With the launch of Amazon Go, the internet is buzzing with both excitement over what this move means for the future of physical retail stores. If you haven’t seen the announcement video yet, check it out here:
Alright, now that we’re all on the same page, let’s talk about what this announcement actually means.
This isn’t the first time the idea of a just walk out (what Amazon is calling it) shopping experience was proposed. The grocery shopping industry has been on the tipping point of innovation for awhile. IBM had produced a similar video (shown below) about ten years ago but the idea wasn’t given attention for long, and IBM abandoned the idea about a year after the video came out.
So what has changed in the past ten years that makes Amazon think this is the right time to invest in the just walk out concept? Many things. However for the sake of this article, we’ll be discussing the three biggest reasons why now is the right time for Amazon Go to take off.
1. Advanced Artificial Intelligence and Image Processing Power
The approach Amazon Go has taken to implement just walk out involves some incredibly complex and cutting-edge technology. It’s unclear exactly how Amazon plans to capture and process such large amounts of image data in real-time, although they have said in the video at the top of this article that it is related to technology used in self-driving cars. Amazon is no stranger to the field of artificial intelligence (AI), except until this point they’ve mostly operated within the confines of their digital shopping platform, offering customers personalized product suggestions.
It will be interesting to see in the coming months exactly how Amazon has dealt with all the intricacies of real-time image and sensor processing in order to make their system feasible. I have no doubt in Amazon’s ability to make such a system work but the real question which will determine if their approach has a viable business model is the cost of outfitting a store with the high-res cameras and sensors used to capture this data.
Another concern would be with real-time analysis of the data gathered. The bandwidth and speed at which data transfer would have to occur would not be possible on today’s information infrastructure if Amazon plans to use their existing remote servers for processing. It would only make sense to process the data onsite at each store location, which means more cost upfront for powerful computers to make sure everything runs smoothly.
2. Privacy is Dead
With the emergence of social networks, people are becoming increasingly willingly to give up their right to privacy in exchange for services. This social change has been able to take hold over the past few years to the point that people just accept it. They know Facebook, Google, Amazon, and hundreds of other companies track their every move online, stockpiling petabytes of personal data and yet, this bothers very few people these days.
Now I don’t want to go too deep on the morals of privacy — I’m not saying this is absolutely good or bad — but the way in which Amazon Go tracks what you’re buying does involve cameras and a variety of sensors. These methods of data collection would have never passed the social barriers of privacy a decade ago. But instead of companies violating your privacy, in 2016 companies buy your privacy in exchange for features. With this announcement, Amazon Go treats privacy as a non-issue. They simply don’t mention it, but rather highlight the benefits of tracking your every move and the value they can provide you as a consumer in exchange for tracking you.
But don’t be fooled. Even though companies are already tracking us, doesn’t mean Amazon Go does so in the same way. The level of access Amazon Go has to your personal life the moment you step into their store is unprecedented. Until now, companies had access only to the information we provided to them, but the cameras and sensors that track whether or not you’ve picked up a product on the shelf could also track other information about you like race, weight, height, etc. which could be a concern for some consumers who don’t want to be targeted based on their physical appearance.
We should always be aware of what personal data we’re handing over to companies and how that data could be used to serve us and manipulate us, and decide if revealing our personal data is worth what we get in return.
3. Online Shopping vs. In-Store Shopping
For years now Amazon has dominated the online retail space and although they’ve been able to make a dent in the profits of physical retailers, Amazon has not been able to replace physical retailers. There are several reasons that have limited Amazon from creating a shopping experience to significantly challenge physical retailers, many of which come back to their online-only business model.
What Amazon Go brings with it’s physical store location is the ability for customers to browse the physical space of the store, they can see, touch, and smell products before buying them, and have the satisfaction of having products in their possession instantaneously. However, these are trivial compared to the physical retail revolution Amazon Go has the potential to set off.
By eliminating checkouts, Amazon has three options for what to do with the resulting reduction in operational costs (given the technology costs mentioned in section 1 are reasonable). They could (1) increase their profit margins, (2) decrease prices of products, or (3) create new jobs within their stores focused on improving the customer experience. Options one and two will cause little change in the industry, but option three has the potential to change the way retail store operate. Imagine having a nutritional expert on staff at a grocery store to help you choose the right foods for your diet, or chefs who will teach you the best way to cook a steak. There are so many possibilities for new and engaging jobs in physical retail that are simply not possible in the online space.
Conclusions
If Amazon Go is able to create the shopping experience they claim in their video and use their reduced operation costs to engage consumers on a personal level with face-to-face interactions, other physical retailers will follow or lose business. This however raises questions around the ability of other physical retailers to keep up with Amazon Go from a technology perspective, and at the time of writing this article it is unclear whether or not Amazon plans to licence out their just walk out technology or keep it to themselves…
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