Amazon on Monday revealed that it will open a brick-and-mortar grocery store called Amazon Go, an ambitious bid by the once online-only retailer to gobble up more of Americans’ shopping dollars by taking the fight more directly to traditional supermarkets and big-box stores.
The store will be powered by a web of technology that allows customers to fill their shopping bags and walk out without going through a checkout, a concept that has long been discussed in the retail industry but has not been implemented at any major U.S. stores. (Jeffrey P. Bezos, the chief executive of Amazon, owns the Washington Post.)
Here’s how Amazon Go will work: Customers download an app and swipe their smartphones as they walk through the entrance. Then they just start picking up groceries. In a process that the company does not describe except to say that it involves such capabilities as computer vision, machine learning and artificial intelligence, every item the shoppers tuck into their bags or carts is tracked on the phone. If an item is put back on the shelf, it’s deleted. As the shoppers exit, their total bill is calculated, a digital receipt appears on their phones and their Amazon account is charged.
The store is set to open in Seattle, Amazon’s hometown, in early 2017. And its arrival could end up posing some critical questions for the wider retail industry. For starters, Amazon Go will probably need fewer workers than traditional stores that rely on cashiers and clerks. If shoppers respond favorably to this low-touch customer service model, it might end up encouraging other chains to give similar setups a try and save labor costs.
If Amazon Go is successful and is expanded widely, it could put serious competitive pressure on a wide range of retailers. For starters, at just 1,800 square feet, Amazon Go looks to be targeting so-called fill-in trips, the kind of quick errand a shopper does when just a few items are needed.
In recent years, drugstores and convenience stores have proved to be potent competitors to supermarkets for these kinds of shopping trips. So, a fast-growing Amazon Go could present competition for chains such as CVS and 7-Eleven.
The company is promising it will sell prepared foods made by “on-site chefs,” meaning it will be fighting for the same breakfast, lunch and dinner spending that fast-casual and carryout restaurants currently vie for. Amazon Go also plans to sell prepackaged meal kits that contain ingredients to make a home-cooked dinner for two. That could produce new competition for the wave of meal kit startups such as Blue Apron, HelloFresh and Purple Carrot.
Amazon’s decision to sell groceries in physical stores would seem to be an acknowledgement of how hard it is to sell these kinds of goods on the Internet. Despite the explosive growth of e-commerce, groceries have largely remained an old-school business, with less than 2 percent of sales taking place online. Source.