Amazon Go – What should retailers Stop, Start and Continue?

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Lessons in retail survival are increasingly clear – change is not an option

Amazon Go

Image Credit: Amazon.com

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If you did not hear about Amazon’s launch of its new Go store in Seattle, you had to be living under a rock. Amazon’s new convenience “grab and go” format was grabbing headlines in the trade press, as well as mainstream media. Some pundits are calling the Go format the reinvention of bricks and mortar retail. When you crawl under the cover of the technology required, it is expensive and may not easily scale. However, the real question for the rest of retail is not Amazon’s success with Go, but how they should respond.

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Few retailers can copy Amazon, nor should they try. Each must honestly evaluate how they can meet rising customer demands.

Amazon Go is a physical retail marvel, but will it transform retail?

Amazon Go is many things. It is Amazon’s perspective on innovating the classic “convenience store”. To be fair, the customer experience is dramatic. By checking in with a phone app, customers can literally “grab and go”. Whatever they take from the shelf automatically bills to their phone via the app. Very sexy and very dramatic from the eyes of customers who abhor waiting in check out lines.

However, the removal of cashiers and registers in Go literally requires more than a hundred cameras overhead in the store required to track all of the customer movements. It also requires an array of sensors and state of the art infrastructure. No one is quite sure if this will scale for Amazon in larger stores like Whole Foods. So, why is Go so significant?

Amazon has just transformed a structural foundation of retail – the store itself. By taking a customer centric approach to design, Amazon has taken the pain out of check out, and put the customer in charge of their in store experience. The greatest impact of Amazon Go will be another disruptive innovation, which “moves the goal line” and raises customer expectations even higher.

Amazon is not the only one – Other examples of innovation at check out

The headlines could lead you to believe that innovation is almost the exclusive purview of Amazon. While some of the other innovations in checkout may be less “sexy” than Amazon Go technology, other retailers are paying attention to customer needs and addressing how to improve their experience. Here are just some examples of retailers a who are competing with Amazon by employing processes that are customer centric, and may be much more scalable:

  • Kroger is already starting to rollout “Scan, Bag, Go” self-checkout system to 400 supermarket stores enabling customers to bypass long lines.
  • Woodman’s Market is a much smaller retailer testing handsets, where customers can scan as they shop so that they can bag as they go, rapidly speeding up payment.
  • Let’s not forget the world’s largest retailer. Walmart is already rapidly scaling its own “Scan and Go” technology enabling customers to skip cashiers and checkout entirely.  
Walmart

Image Credit: Walmart.com

The lesson in retail survival is clear. These retailers did not wait for Amazon to launch Go. They were already addressing the customer pain point of check out. They have developed, and are already rolling out their own options to optimize a better shopping experience, including opportunities to bypass traditional checkout entirely. These three retailers are doing that with technology that appears to be more scalable than all those cameras required in the ceiling of Amazon Go’s store.

What the rest of retail must Stop, Start and Continue in order to survive

The old adage is still true: “Even if you are on the right track, you will get run over if you are not moving”. Many interpret “moving forward” only as starting new things. It can be just as important to identify which things to STOP doing because they are no longer effective, or inefficiency is draining much needed resources.

With the ever-increasing speed of innovation by the retail goliaths, there never has been a better time to evaluate what to Stop, Start, Continue.

STOP …

Old habits die-hard. Habits are comfortable patterns ingrained within individual behavior, and corporate culture. One of the hardest things for companies to do when transforming is to identify those things that they should stop doing, as well as where to stop investing time and resources.

The list of what to stop doing is certainly situational and company specific. In response to Amazon Go, here are some key “Stops” for the rest of retail to consider:

  • Stop blaming Amazon for your retail problems
  • Stop searching for technology as a panacea for innovation
  • Stop separating digital from physical retail
  • Stop relying on KPIs just focused on top line traffic, sales and revenue

    START …

Other than Walmart, few retailers have the resources, infrastructure and capital that can match Amazon or Alibaba’s pace of innovation or level of investments. With respect to Amazon Go, it is not yet clear whether all those cameras and infrastructure required can even scale to larger format stores.

