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December 21st, 2016

Amazon Go’s Impact on the Mobile In-Store Experience

Amazon: a brand synonymous with e-commerce that shifted the way the world approached shopping. Since inception, Amazon has constantly innovated and improved the online shopping experience, expanded into a number of diverse but related markets and now that they’ve forced so many competitors online – some even out of business – they’re going back to brick and mortar.

What Is It?

Recently, Amazon announced their latest venture, Amazon Go – a physical grocery store that radically rethinks the customer experience around efficiency. Inside, you’ll see no checkout counters, attendants or scanners. Instead there are only turnstiles, scanning people’s phones as they enter and exit. Amazon is calling it, “Just Walk Out” technology – letting shoppers pick up everything they need and simply leave without ever having to wait in line. According to their site, the store will know what you pick up, what you put back and all of it is charged seamlessly to your Amazon account when you leave.

Many have tried to innovate the grocery space before, and while a few have succeeded, none have truly changed the experience or garnered wide-spread acceptance. But unlike self-checkout and scanners, Amazon’s impossibly simple experience is designed around incredibly complex technology. This unique backend infrastructure is what makes Amazon’s venture uniquely poised to successfully disrupt the grocery industry and set a high bar for other retail experiences.

What Do We Think?

Experientially and technologically, the ideas behind Go are really exciting. It will be interesting to see how Amazon can take what they’ve learned online and apply it to a market where only 2.4% of sales are made digitally. This is an industry where customers still value the ability to choose products themselves, and where the idea of confidence is different because “returns” don’t work the same way as in other verticals. Startups like Instacart have tried to bring convenience to grocery shopping through delivery but the results are often inconsistent. Go is differentiating its approach to tackling the biggest problem in the retail shopping journey: the friction between the excitement of picking something out and then waiting to experience it. Rather than trying to make something for the customer, they’re reducing interaction. If they succeed, their model is ripe for application across retail.

There are a number of benefits that we see in Go through its integration of technology and mobile devices in stores. The customer gets an incredibly efficient experience that makes shopping fun and will likely reduce the buyer’s remorse that often comes from long lines. Customers will feel better about their experience, their purchases and the store itself.

The business on the other hand, gets data. So much data! Amazon will learn tons about the way people move through their store, how much time they’re spending, which inventory sells, what people have a hard time justifying buying PLUS everything they already get from their accounts! With that much information paired, they’re well equipped to make some very smart, value-based optimizations to both their stores and their marketing. Additionally, if the store is as pleasing to visit as it looks, it’s likely that they’ll see customers pop in more often for smaller purchases outside of their larger, weekly grocery shopping.

Also, worth mentioning is the halo effect this might have on our overall technology infrastructure. Though mobile-payments and in-store technology have been around for some time, adoption and recurring use has been inconsistent. Grocery shopping might be a frequent enough scenario to really show users the ease and reliability of mobile payments which could influence more players to employ the technology themselves.

Of course, all of that hinges on a successful execution, be it by Amazon or someone else. The question remains: how well can this concept translate to other retail brands, is it something that can be recreated or is it something that only Amazon can truly create? With that in mind, we should balance the benefits with the costs.

The unfortunate truth is that the largest barrier to an in-store experience like Go is the investment – in technology, time, money, testing and training. This is not a “simple” deployment of beacons or RFID but a highly interconnected ecosystem of sophisticated technologies. Amazon has been strategic in leveraging their diversity and piecing together tech from their other products and services. Their vertical integration allows them to employ technologies in a more cost-effective way and because they built many of them, they can more easily make them work together. And that’s really the key piece, the integration that create a unified system rather than dropping a few different digital or mobile experiences that may be useful but are siloed from the rest. For others, creating that ecosystem, especially using third-party technology will be much more resource intensive to execute properly.

What Should You Do?

Just because it will be hard to imitate doesn’t mean you shouldn’t target the bar Amazon is setting or shy away from in-store technology. You may need to think longer-term and shift your perspective from looking at the store as a vehicle to looking at the store as a product and thus rethink your goals for retail. Then you can examine your customer’s experience and find pain-points to innovate through digital which is a critical step to success as expectations get higher and higher. With that insight in hand, you can start to map out a high-level vision of the ideal store experience and begin to lay the groundwork to make that vision a reality over the course of a few years.

There are a number of steps that can be taken to start improving the in-store experience for the better, for example:

  • Deploy an inventory system that helps integrate in-store stock and your ecommerce.
  • Follow Starbucks’ example and make your app a brand hub and preferred mode of payment in stores.
  • Use RFID tags so customers can learn more about specific products at the store.

Ideas like these can be completed in a short amount of time and allow you to test and optimize each piece of your experience for both customer value and business efficiency before layering in the next one. Amazon proved each piece of their infrastructure separately and then beta-tested the complete experience with employees.

Now that the store is launching, we’re looking forward to seeing where Amazon takes it, how it’s received and most importantly, how others adapt the idea to create even more unique experiences in retail and beyond. To learn more about how to unlock the potential of consumers’ mobile devices in brick-and-mortar stores, visit our research center.

Tags: Amazon Amazon Go ecommerce Mobility Strategy retail RFID

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