With the revolutionary Amazon Go concept, Amazon flipped the traditional grocery store model on its head, enabling a shopping experience without check-out lines. Amazon identified a consumer need in simplifying the often frustrating shopping experience by eliminating arguably the most annoying part: waiting in line. At Amazon Go, consumers simply choose which items they want and walk out of the store. To come up with this solution, Amazon leveraged its immense trove of consumer data, and combined it with innovative computer vision and deep machine learning. However, with the grocery industry’s low margins of between 1%-3%, Amazon certainly isn’t targeting this sector for profitability alone. Amazon Go is part of a larger organizational strategy to grow its payments business, expand into physical retail, and ultimately drive more traffic to the larger Amazon.com marketplace.
The science behind Amazon Go involves a combination of sensors and technologies, including (i) computer vision to see what people are looking at and what they’re picking up, (ii) sensors on the shelves, (iii) a mobile app that identifies individuals and ties them to their Amazon accounts, (iv) QR codes scanned upon entering to track identity, and (iv) advanced RFID technology to verify when items have been picked up off of a shelf. After a customer scans her smartphone into an Amazon Go-enabled supermarket, every step she takes, and every item she picks up, puts back, or purchases, will generate data. By learning customers’ purchasing habits, stores will be optimized to stock the most relevant products to them, offer relevant discounts, and even notify them when their milk is expiring via Amazon Echo. Eventually, all of these features will come together as an augmented, individualized, and seamless experience. While Amazon Go involves multiple sensors, layers, and technologies coordinating and communicating with one another, all of this remains behind the scenes for the consumer. To see the magic for yourselves, watch Amazon’s demo video here. This technology could mean the Internet of Food. Since Amazon owns the overall ecosystem, from Amazon.com to Amazon Echo, and from Amazon Payments to physical stores, Amazon Go provides Amazon with a positive commercial outlook.
While Amazon may be the first to implement these technologies in the real world, it was not the first to imagine a future in which technology could enable this type of experience. IBM predicted a jarringly-similar concept over ten years ago (watch here), from which Amazon likely drew inspiration for this final store concept. Going beyond the cashier-less checkout process, there are also several retail tech companies that recognize the larger trend and importance of tracking consumer data in-store. RetailNext, Euclid, Brickstream, Nomi, WirelessWerx, Mexia Interactive, and ShopperTrak are just a handful of services that provide brick-and-mortar stores with analytics akin to website traffic reports. By tracking movement within stores, they help retailers better understand how to optimize their layouts, staff their registers, attract returning customers, and more. However, because Amazon was first to market in bringing an experience of this level to life, it has earned itself a significant first-mover advantage, it has created a strong competitive advantage through the incorporation into its larger ecosystem.
Despite its strong strategic positioning, Amazon Go faces several challenges, including (i) the reluctance of customers to be tied to the Amazon mobile app and Amazon Payments, (ii) the need to address frequent misplacement of items caused by grocery shoppers, and (iii) items priced by weight. Potential ways that Amazon may be able to address these issues include: (i) licensing the underlying technology to non-Amazon grocers in exchange for a licensing fee and acceptance of Amazon Payments at their stores, (ii) sensors being programmed to alert employees when items are misplaced (perhaps with a subtle colored light that shines underneath the item), and (iii) having built-in food scales for shelves that include fresh produce, auto-adjusting digital price tags based on weight.
All in all, Amazon Go is a huge step forward in innovation. We are excited by the technological advances and possibilities that are still to come as Amazon perfects its Amazon Go concept, and as other players within the larger tech space find ways to apply the underlying technology behind Amazon Go towards innovations in other fields.
By The Terminators (Maayan Aharon, Aanchal Bindal, Aditya Bindal, Youngeun Kim, Eran Lewis, Angela Lin)