Self-Service in stores- What have we learnt from Amazon Go?

The term “digital disruption”, since the last decade, has been attributed to several technological phenomena; some lived and thrived up to shuffle the market for good while the other trends got extinguished as a flicker. Then there was Amazon and its intelligent, futuristic solutions that changed the entire dynamics of the markets that it touched upon- a true “digital reformer”. Following in e-retail and Amazon Web Services (AWS) in cloud, Amazon Go is now all set to lead the next generation of retail revolution.

The Story of Amazon Go

In December 2016, Amazon Inc. announced that they are taking grocery shopping to the next level with the launch of their concept store called “Amazon Go”. The store is based on their patented “Just Walk Out Shopping” model (built with computer vision, sensor fusion and deep learning) where the customer can enter the store, grab whatever they want and just walk out of the shop to proceed with their day; no waiting in line at the check-out counters. The company further explained that the customers should have an amazon prime membership and a smart phone with their free app installed to enter these stores of the future.

Did you know?

A Bloomberg report says that only 4.5% of shoppers made online grocery purchases in 2016, up only by 0.3 percent from 2012.

Grocery Shopping, the Amazon Go Way

As a customer walks inside a store, they automatically check themselves in by authenticating their smartphones in the sensor that has seemingly replaced turnstiles. As soon as they walk inside, the different cameras fixed across the store record every single detail of their movements and uses deep learning to understand and differentiate gestures such as making a selection (whether they place it in their bags or in their jackets or just hold it in their hand), examining a product and returning it to the shelf. Based on this information, the customer’s virtual cart adds and removes items only to finalize and debit them as the customer walks past the “transition area” to exit the facility.

How Amazon manages to stay ahead of its age

While the retail world watched the news unfold with a mix of shock, confusion and awe, they also realized the path for this future has been well laid out all along; right from 2009 when they acquired SnapTell, an image recognition startup. The next clue got planted in March 2015 when the news about the company’s latest patent titled “Transitioning items from a materials handling facility” gained traction after a well-circulated rumour about the company’s entry into the brick-and-mortar retail outlets.

Along with Amazon Go initiatives, the company also launched “Amazon Fresh Pickup”, a click-and-collect model that also promoted cost-cutting in last mile delivery initiatives (amounting to a whopping 53% share in delivery costs for companies). The company further strengthened this position by accelerating its supply chain initiatives to the point that 44% of the US population will find Amazon’s warehouse or delivery station within 20 miles, according to a report from PiperJaffray.

The most interesting observation here is that Amazon is not a newbie that wants to enter the world of grocery shopping in a storm. They developed their grocery delivery model “Amazon Fresh” as early as 2007 and yet were quick to notice the declining trend of online grocery shopping. Amazon realized that their growth in the grocery market can be made predominantly via physical stores combined with the ease and comfort that online shopping bestows, way back when omnichannel was not even a buzzword.

This Day, That Age

When Amazon Web Services was launched, it began as a simple internal solution to manage the companies growing infrastructure complexities and got transformed into a licensed cloud solution provider model that ended up smashing revenue records last year with over $10 billion dollar in profit to the company. Drawing parallels to that move, as Amazon was quick enough to patent the core of Amazon Go’s concept, experts are already predicting an amazon licensed grab-and-go retail suite in the future.

Lessons for Retailers

Let’s be honest, with Amazon Go the company has pushed the retail industry beyond boundaries and has also furthered the divide between the digital native and traditional enterprises. The onus is now upon the retailers, big or small, to innovate in their own ways and take the next big leap before they get consumed by the next digital reality. On their way, they must not forget these key lessons that the story of Amazon Go has offered:

It is all about Data

By making it mandatory for customers entering Go stores to have an Amazon Prime account, the company is cleverly and confidently attracting and clubbing their customers under one giant Prime Membership kingdom (with estimated population around 69 million as of June, 2016)that lives and thrives on data. While fostering this ecosystem with much sophisticated levels of personalization with customized real-time discounts and benefits, Amazon is also acing its Big Data game and is soon expected to beat Google at their own game.

Digitization of Stores

In understanding the inevitability of an omnichannel retail future, it is also vital to understand that brick-and-mortar stores are an integral part of the ecosystem. With futuristic shopping solutions like Amazon Go entering the market in 2017, it is also imperative that customers would not be satisfied with “digitized stores” that offer just multiple delivery options; they want the whole culture to undergo a digital revolution. Recent reports saying that 65% of shopping budget is spent in-store is also giving hope to the retailers that digital and store can feed and not eat each other .

Real-time Inventory Visibility

Shopping models like Amazon Go, by design, have unarguably been upping the ante in terms of overall inventory and supply chain management. But the most interesting aspect here is that Amazon Go stores do not use RFID to track the orders taken. The technology gauges item availability with a combination of image, scale, pressure and weight analyses of the aisles thus creating a transparent system where the retailers and the supply chain managers can be in control for maintaining the endless aisles equilibrium.

Rising culture of Wallet Payments

By making the store check-out free, Amazon Go’s concept has opened the doors for what could be known as the era of cash/card-less payments and has indirectly underlined the irrelevance of PoS systems in the future. As retailers develop the stores for the future, they have to understand where their target audience stand in terms of easing the whole process of payment or at least open up avenues to minimize manual interventions.

Innovate endlessly

If there is one thing that anybody can observe and learn from Amazon’s case study spanning over 2 decades is their aggressive urge to innovate constantly. From ideating a concept that made people glued to their screen even when shopping to developing a robot-run warehouse, Amazon has always innovated and leads the revolution even in the face of controversies and losses.

In Conclusion

Amidst the hullabaloo around the launch of the concept, Amazon Go has also raised concerns over customer data exploitation and loss of millions of in-store jobs. But the company is ever-confident in their ability to innovate and provide opportunities in a whole new dimension that promises to nudge people back safely to the stores and engage them, more than ever, in the real world.

Author : Bhargavi Seshadri, Research Analyst

Practice Head: Abhishek Mahajan, Digital Retail