Amazon Wins Retail Experience, Again.
Amazon launched its first Amazon Go store last week, and it’s everything you’d imagine it to be — flashy, futuristic, cashier-free and painless. Painless? Indeed. The Go store’s slick payment method is the latest installment in a long list of product features that purports to alleviate the “pain of paying”.
The pain of paying, behavioral economist Dan Ariely explains, “is magnified when our feelings about spending money are coupled with consumption.” The more someone reflects on spending money, the less stoked they are going to be to spend that money. The general rule, then, is that the more abstract the payment, the more a consumer spends. Less thought = more spend. Amazon has a history of making payments more abstract. Some highlights: 1-Click Ordering, Dash buttons, Amazon Alexa, and the latest, Amazon Go.
Past research also has shown consumers buy more when using a credit or debit card. That relationship has widely been attributed to the pain of payment phenomenon. This may be part of the reason that Alexa users spend more on Amazon than regular old Prime users, less steps in the click-path-to-purchase = more purchases. It’s ease combined with impulse, and then combine this with the possibility that Amazon charges more on purchases over Alexa: you’ve got a recipe for consumer spending.
Amazon Go is an excellent example of Amazon’s strength in removing payment friction around commerce transactions. The company is building experiences that minimize comparison shopping and maximize revenue. It is also trending towards a future where, as payment becomes more abstract and seamless, consumers are going to have to introduce their own sources of friction to control their spending.
My $0.02:
As VP, Innovation at VISA Europe in 2007, I proposed a checkout solution that wouldn’t involve cards. At the time, VISA felt that the physical card was too important a form factor to justify implementing a frictionless solution for the customer.
Again in 2010, as Senior Director of Emerging Opportunities at PayPal, we built a similar experience (our first public step documented here) that would make an Amazon Go-like experience possible:
Despite the technical feasibility of the solution at the time, the retailers we explored the concept with felt the friction in the checkout process was a value-add to the customer. It gave the retailers a “customer touch point” wherein they could develop a relationship with the customer. All of those retailers now have flat to negative growth.
Once again, it took Amazon leading the way in building an actual, physical store, that removes friction for the customer.
Another Perspective
To find out more about Amazon Go and the evolution of payments, I reached out to entrepreneur Ben Silver whose company is developing a new physical retail concept designed to encompass new technologies, a unique experience, and address basic consumer needs. Here’s what Ben thinks:
We all know that Amazon Go has been in the works for a couple of years now, albeit delayed due to floor plan-density challenges, pending issues surrounding theft management, and other technical equations. Based on reports from the people I know who have visited, the time Amazon spent refining the technology has led to a positively ‘underwhelming’ shopping experience. By that, I mean it’s so seamless that it’s natural. And that’s a good thing, by the way.
Amazon Go is a fully working MVP. The store itself is irrelevant, aesthetics don’t matter and it’s purely about pushing technological boundaries within a physical retail environment. This has huge implications across brick and mortar, as more and more consumers will now start to identify and expect this type of technology within their shopping experiences, and no doubt many innovation teams are scrambling to launch an equivalent as fast as possible.
My view and opinion is that checkout free stores alone will not cause a seismic shift in the fortunes of existing brick and mortar. Cool, yes. Gimmicky, maybe. The future, absolutely. But, as I’ve written before, the industry needs far more drastic and meaningful changes to really turn the tide and autonomous checkouts are one cog in a very large and stuttering machine.
Addressing consumers craving for speed and fluidity are critical to the grocery and convenience formats, but within the last decade the way that consumers interact, interpret and utilise commerce outside of these formats (and somewhat affecting them too) has acutely changed and that has led for needs far beyond speed and fluidity.
Our philosophy at Spotlight is that frontier technologies, when integrated from the ground up, are able to take a far more abated role. Technology doesn’t need to be boisterously in consumers faces’ and it should only be there to compliment the experience from back (supply chain) to front (consumer experience). Mixed in with experiential components and a more passive shopping experience, technology will form symbioses enabling a physical retail experience unlike any today.
In short our belief is that retail will become a far more passive and fragmented experience. We will create an environment, where the first use case isn’t to shop. Consumers are coming to do something else, but retail is distributed and curated. A term we coined for this is curated fragmented retail or curated distributed retail.
What do you think?
Has Amazon proven by their investments and their actions that they are truly the only bold and innovative company in large scale retail in North America? Now that Amazon have boldly led the way, will other more timid and luddite retailers understand that the real target they should be aiming for is the elimination of all friction from the customer experience? Will these retailers catchup?
Or will they continue to fall behind, spending the dollars that should be allocated towards enhancing the customer experience on buying stock back from Wall Street to maintain any sort of valuation while desperately clinging to antiquated and outmoded branding strategies and physical retail models?
What do you think?
