You might not ever shop in one of Amazon’s grocery stores. In fact, right now, if you don’t live in one of the few cities that already have one of its ‘Go’ self-service stores, there’s a good chance you’ll never even come across one. Still, the way you shop is about to change as a result of Amazon’s newest grocery store.
On Tuesday, Amazon opened a full-size grocery store in Seattle. There are no cashiers. Instead, you use the Amazon Go app with your Amazon login credentials. You can’t even visit the store without it, since you have to scan a QR code at a gate to enter.
As you walk through the aisles, you simply place things in your cart, and when you’re done, you leave. Everything you’ve purchased is then charged to the payment method you have on file, and the receipt appears in your Amazon account. The store uses cameras and computer vision to keep track of everything you pick up and intend to purchase.
In that way, Amazon’s physical stores are the perfect reflection of what happens to all of us in the digital world where Amazon is always watching.
Amazon, of course, already owns a chain of full-size grocery stores: Whole Foods. I guess the difference there is that you actually have to stand in line and hand over cash or your credit card in order to grab your groceries.
The Wall Street Journal points out that a person close to the company says Amazon is offering to sell and setup the technology in other grocery stores. Amazon likes having it both ways. It would be happy to sell you some groceries, but it would be even happier to sell its technology to the thousands of existing grocery stores across the country. In fact, considering that this is one business in which Amazon has had very little luck gaining ground, I wouldn’t be at all surprised if licensing its tech to other retailers that was the entire point.
Grocery stores are an incredibly low-margin business. Buying, transporting, and storing inventory is expensive relative to the prices consumers expect to pay for the food they purchase. That’s especially true for products like produce or fresh items, which have short shelf-lives.
This explains Amazon’s push to eliminate another costly expense: the people standing behind the cash registers. Get rid of the people and you cut out all kinds of costs like hourly wages, training, and benefits. Suddenly your margins look a little better.
Selling technology services, on the other hand, is a far higher-margin business to be in. This wouldn’t be the first time Amazon built something and then monetized it by selling it to other businesses. Amazon Web Services (AWS), the cloud-computing platform that powers Amazon’s ecommerce business also powers vast swaths of the internet, with customers like Netflix, LinkedIn, and NASA.
Grocery stores like Kroger already allow you to use an app to purchase their products, though they haven’t yet gone as far as to eliminate the checkout process altogether. It’s worth mentioning that with the coming rollout of 5G networks, it suddenly gets much easier to imagine a shopping experience completely dependent on an app on your smartphone and technology embedded throughout a grocery store.
Now, Amazon thinks it has figured out how to make that part happen and it’s happy to let you come in and test it out. You can even grab some groceries while you do.
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