The benefits of Amazon Go may not outweigh the costs, analysts say
- Amazon Go may not be the future of retail because of the cost and complexity of its proprietary technology, according to consultants with Oliver Wyman. The consultants also argue that the grocery format doesn't save enough or generate sufficient new revenue to covers its cost, and that many customers don't like the futuristic experience it offers.
- "Amazon has already benefited from the industry buzz around its concept store, which could very well set customer expectations for the in-store experience of the future," the consultants write in Harvard Business Review. "But other retailers will most likely find the initial costs too high and benefits too uncertain to immediately follow in Amazon’s footsteps."
- Others believe the concept is the very definition of disruption and, though a major rollout is unlikely anytime soon, Amazon Go offers time-saving solutions consumers want. Other retailers, including Walmart, are testing cashier-free technology, including mobile product scanning.
In an increasingly tech-dependent world, Amazon Go seems like a big win. Because the new retail format offers convenience and time-saving solutions, tech savvy consumers, major publications and investors alike heralded the opening.
Despite the early excitement, though, a few consultants at Oliver Wyman remain skeptical, writing in the Harvard Business Journal that “retailers shouldn’t rush to rip out their registers just yet." They noted several high-fanfare technologies that have whipped up industry and consumer excitement in the past, but have fallen short of expectations. This includes radio-frequency identification (RFID), electronic shelf labels and even self-checkout.
No doubt, RFID has failed to live up to expectations, but self-checkouts have become a mainstay in grocery stores over the years — even if research shows they don't live up to the promise of a faster experience. Electronic shelf labels, meanwhile, could see adoption accelerate with the rollout of Kroger Edge in numerous stores this year.
Amazon has failed before — note the Fire Phone in 2014, the Amazon Webstore, Amazon Destinations, WebPay, PayPhrase, Askville, Amazon Auction and “a very brief range of premium diapers,” according to Retail Gazette. But the concept of quick and frictionless shopping seems to be here to stay. Walmart's startup incubator, Store No. 8, is developing a technology-heavy Amazon Go-like store that uses computer vision and cashier-free checkout. Kroger’s new “Scan, Bag, Go” technology allows customers to scan and pay for products while they shop, and will roll out to 400 stores this year.
Indeed, Amazon Go seems to be the most advanced solution yet to a prominent consumer demand. The main issue, then, as the Wyman consultants note, is whether that technology is scalable and attainable for other retailers.
Brendan Witcher, an analyst with Forrester Research, told USA Today that the technology likely wouldn't translate to large, full-service supermarkets — at least not in the near future. As Amazon itself has noted, the current technology is meant for small-format stores. Still, Witcher calls Amazon Go the very definition of disruption, comparing it to Netflix replacing Blockbuster and Uber replacing taxi cabs. If it isn't the future of retail front ends, it will likely inspire better, more cost-effective models that could become widely available to grocers and ultimately, consumers.
- Harvard Business Review Why Amazon’s Grocery Store May Not Be the Future of Retail
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