While many industry commentators and retail executives view Amazon Go as Amazon’s attempt to show innovation, I believe that Amazon is only servicing its own ambitions.
Amazon has two large weaknesses related to physical retailers like Walmart and Target--product discovery and being able to leverage retail’s dirty secret, impulse purchases. In both cases, physical retail is designed to provide retailers with an opportunity to aid customer product discovery and also generate revenue from impulse purchases. Amazon’s discovery is a well-known problem and impulse purchases for digital commerce businesses are driven by discounts, not on a moment’s inspiration as seen in traditional retail.
Amazon is aiming to use the Go store to collect copious amounts of customer behavior data. Amazon was designed to leverage data to offer customers a personalized experience.
Customers must download another Amazon app that they must open before entering the Go Store in downtown Seattle. For online purchases, Amazon has copious data to evaluate both consideration and purchase. The Amazon Go store provides Amazon with a watered down version of these data, in the brick and mortar world that has not traditionally been suitable for evaluating consideration. Given how useful data on conversion rates can be for updating product selection, pricing, and placement, it is not surprising that Amazon is looking to gather such data to marry to its online consideration and conversion data. The frictionlessness is a by-product of the technology that Amazon has developed for the Go store but it’s not its core focus – the core focus is to collect data on customer behavior and marry that with existing data insights.
The lack of perishables that are the staples of grocery purchases is telling. I believe that Amazon Go will eventually become part of Whole Foods, but we are a long way from that. It feels like Amazon is conditioning customers that CPG items should be ordered online from Amazon and fresh/perishables items are to be purchased from Whole Foods.
The number of customers that shop at Whole Foods is considerably more than what is seen at the Go store in Seattle. Factor in that fresh produce, fish and meats are different sizes, have different shapes and thus will provide the Go technology with a challenge not currently seen inside the Go Store in Seattle. This reminds me a lot of AmazonFresh's initial start. Amazon has two locations that are using this technology, whereas Alibaba has 47 Hema locations that use the same business model. I believe the small number of shops also is holding Amazon back in terms of learning about issues with customers, popular products not being in stock, purchase habits and learnings. Scaling these businesses are hard and the lack of locations is another sign that this will take time to become part of Whole Foods (if that is the endgame).
So besides data what is Amazon using Go Stores for? Amazon essentially has products for sale that are only found at Amazon Go stores (ie. the larger bottled soda's and the meal kits) - which for me is the telling factor. Amazon is testing the different purchasing habits of customers in store vs online. Secondly, their meal kits and other private label items are Amazon essentially doing user testing and scaling private label at a local level.
Amazon Go provides Amazon with the opportunity to market testing and do advertising on a new group of customer that are not Prime customers or regular Amazon shoppers. The Go Store essentially become a retention and customer acquisition channel for Amazon.
From what I read to what I experienced - I left unimpressed and underwhelmed as it felt like there was more tourists like me in the shop and none of those in the shop being returning shoppers. As usual, Amazon does things on its own terms for its own benefit, and the Go Store concept is no different.
