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Expert opinion

Amazon Go – Where do we Go from here?

Monday 12 February 2018 | 09:33 AM CET

Amazon goes into physical retail. Will it pay off? Regardless of the outcome, Amazon Go will help the online retailer learn a bit more about its customers.

Amazon Go is Amazon’s first attempt at creating a physical retail experience and, as we have come to expect, it is different from any brick-and-mortar store on the market. Featuring no checkout, the high-tech convenience store uses a sophisticated monitoring system to track what shoppers buy and then automatically charges purchases to their Amazon accounts. Thus, it creates a completely seamless shopping experience and sets a new standard for the omnichannel experience.

Not even a month has passed since the store’s opening and some have already started to talk about a retail revolution or "apocalypse". Both scenarios assume that Amazon Go-stores will spawn in every city and on every corner, thus disrupting the retail industry with either positive or negative consequences.

I will not discuss the social repercussions that the opening of a high-tech convenience store in Seattle could have over the entire US or the world. It is my opinion that Amazon Go serves a different purpose in so much that I hesitate to call it a store. I will explain in a minute, but first, let us give praise where praise is due.

img src: Amazon.com

Merging the offline and the online

Amazon Go seems to define a new standard for omnichannel commerce by effectively uniting the online and offline experience.

The Amazon Go store is not completely unmanned, a strategy that has been pursued by both Alibaba and JD in China but it does offer a checkout-free experience. The frictionless experience it tries to achieve in the brick-and-mortar space mimics the one in the online store. A single mobile app controls the entire customer journey – payments become invisible and other interactions, unnecessary.

A shopper scans the app before entering the store – a first step that authenticates the user and lets the system know who has entered the store. From then on, the consumer is closely monitored by hundreds of cameras hanging from the ceiling.

The technological feat is no doubt impressive, as the system can distinguish between body types (they even did a test with shoppers dressed in Pikachu costumes) and similar products, while at the same time it can track what a shopper takes from the shelves, what he puts back and what he wants to buy. It is probably no wonder that many have called Amazon Go the store of the future, but I keep my reservations about this classification.

Does Amazon Go have a future?

I doubt that we will see as many Amazon Go stores as some hope, at least not in the immediate future, but I admit that anticipating Amazon’s next move may be difficult. However, I do feel that if the ecommerce giant goes for another brick-and-mortar, it will try something on a grander scale and not limit itself to 170 square meters.

The future and success of Amazon Go does not depend on how well it performs from a retail perspective. Its main use is to mend the data gap – between the online and offline. Amazon knows how and what consumers shop online, but it has no direct data from in-store sales.

In this context, I believe that Amazon Go is designed to be a data-mining centre.

It allows Amazon to observe customer behaviour in real time, while having unprecedented reach to data about each shopper. Indeed, scanning the app to be allowed entrance is similar to showing your ID (if interested in the future of mobile ID, do make sure to check out this article).

There is a lot of talk about consumer behaviour in commerce.“Know thy customer” is steadily becoming a golden rule for retailers and indeed, its potential can be huge. The methodology of tracking customer behaviour was somewhat indirect. Sophisticated means such as analysing shopping patterns do exist, but few companies have intimate access to their consumer’s life.

This intimacy, the final barrier, if you will, is what Amazon Go tries to surpass. By tracking not what consumers buy but how they shop, what items they reach out for, how enthusiastic they are about a product, what makes them change their mind and reconsider their first choice or how closely they check the price and look for extra info about a product, Amazon can gain intimate insights into consumer behaviour. And all that it takes is hundreds of cameras, myriads of weight sensors, and an advanced system to connect them all.

Knowledge is targeted advertising

Amazon, through its high-tech convenience store gathers all these bits of information about consumers. What next? Apart from the obvious scenario of using the data to improve its own customer journey experience, Amazon may also diversify its sources of revenue.

Knowing how people shop can give you an unprecedented advantage in advertising, an area in which Amazon is steadily making gains. Amazon’s advertising business can get a boost due to two main factors: the scale of its reach and the many streams of data that it can access. The company can analyse shopping patterns via its ecommerce marketplace, can hear customers thanks to Alexa, and now, with Amazon Go, it can observe shoppers directly. 

Indeed, it does look like Amazon is becoming more and more of a physical presence, surrounding its customers and immersing them into its ecosystem. The gamble, however, is big, especially since Amazon is moving into unfamiliar waters. If the company has serious plans for Amazon Go it may have to pull off the necessary resources to secure a substantial market share but nothing, so far, can guarantee that the store of the future will be here tomorrow.

About Bogdan Moisa:

Bogdan Moisa is Content Editor at The Paypers with an interest in the online payments and ecommerce landscape. He follows the latest news and developments that are essential for understanding the changes taking place in the industry.

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