Amazon Go Is in Prime Position to Disrupt In Store Retail
By John Waldron
The supermarket industry has been discussing and attempting a faster checkout experience for years. However, whilst distracting itself with self-service checkouts and certain buy online pickup in store (BOPUS) initiatives to speed things up, it has taken an online retailer to come up with a solution that no-one else thought of – no checkout at all.
Amazon Go is Amazon’s new checkout-free convenience store, set to open a presently unmatched in store-based retail experience to the public in Seattle early 2017.
Watch the video and prepare to be wowed:
The Start of Things to Come for Amazon Bricks?
Amazon has been dipping its toe into the waters of brick-and-mortar for some time. With bookstores popping up around the country and a few small outlets at colleges here and there, the announcement of Amazon Go has nonetheless arrived as a surprise –nay, a shock – to the retail industry.
The premise is simple – customers scan the Amazon Go mobile app as they enter the store, pick off items from the shelves, and walk straight back out the door. Checkouts, card transactions, bagging – all are inconveniences set to be eradicated for Amazon Go shoppers.
Checkout-free shopping has strong, truly disruptive implications not only for food retailing, but each and every segment of retail. If Amazon can successfully deliver a checkout-free experience in a convenience store, then it doesn’t take much to envision a future filled with Amazon outposts, all built upon the same checkout-free premise – book stores, entertainment stores, beauty stores, perhaps even drive-thru grocery locations.
For consumers, Amazon Go represents an exciting new hassle-free concept and level of convenience that until last week could not have even been dreamed of. The question that the pending store poses to the rest of the retail industry, however, is much more serious: Just how far behind are we?
“Just Walk Out” Technology
Amazon has revealed that it uses a combination of machine learning, sensors and artificial intelligence to track items that customers pick up. The items are then added to the customer’s virtual cart, and the virtual bill is subsequently forwarded. This allows shoppers to literally pick up what they want from the store’s shelves and then “Just Walk Out” – hence the name given to the technology.
However, the company is keeping its cards somewhat closer to its proverbial chest with regards to exactly how the Just Walk Out technology works. That being said, tech news site Recode spotted a patent filing by Amazon last year that revealed some details.
The patent filings describe a system that uses Radio Frequency IDentification (RFID) to detect when a shopper removes an item from a shelf, and then syncs the generated data to a mobile device. This enables the system to log items in real-time, thusly eliminating the need for the customer to go through a traditional checkout. As the customer exits the store through a “transition area”, sensors detect that they’re leaving, instruct the app to tally up the bill, and the items are then charged to the associated Amazon account.
From the patent filing:
“For example, if the user is purchasing items from a retail location, rather than the user having to stop and “check out” with a cashier, teller or automated check station, because the picked items are already known and identified on an item identifier list associated with the user, the user may simply exit the retail location with the items. The exit of the user will be detected and, as the user passes through the exit (transition area), the user, without having to stop or otherwise be delayed, will automatically be charged a fee for the items (the items are transitioned to the user).”
From the video and Amazon Go’s online FAQ publication, we are told that the store will utilize technologies that include sensor fusion, which amalgamates data from different sensors around the store to increase the accuracy and reliability of results.
“In some implementations,” the patent filings read, “data from other input devices may be used to assist in determining the identity of items picked and/or placed in inventory locations. For example, if it is determined that an item is placed into an inventory location, in addition to image analysis, a weight of the item may be determined based on data received from a scale, pressure sensor, load cell, etc., located at the inventory location. The image analysis may be able to reduce the list of potentially matching items down to a small list. The weight of the placed item may be compared to a stored weight for each of the potentially matching items to identify the item that was actually placed in the inventory location. By combining multiple inputs, a higher confidence score can be generated increasing the probability that the identified item matches the item actually picked from the inventory location and/or placed at the inventory location.”
It’s been more than two years since these patent applications were first filed, so it’s very likely that the company’s approach may have changed during that time. However, from what we’ve seen so far, much of what is expressed is indeed matching up.
Amazon Well-positioned to Disrupt Brick-and-Mortar Retail
On the surface, it may seem surprising that an ecommerce titan such as Amazon should be the company to make the first move to reinvent the physical checkout experience in such a wholly disruptive manner. But in fact, Amazon’s heretofore (nearly) online-only existence actually serves to strengthen its position as a brick-and-mortar disruptor for a number of reasons.
First, leaving its college pop-ups and bookstores aside, as Amazon now moves to push into the $800 billion US food and beverage market, it has no legacy store network to update – it begins with a checkout-free experience and can build from there.
In addition, Amazon already has in excess of 300 million customers, all already-identified and ready to spend. Since a checkout-free store requires each user to be digitally identified, Amazon’s massive existing digital customer base puts the company in a much stronger position to experiment with such a system than other retailers.
Finally, Amazon customers also tend to be digitally-savvy, meaning that they are likely to be open and keen to adopt the Amazon Go experience.
Big Winners Pay for So Many Experiments
Will Amazon Go work?
Well, one thing’s for sure, Amazon has long been a company that is willing to pilot initiatives that may not be directly or immediately profitable, but nonetheless serve to create additional value in the Amazon ecosystem, and of course drive greater use of its ecommerce platform.
Amazon, indeed, takes a deep-pockets-approach to innovation, and Amazon Go is the latest manifestation of the philosophy. The final word goes to CEO Jeff Bezos in the latest annual report:
“I believe we are the best place in the world to fail (we have plenty of practice!), and failure and invention are inseparable twins. To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment. Most large organizations embrace the idea of invention, but are not willing to suffer the string of failed experiments necessary to get there. Outsized returns often come from betting against conventional wisdom, and conventional wisdom is usually right. Given a ten percent chance of a 100 times payoff, you should take that bet every time. But you’re still going to be wrong nine times out of ten. This long-tailed distribution of returns is why it’s important to be bold. Big winners pay for so many experiments.”