experience.

The introduction of this service will make it easier for consumers to buy “convenience” items such as bread, milk and prepackaged meals, using the Amazon Go app. The shopping experience will be improved as this service will eliminate having to wait in line, scan and pay for items. Customers can do self-service refunds from the Amazon Go app.

An opportunity exists for retailers to save on in-store labor, one of their largest costs, as cashiers would be replaced by automation. However, there would also be shift to other positions, like stockers to ensure products are available for purchase in this high-volume and small-footprint environment, or staff to provide support for the check-out as needed or to answer questions. The service could also help to tackle shrinkage as once the item is in the basket, the customer will be automatically charged for it.

Another benefit from the technology would be customer insights gained from the plethora of information generated by this service, through capturing customer data from when they walk in, to where they browse and what products they select. Terms will be consistent with Amazon’s existing privacy policy.

Before determining the viability of this service, some areas of concern will need to be addressed. The customer experience is predicated on 100% accuracy in product recognition, tying the right product to the right person, charging procedures, and payment data security. For traditional grocery stores, problematic areas may be how the service copes with food that needs to be weighed. The service will also need to flag items that need age verification, such as tobacco or alcohol. Retail environments, such as apparel, will have to deal with the issue of detagging and bagging. Customers will also need clear communication on the physical returns process post-payment. In its current form, the trial excludes shoppers without smartphones. Not only could this be perceived to be discriminatory, it also means that retailers will fail to maximize the market opportunity.

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Beyond the technology, Amazon may also be using this opportunity to gain credibility in the physical store space. The competitive advantage traditional brick-and-mortar retailers have over online retailers (e.g., convenience of fulfillment) would be disrupted if Amazon’s Go stores prove to be successful.

Recommendations

 Retail CIOs:
  • Watch the pilot development and determine how this technology could be implemented to meet the needs of your specific customer base.
  • Collaborate with marketing and customer insights leaders to understand what proportion of your customer base would be willing to engage in this type of model in the near term.
  • Consider the total cost of ownership. While labor cost savings are possible, don’t lose sight of the technology investment as well as the additional labor costs that will be needed for the preparation of fresh food on the premises.
  • Work with HR and human capital leads to assess the shift in skills that would need to be put in to place in preparation for the oncoming push for the automation of repetitive tasks.

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