We have seen time and time again that convenience is king. A frictionless shopping experience will allow many customers to get their grocery shopping done quickly, and efficiently. There is no need to wait in line to check out. No need to pay at the register. This is a long overdue break-through innovation that will give Amazon a competitive edge in the grocery space.
Not only does the promise of convenience drive a competitive advantage for Amazon in the grocery space, but through technology, Amazon is able to drive efficiencies and, in return, reduce cost of operations in running a grocery store.
Business Model Advantage
Amazon is going to have the ability to apply their customer-centric methodology to the grocery space by driving convenience and lowering costs to the consumer.
Amazon will save money with their Computer Vision, Algorithm, and sensor fusion technology. Through Amazon’s Computer Vision, a customer will be able to take what they want off of the shelf, and it will be added into their virtual shopping cart. If a customer decides they do not want a certain product, they only have to place the item back on the shelf in order to have it removed from their virtual basket so they do not get charged for the item. This will save Amazon employee costs because they will not need their stores loaded with people restocking all the items that people leave in random spots of the store before checkout.
Second, shrinkage due to theft will become a thing of the past. Billions of dollars a year are lost due to theft in the retail space. With Amazon’s technology, theft will be a thing of the past. Allowing computer to manage the virtual cart eliminates human interaction, which, in this case, eliminates theft.
Third, checkout will be an unnecessary expense for Amazon since the checkout process will take place in the shopper’s pocket automatically on their mobile phone. This will also reduce the number of employees, which will result in lower overhead for Amazon Go.
Finally, and most importantly, is the Amazon shopping algorithm. Amazon knows more about its customers through shopping behavior than most people can imagine. Amazon has the ability to learn from its customers within a geographic location to ensure that the right type of inventory will actually be available for purchase. What does this mean? This means that Amazon can expect to see revenues of a football-field sized Walmart with a physical brick and mortar footprint the size of your local convenience store!
All in all, this is huge and I am optimistic that this will put pressure on existing grocery chains to “step up their game” in technology and convenience in order to compete with Amazon in this space.
The good news for grocery consumers will be that we can all expect huge improvements across the board in multiple chain grocery stores and improved pricing as others shift to compete with Amazon Go.