Amazon Go a ‘shot across the bow’ to the traditional brick-and-mortar model

Amazon Go, the completely self-service convenience store in Seattle expected to open in January, is not an immediate threat to large retailers like Wal-Mart Stores, but it likely has their attention.

The unique store is now open to employees who are testing new applications of artificial intelligence, internet of things (IoT) and deep machine learnings that could make the shopping experience the easiest yet, said Annibal Sodero, assistant professor of supply chain at the University of Arkansas.

He said while retailers like Wal-Mart and Target have dabbled in Scan and Go and mobile payment applications centered around the use of mobile apps, Amazon is moving much further.

“Retailers need to use apps and layer on services through the apps so that they can lock consumers into a relationship. Through an app the customer still has to scan the product with their smart phone. The Amazon Go store bypasses the scan requirement and uses artificial intelligence and the internet of things (IoT) to allow the shopper to merely grab and go. This is incredibly exciting to see this level of technology being used in a retail setting,” he added.

When a customer enters the new store they tap their cell phone on a turnstile which logs them into their Amazon account. As a customer takes an item from the shelf it is automatically placed into their virtual cart. As they leave the store their account is charged and they can see the receipt. Should a customer change their mind about a product and put it back on the shelf, it is removed from the virtual cart. The Amazon Go test store is a convenience store model with meal kits and other food items, from ketchup to milk and breakfast cereal. Amazon said it’s worked on the store concept technology since 2012.

Sodero said it’s normal for consumers to have concerns about such a new use of technology. He said the issues of shrink – product loss – are minimized because to shop in the store a customer has to have an active Amazon account. When asked he how this might reshape retail, Sodero said it’s too early to tell.

“You must remember that Amazon is a technology company, continuously iterating new services and applications that can be deployed to make the shopping experience more convenient. Amazon is not a retailer but they continue to disrupt the retail sector because they own the technology,” Sodero said.

He applauds Wal-Mart’s focus on technology and e-commerce in the past couple of years, saying it has given it a clear lead as far as retailers go, noting again that Amazon is not technically a retailer.

“There’s no doubt retail is a shifting paradigm as the consumer convenience focus takes over. Wal-Mart is doing amazingly well steering their huge ship into uncharted waters,” Sodero said.

Wal-Mart is no doubt interested in the Amazon Go experiment. The savings for Wal-Mart by cutting one second from the checkout process is an estimated $12 million. That is why the retailer continually looks for ways to improve the checkout process, which includes the mobile WalmartPay system, holiday helpers directing shoppers to the shortest lines, more self-checkouts, and Scan and Go applications still being tested. Sam’s Club has Scan and Go with the use of its mobile app and is reporting positive consumer feedback from the expedited service.

Carol Spieckerman, CEO of Spieckerman Retail, said the new technology used in Amazon Go is a big deal and competitors are no doubt taking notice, even though it might be a long time before this technology is applied universally.

“The seamless, widely-adopted technologies of tomorrow have to start somewhere and this is Amazon’s shot across the bow on creating an automated brick and mortar experience. Even so, the bugs will need to be worked out and, just as with online shopping, widespread adoption still doesn’t immediately equate to the obsolescence of traditional models,” Spieckerman said.

She also said the retail sector will continue in the next few years to experiment with technology uses tied to new customer service options.

“Just as the case with the proliferation of various shipping, pick-up and delivery solutions, retailers will continually test new technologies because they can. Consumer adoption, however, will continue to fall on a spectrum from old school to cutting edge. I have no doubt that Walmart is already looking at the viability of similar solutions and in the meantime, it’s done a great job of testing and rolling out innovations like Scan and Go that resonate with shoppers right now.”