Go

Go. Amazon Go. The online retail giant’s recent announcement of the checkout-lineless store has caught the fancy of many. Nothing extraordinary about the technology itself, everyone has been talking about deep learning, computer vision and the likes for some time now, especially in context of how these technologies are being leveraged to build self-driving cars. What is extraordinary is the innovative application of these new-age technologies to traditional retail. Again retail has not been out of technological touch rather it has seen many advancements over the years in various operational aspects including 1) supply chain – knowing inventory, expected fulfillment dates, ship to store options, buy online – return in store; 2) merchandising – analytics for product placement; 3) store operations – IOT applications to check freezer temperatures as an example; 4) customer experience – loyalty programs, targeted mailers based on behavior patterns, price-checks, self-checkout lanes; 5) and the list can go on.

I see Amazon Go as an extension of self-checkout lanes. Now you no longer even need to scan the barcodes on the items you are purchasing. The technology will watch you and decipher what you are placing in your shopping cart.  As these stores become more popular, there is our natural societal tendency to recite the ‘sky is falling’ story that we read to our kids and may have been read to as kids. In this case, the story wears a veil of the retail jobs that will cease to exist. Amazon Go on its own will probably have close to zero impact on retail jobs. However, if Amazon decides to license its technology to other retail chains – which I suspect it will and more about it further below – then the threat of loss in these retail jobs comprising of routine manual tasks is real.

I also see a couple of underlying themes in Amazon’s business strategy –

• Monetize your innovation instead of clinging on to it as a differentiator.

Amazon started off as an online bookseller in the nineties and gradually utilized its ecommerce infrastructure to expand the merchandise sold via its website. Then came the marketplace which allowed other merchants to leverage Amazon’s ecommerce and supply chain infrastructure to sell their goods. Even the horizontal technology backbone was monetized and spun off as AWS for satisfying data center needs of any industry. When Amazon started Prime Now, it quickly expanded its reach to allow onboarding of other stores for similar delivery capabilities. In multiple cases, we have seen Amazon productizing its innovation which was initially meant to be a differentiator.  This is a win-win strategy – the new customers won’t need to reinvent the wheel, and Amazon gets to monetize its innovation by creating a new market which didn’t exist before.  I therefore suspect that in the future not very far away, you could visit a Target or a Safeway which will be ‘Powered by Amazon Go’.

• Go where the customers are – a subset of their true ‘customer first’ philosophy.

Another pattern I have observed as a mere Amazon customer is Amazon’s desire to be where the customers are. Look at Amazon Dash for example. It made the ability to reorder a supply available exactly at the time and place where the need occurred. Marketplace again is another example under this category – if customers are going to other websites, bring those merchants under Amazon’s fold. Similarly, many customers continue to shop at traditional retail chains and convenience stores. Amazon wants a piece of that pie. Amazon Go on its own will only let it have a small piece of the pie, however by licensing the technology to other stores, Amazon will be able to apply its Marketplace model to the world of offline retail as well.

It will be interesting to watch where Go ends up as a technology, whether limited to Amazon Go stores or indeed it gets rolled out to other chains. Meanwhile I do not believe we need to worry only about the impact on retail jobs, which is a smaller problem to worry about given perpetual displacement of industries by technology advancement. The bigger issue that automation seems to be bringing about is the increase in socio-economic gap.  The primary reason businesses invest in automation technologies is to impact the bottom line. By converting recurring labor costs to one-time capital investment and lower ongoing sustenance costs, the overall operational efficiency increases. Arguably, in the long run, it is the capitalist and not the consumer or the employee who ends up getting the better side of the bargain. On the contrary, the argument in favor of automation is a more delightful customer experience at a lower price point, with the accumulated savings resulting in an incrementally improved standard of living.