Amazon Go’s Implications for an Industry in Need of a Revolution
Amazon fired the first shots of a long-needed retail industry revolution recently with its announcement of Amazon Go. While most major retailers have been working on solutions to many of the point-of-sale issues that a checkout-less store solves; Amazon is simply going to eliminate these issues entirely — at least in its own stores.
Having followed Amazon through its journey over the years — beginning with the major disruption to the publishing industry, continuing into connected TV and video content, and always with a hand in the transformation of the retail experience — it’s not difficult to imagine the basic trajectory that Amazon’s interests in the brick-and-mortar retail space will take.
Amazon is already softening the market for retailers looking to shake up their checkout process, and early adopters will quickly follow suit. The major stores, however, will run a mile from anything that puts Amazon in contact with sensitive customer data. Retail agnostic AI and computer vision companies will ride the wave as they’re called upon to introduce proprietary solutions. Companies like Facebook and Google will get in on the action by positioning themselves as the answer to Amazon. POS companies will fight for dear life. And consumers will enjoy the ride.
Here’s how it will all likely play out:
First, Amazon will prove their concept. Amazon Go is currently open only to Amazon employees; in 2017 it will open its Seattle doors to the public. Word about the “look ma, no hands” experience will spread far and wide to consumers, tech companies, retailers and the rest of the world. Suddenly, non-checkout will officially be a thing, rather than a novelty that exists somewhere in the future.
This will create demand for a new type of shopping experience. Apple stores have unintentionally paved the path for a register-free shopping experience, and customers who have become accustomed to that have subsequently come to resent waiting in lines at other stores. Amazon will take this a step further and customers will quickly become accustomed to the idea of not having to speak to a single store employee in order to complete a transaction.
Amazon will likely package their technology as an off-the-shelf solution for retailers. To cater to growing demand for the no-checkout experience, Amazon will introduce a viable new revenue stream by packaging their artificial intelligence and sensor hardware. They’ll provide this to retailers eager to introduce this experience into their stores, but without the resources to build their own solutions.
Major retailers will look to checkout-free solutions to solve legacy problems. If customer demand isn’t enough to motivate retailers to get on board, a new solution to age-old problems will. Major chains, in particular, will see the obvious value to a checkout-free system considering the point-of-sale is a major source of overall loss. In particular, products not being scanned at self- and staffed-checkouts account for 96% of all loss at the point of sale , which is further responsible for the industry’s $45.2 billion annual shrinkage problem.
Because retailers haven’t historically had access to data about the origins of this loss, they haven’t been able to properly stop it. This has extended the issue beyond the checkout and throughout the supply chain, interfering with stock file accuracy, on-shelf availability, and even compliance issues. All retailers will additionally save on staff costs as register attendants will be replaced by some form of strolling customer service agents, of which they’ll require far less.
Major retailers will steer clear of Amazon. Although major retailers have the most to gain from a technology that cures them of their checkout ails, they’re the least likely to hand over any of their sensitive customer POS or behavioral data to Amazon, a company that has repeatedly proven that it wants to put retailers out of business. Instead, these retailers will look for neutral, retail-agnostic technology companies who can implement a solution without a conflict of interest on the consumer side.
Google, Facebook and other companies will quickly enter the scene. Data companies like Google and Facebook that thrive on rich consumer information will begin competing with Amazon Go, and as they have success doing so, they’ll begin gaining access to data around consumers’ habits within the physical store environment. Most larger retailers won't trust them either since they too have their own conflicting consumer interests. Google and Facebook will try to lure those retailers in with a focus on a cohesive retail ecosystem that ties in-store consumer data into their online retail efforts.
Smaller retailers who want to get in on the action will have to make a compromise. That compromise is giving a company like Amazon, Facebook or Google access to their customer data in return for fairly-priced technology that won’t be available to them otherwise. While major retailers will turn to the computer vision and artificial intelligence community to create their own proprietary solutions, smaller retailers won’t have this luxury and will have to sacrifice their customers’ privacy for their customers’ convenience.
Traditional POS companies face an uncertain future. These companies have, in many cases, failed to solve retailers ongoing problems with loss at checkout, and as a result, retailers won’t have a hard time wishing them farewell when presented with a better solution.
Amazon will collect a lot of customer data from its own stores and other retailers. The positive side of this story is that Amazon will inevitably use this data to introduce more personalized shopping experiences for customers, including their famous recommendations. The downside is that with an influx of customer data and spending patterns, Amazon will continue the refinement of its dynamic pricing solution, which introduces customer-specific pricing based on how much they estimate a customer will pay for a product (among other factors), rather than on basic law of supply and demand.
Long story short, Amazon is shaking things up in retail, for better or worse. But the retail industry in its present form is around 200 years old and will not be transformed by Amazon Go over night.
Alan O’Herlihy is CEO of Everseen, an AI software company whose signature retail technology uses AI, deep learning and real-time video analysis to detect non-scans at checkout as they happen.
LBM dealers pull through with above-average retail performance in November
Advance estimates of November's monthly retail sales are out, and it looks like LBM dealers pulled ahead of the pack.
Building material and garden equipment & supplies dealers (NAICS 444) were up 0.3% over October and up 4.3% over November 2015, with adjusted retail sales of $29.7 billion in November.
In comparison, total U.S. retail and food services sales (adjusted for seasonal variation and holiday and trading-day differences, but not for price changes) were $465.5 billion, up 0.1% for the month and 3.8% for the year.
The categories that showed the most improvement included nonstore retailers, who were up 11.9% from November 2015, and health and personal care stores retailers, who were up 6.2% from last year.
Food services & drinking places showed the most month-over-month improvement: up 0.8%.
Categories that didn't do so well included sporting goods, hobby, book &
music stores, which were down -1.0% for the month and -1.4% for the year. Department stores were down -0.2% for the month and -6.4% for the year.