Amazon focusses on stationary retail using sensors instead of cash registers
BY DR CLAUDIA PELZER
(Published in The Produktkulturmagazin issue 1 2017)
A supermarket with no queues at the checkout – but with lots of high-tech and sensors in the shelves. The amount due is simply debited online upon leaving the store. No more annoying queuing at the checkout. The online retail giant Amazon is currently experimenting with this in the US. The first cashless Amazon Go test store is already operating in Seattle, home to the company’s headquarters.
While ever more bricks-and-mortar retailers and supermarket chains have expanded their operations to include online offerings over the past few years, Amazon has now decided to go in precisely the opposite direction. Spread over approximately 1,800 square metres, ‘Amazon Go’ already offers – within the context of a test set-up – a broad range of products, including fruit and vegetables. In addition to ready-made take-away cookery packages, a live cooking area is also planned.
However, the truly exciting thing about this model is that it has been designed to operate on a completely cashless basis, which requires a huge amount of technology. Numerous sensors monitor the movements of the customers and the goods. But the classic Amazon online shop is and remains an important component of this model as well. To be able to use the service, customers log into the system via the Amazon app, with which they can be identified and charged when shopping. If a customer removes a product from the shelf, the item is automatically added to the respective online account. However, if the customer changes his or her mind and puts the item back on the shelf, it is removed from the basket. Upon leaving the store, the final amount is then debited from the user’s Amazon account in precisely the same way as for conventional online purchases.
The shop is currently being actively tested by Amazon employees. The retailer has already collected very similar empirical data with stationary book stores. It opened the first Amazon book store in 2015, also in Seattle. And the Internet behemoth also profits from existing customer data here. The shelves feature titles with the best online sales. It is believed that this will enable the company to cater to customer needs in a much more targeted manner than is the case with purely offline competitors. A small board next to the books not only provides information on the current Amazon sales ranking, for example, it also presents selected online reviews by users. Employees can also present their favourites in a corner of the store, among them Amazon boss Jeff Bezos.
The new Go supermarkets can therefore focus on certain empirical data and deploy these in a segment that is extremely stable and hence highly profitable for Amazon. Following initial delivery concepts with food and everyday items (‘Amazon Fresh’ and ‘Amazon Pantry’), we might soon see bricks-and-mortar retail joining the group’s portfolio. With this, Amazon could then also distribute product groups that are less suited to mail order – for example, fresh and particularly delicate goods. A scenario that is likely to make classical supermarket chains and delicatessens break out in a sweat.
But what change would this frontal assault on the large supermarket chains mean for customers? They would not only have their data digitally collated, but they would also be identified and gauged analogously through evaluation of their habits and movements in the shop. Here, the Amazon Go concept merges Internet data with the data provided by the sensors onsite. The group calls this learning-algorithms-based online-offline principle ‘Sensor Fusion’.
To this end, the US group is gradually expanding into additional customer segments. Only recently, the new ‘Amazon Business’ service was launched in Germany, targeted squarely at business customers. With a comprehensive offering comprising more than 100 million products, the marketplace – which is also open to external retailers – focuses on office supplies, for example, but also on tradesmen and restaurants. In addition to the option of creating company accounts with several user IDs, Amazon Business also permits on-account purchases, net price display and integration of standard procurement software. According to statements from Amazon, the service – which was launched in the US back in 2015 – generated one billion in sales in its first year.
The company is trying to increasingly close the gap to the customer within the analogue sector with its own Prime and Prime Now delivery services. In addition to personal deliveries by Amazon drivers, it is for this reason that local pick-up stores are also being planned, where items previously ordered online can be can be collected. Add to this numerous Internet of Things-supported shopping experiments – for instance, the voice-controlled Amazon Echo Box and the also recently-unveiled Dash Button, which permits repeat orders by simply pressing a button. And those still not tempted to purchase are additionally being led into temptation in Amazon’s home town of Seattle by the ‘Treasure Truck’, a truck filled to the gunnels with Amazon special offers. Customers can order the goods on the truck using an app and have them delivered to their homes.
The group increased its annual sales to more than US$ 100 billion globally in 2015, of which just under US$ 12 billion were generated in Germany, a figure that is set to rise dramatically. The lucrative business with food is an enticing prospect despite – or maybe because of – this. The German discount retailers Aldi and Lidl alone jointly generated sales of just under € 50 billion in 2015. In the US, grocery stores actually generated sales in excess of US$ 600 billion with heavyweight retailers such as the Walmart chain in 2015. A market that Amazon really does not want to miss out on.
In addition to the option of building and operating a store network with Amazon Go, there is currently also initial insider speculation about whether Amazon – in a very similar way to the principle it uses for its Web services – may want to focus merely on functioning as an innovation driver and infrastructure supplier. In this case, customers would be the major retailers, using Amazon technology to convert and update their stores. This would in fact not be the first time that Amazon earns more with an idea than it does with its own implementation of a concept. The company is already generating billions in turnover with its Web services. Could Amazon quietly take a cut in the background without having to look after thousands of supermarkets across the globe? Fact is that the group registered a patent on ‘transitioning items from a materials handling facility’ in 2013 – in other words, a system for tracking items removed from shelves. The group has a further patent for the method of paying for items without having to queue at a checkout.
But regardless of whether self-implemented solutions or functioning as a service provider, the recipe for success appears to always be about reacting better and faster to customer requirements than its competitors. A similar approach can be observed among stationary businesses. To this end, the idea of abolishing cash register systems is nothing new within the sector. In addition to the sometimes long queues for customers, they are particularly staff- and hence cost-intensive for retailers. To date, however, initial concepts for automated cash register systems have never progressed beyond the initial trial stages. So, it remains all the more exciting to see just how suitable the Amazon Go stores will ultimately be for mass use and whether our weekly shopping in Germany will soon be cashless. Without having to count change or enter a PIN – instead a ‘just walk out shopping experience’, as Amazon calls it.
Picture credit © Amazon