The rest of retail must start evaluating what they must do now to differentiate and appeal to their customers. In response to Amazon Go, there are some critical “Starts” that the retailers should consider right now:

  • Start focusing on how to “take the pain” out; optimize the customer experience
  • Start aligning resources to “help” customers buy, rather them selling them “stuff”
  • Start investing in those things that give customers reasons to come back
  • Start focusing on “life time customer value” rather than POS sales today

    CONTINUE …

While Amazon grabs the innovation headlines that does not mean the rest of retail is doing it all wrong. While retailers can never be complacent in this age of rising customer expectations, they also should not, and cannot afford to abandon everything. However, there is also an inherent danger of just clinging to what is comfortable, and justifying it based upon historical legacy.

The challenge of the “Continue” is balancing knowns with innovating in new areas critical for future success. In response to Amazon Go, retailers must carefully evaluate what they should “Continue” from a balanced perspective:

  • Continue to evaluate past success from the eyes of today’s customer expectations
  • Continue to engage staff as highly valued assets for differentiation
  • Continue to view innovation as a daily process, not an event
  • Continue to measure results that count on both the bottom line and with customers

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Change is not an option. Customers are demanding it. Retailers must do more to be compelling. Much more. Sooner rather than later.


Road kill occurs in the middle of the road – today is the time for action

Amazon Go in its present form is not be a universal retail panacea. However, Amazon Go is a great case study in how just one store shapes expectations for both customers and the industry. No retailer can afford to be complacent. They are going to have to do more in order to compete and be compelling. Much more. Sooner rather than later. Amazon’s mantra is “Tomorrow is Day One”. For the rest of retail tomorrow, and every day, is the best day to evaluate Stop, Start, and Continue.

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2 COMMENTS

  1. I admire Amazon’s effort, since I believe it might reduce the checkout counter bottleneck. But I am unclear about their primary motive. Are cashier-free stores being developed to improve CX? Surely, that’s the way marketers are spinning this initiative. Or, is it for reducing a stubbornly persistent operating cost that erodes profitability while adding little value? I’m betting it’s the latter.

    Amazing as a cashierless store might seem from a technology perspective, I don’t think it’s a significant development compared to the the advent of, say, online retailing, which represented a sea change in how consumers experience shopping. With this Amazon development, customers must still travel to the store, select products, put them in a basket or shopping cart, bag them (somehow), and move them out of the store. Sure, the annoyance of the checkout queue has been eliminated, but so has all the profitable ‘impulse buy’ stuff that used to line the checkout lanes. How will retailers make up for this lost revenue? How will the space not given to checkout lanes be reallocated to drive more revenue? Will more SKU’s be added? Or, will retailers develop more seductive store layouts designed to encourage customers to wander and linger? I’m sure that people at Amazon are mulling those questions right now.

    Further, I’m unclear how Amazon’s elimination of cashiers – assuming they can pull it off – “puts consumers back in control.” In exchange for the convenience of not needing to stop at the check out, consumers will be surveilled as never before, as every movement will be tracked by a phalanx of cameras. I have thought quite a bit about the potential dystopian effects of this, and I don’t find the visage appealing. If Amazon’s project becomes cost effective, it might be the retail wave of the future – or not.

  2. Andrew, thank you for your comment and great insights! You raise very salient questions about Amazon Go, and the disruption of retail.

    What many have missed about the initial Amazon Go store is the unique selection of offerings. This is not your typical convenience store. Very high end items with high prices, which definitely generate substantially greater margins. But even with those higher margins, it is doubtful whether Go technology will scale in it’s present iteration. Yes, Amazon will continue to improve it, but that may not be their end game. They are still in the process of understanding customer behavior in store, and Go is a perfect lab for that.

    Far too many retailers are treating staff on the floor as an “operating expense”. If they are merely cashiers, they can and will be replace with “scan and go” apps or other technology. The bottom line is that only a couple of retailers on the planet have the capital to implement Amazon Go technology. They seriously need to evaluate the role and value of staff as a means of differentiation and survival.

    Thank you Andrew for your detailed analyses and insights. There will be much more to discuss as we see this play out over the next couple of years.

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