Blog: Dean BestWill Amazon Go be retail "game-changer"?

Dean Best | 6 December 2016

Ask any FMCG executive to list the trends shaking up the sector and digital and e-commerce will be pretty high on the list. Drill down into that and Amazon will be one of the subjects in the digital sphere of keen interest to consumer goods manufacturers the world over.

The core amazon.com site is becoming an increasingly important channel for a number of food companies, while the e-retail giant is dipping its toe into online grocery delivery in a number of markets through its Amazon Fresh service. All the while, Amazon has a series of other grocery-oriented services - from Amazon Pantry (which has just made its debut in France, its latest market) to the Amazon Dash replenishment service - and also offers takeaway deliveries from restaurants in selected cities in the US (the service launched in London in September).

What does AmazonFresh's UK launch mean for sector? - analysis

The US behemoth's latest venture - a move into bricks-and-mortar retail - has certainly got the industry talking.

Amazon's ambitions in physical retail have long been the subject of fevered speculation and yesterday (5 December) launched Amazon Go, a 1,800 square feet store in Seattle.

However, what has caused a stir in the industry is the outlet's use of artificial intelligence-powered technology that means, the retailer says, Amazon Go is "a new kind of store with no checkout required".

A shopper scans the Amazon Go app on his phone when he walks into the store and the technology used in the outlet means the retailer can detect when items are picked from the shelf - or put back for that matter - and registers them in a virtual cart. When the shopper's done, he just leaves the store, the trip is registered on his Amazon account and the retailer sends him a receipt.

Here's a short video Amazon posted on YouTube yesterday:

Neil Stern, senior partner at US retail consultants McMillanDoolittle, suggested bricks-and-mortar retailers should fear the new concept.

"The premise is simple and the video circulating on-line and produced by Amazon, will surely be among the most watched futuristic retail videos around. But, what should be scarier for retailers is that the future will appear in Seattle early next year in the form of a 1,800 square foot convenience store called Amazon Go," Stern said. "The proposition for the consumer is simple—save time and hassle. The proposition for retailers may be even more compelling - save labour on the biggest component of the store (the front end) as well as improve throughput. In an era where labour costs are increasing and labour availability is scarce, this becomes an incredibly compelling one-two combination. One can envision a future of Amazon brick-and-mortar outposts: book stores, beauty stores, drive-thru grocery stores and convenience locations all using this technology. The big question: How far behind is the rest of the retail industry and what can they do in the interim to keep up?"

Stern was among a series of industry watchers and executives to take to social media in the wake of Amazon's announcement.

The Amazon Go store, located at 2131 7th Ave in Seattle, is, at present, open to the retailer's employees, effectively at beta testing stage. It will open to the public "in early 2017", Amazon said - and, of course, open to Amazon's physical-retail rivals, which will likely immediately send executives to the store to see how it works, what punters think of it and what it stocks.

Will shoppers take to the concept? What will they make of the range in-store? What impact will there be on jobs should Amazon look to roll out the store? Where could Amazon look next in the US? What about overseas?

There will be all these questions and more in the weeks and months ahead.

And, to add to those in the FMCG sector watching Amazon closely, comes a report Amazon Go is not the only bricks-and-mortar format the retailer is looking at. The Wall Street Journal said yesterday Amazon Go is one of at least three formats the retailer is studying. Two of the other formats are larger than Amazon Go, the WSJ said, citing unnamed sources. Two drive-through locations are set to open in Seattle, it reported.

In all, Amazon has a vision of opening more than 2,000 physical stores in the US, the WSJ said.

That in itself should make FMCG executives sit up and take notice.

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