#Industry News #Commerce

Is Amazon Go the Future of Retail?

This week Amazon launched its unique grocery store, Amazon Go. Located in Seattle, the store has no checkouts, not even a self-service one, as well as no cashiers. 

With technology and A.I. exponentially increasing their role in our everyday lives, what does this latest innovation mean for the future of retail, and can we expect to see the checkout-less grocery experiences in the UK any time soon?

It’s worth mentioning that Amazon Go didn’t come out of nowhere. The store has been open to Amazon employees since December 2016 and the beta launch has seen a lot of publicity.

While Amazon dominates online retail - in December over 26% of online traffic in the UK retail category was to Amazon according to Hitwise - the reality is that a significant proportion of purchase still happens offline. Additionally the overwhelming majority of grocery purchases also remain offline. Last year, only 10% of grocery purchase was online in 2017 in comparison to only 1% in the US according to Mintel and IGD.

We’re also seeing offline grocery shopping behaviours shift with a rise in local, convenience shopping rather than at out of town big box superstores. And the big four UK grocers have long been responding to this trend, with little, local and express incarnations of our favourite grocery stores popping up across the country. There are also plans for out of town big box grocery superstores being shelved.

This of course has a cost implication. It’s cheaper to do business out of town where real estate is cheaper and where there are efficiencies of scale to be realised, notably in terms of labour. Already in the UK the self-service checkout is commonplace, with all its unrecognised item in bagging area woes. In the US the most common job is that of retail salesperson and cashier - some 8m people in total. Amazon Go gives us a glimpse of the future, and the associated and inherent impact on the labour market as technology and automation further permeate our lives.

So what of the long term? Price aside, consumers are swayed by convenience. From Uber to Just Eat, there are countless examples, old and new, to remind us how our behaviours change out of convenience. It’s the reason we buy even more online. And it’s not by accident that it drives Amazon’s success. In Jeff Bezos’ first letter to shareholders in 1997, he didn’t speak merely of a commitment to provide outstanding convenience, selection and service but rather the necessity for sustained investment in systems to realise that convenience.

Of course Amazon are already making inroads on the online grocery market, with their Fresh and Pantry propositions already available, albeit in limited locations in the UK. Bricks and mortar stores could well not only complement this but also help drive more people to choose Amazon for their online grocery shop.

It's safe to say that, for the foreseeable future at least, we will still physically purchase some of what we eat as we go from A to B. This brings us back to convenience. The more convenient a store, the more likely we are to change our behaviours and brand loyalties. With the increasing density of smaller grocery stores on street corners, it will no longer be a case of convenience of proximity but convenience of experience and service. 

Of course the Amazon Go experience is not the only solution to delivering convenience. Moby Mart is a prototype which flips the concept of a physical store to realise a new level of convenience of proximity. Autonomous and mobile, not only is it staffless, it also comes to you. Can we expect to see more Amazon Go-style grocery experiences? Undoubtedly. Amazon has already disrupted online retail and are swiftly disrupting online grocery. We can certainly expect physical embodiments of the ubiquitous brand on our streets in the future.