This year, Amazon introduced a few splashy physical store concepts that could shake up the brick-and-mortar landscape over the next few years. Jason Goldberg, chief commerce strategy officer at Publicis.Sapient, spoke with eMarketer’s Andrew Lipsman about what Amazon's most talked-about store format—its cashier-less Amazon Go locations—says about the company's business strategy and how it's disrupting retail's competitive landscape. Goldberg was interviewed as part of eMarketer's December report "The Future of Retail 2019."
You and I both had the chance to check out the Amazon Go store in Chicago. What do you think its cashier-less checkout concept tells us about where brick-and-mortar retail is headed?
One of the larger trends is reducing friction from the shopping experience, and there are numerous ways in which this drives more retail success. When you say "cashier-less checkout," there's a variety of experiences in that spectrum. There are many scan-and-go experiences that make a lot of sense in certain contexts.
The actual Amazon flavor of computer-vision-based cashier-less checkout is pretty niche at the moment. That may be less true in 10 years. But today, the technology used at Amazon Go doesn't scale very well to a lot of bigger and more common retail formats. And it's not the immediate customer expectation—they won't expect to buy a big-screen TV from Best Buy or a gown from Nordstrom and just walk out of the store with it.
Today, the technology used at Amazon Go doesn't scale very well to a lot of bigger and more common retail formats.
In which segments of retail does Amazon Go ultimately compete?
If Amazon is reportedly opening 3,000 Go stores, it's because the company thinks there's an untapped market or low-hanging fruit in the grab-and-go lunchtime food sector—which is really what the Go store is. It's not a convenience store. Amazon doesn't sell the items that normally sell well in convenience stores in the Go store.
Amazon Go competes with [fast-casual restaurants] Au Bon Pain and Pret a Manger. Its main value proposition is that it's much faster, easier access than even a Pret a Manger.
There are some niches where that works, like hotel gift shops, unattended convenience stores and airports. The technology can be useful, but in the near future, you won't see it in a Kroger, Walmart or Costco—or any of the big retailers that make up the majority of consumer spending.
Do you think Amazon has a grand strategy behind the Amazon Go store concept beyond just growing sales through brick-and-mortar?
Amazon is in this super-enviable position where it's a platform and every other retailer is not. It's fundamental to Amazon that every new customer is cheaper to acquire than the last one and is more valuable.
For traditional retailers, every new customer they acquire is more expensive than the last one—they've already acquired all the easy-to-get customers that have an affinity for their brand or the products they sell. And every new customer they get is less of a brand loyalist and spends less of their wallet share with them.
For Amazon, adding more planks to that platform—or in this case, more bricks to that platform—has a synergistic effect on the rest of the ecosystem. If it puts 3,000 stores out there and that changes a bunch of people's behavior for buying lunch, maybe that's also what causes them to shift their replenishment purchases from Walmart to Amazon, or their video watching behavior from Netflix to Amazon.
Amazon is in this super-enviable position where it's a platform and every other retailer is not.
What are the most significant ways Amazon Go grows the ecosystem opportunity?
All of these stores extend the platform, and getting more customer data is a big deal. I have this premise that one of the most disruptive trends in retail over the next five years will be a shift to auto-replenishment. There's a subset of things we buy that we get no joy from shopping for, like toilet paper. If toilet paper would magically appear in your bathroom before you needed it, every customer would opt in to that experience.
Predictive shipping and using artificial intelligence to do that auto-replenishment is increasingly possible. But to do that well, retailers need a large share of the customer's wallet so they see a lot of their shopping behavior. One of the few disadvantages Amazon has is that Walmart sees a much bigger chunk of the wallet share of the majority of Americans.
Adding new amenities that help Amazon see and collect more customer data points, which it can use to feed an auto-replenishment engine, feels like a strategy for Amazon.