Seattle is an incredibly fortunate city to be home to both Amazon and Microsoft critical yardsticks for technology. Before the rise of technology, it had a very strong retail history. Starbucks, Costco and Nordstrom are all Seattle based there as is outdoors and recreation favourite R.E.I. Seattle also acts as a “test lab” for all of these companies.
To highlight the impact of Amazon on Seattle, particularly the downtown core, at last count it has 35 buildings in the CBD of alone. This clearly justifies the search for a second HQ, which is now in the site evaluation stage.
One of the latest Amazon innovations in Seattle is Amazon GO located in the CBD. I was fortunate to visit the store in October of this year. If you do not know Amazon Go, it simply is a checkout and cash free convenience store. Time to consider the implications of a 100% technology-enabled experience.
Since opening late last year it has been in a restricted Beta mode before opening to the world. Work for Amazon, download the app, wander the store, choose your lunch or weekly groceries and walk out. The bill and payment comes to your app.
There is no checkout. This takes a bit of getting used to. It is a strange sensation in the first instance. Until you get the bill, it does feel like you are shoplifting. Amazon knows you aren’t. Cameras and Sensors take care of this.
There were a number of issues that this experience raised with me.
How does it work? – In simple terms is a combination of technology, sensors and cameras. People try to trick it, but Go appears to have an incredible level of accuracy. In fact, it is a scarily accurate experience. The issue it does have is with scale. More than 20 people shopping at once does appear to be an issue. This has been part of the reason why it is still in beta and not open to all.
Economics and Pricing – This is a challenging aspect. One may expect that it will be expensive due to the high cost of the technology. This will be offset by the changing labor dynamics. Which is cheaper is, of course, part of the Beta process.
Amazon has priced it to the local market. Amazon looks to reduce prices as part of the culture. Amazon, of course, owns Whole Foods and immediately on closing lowered pricing. Never pay $15 for activated mountain cucumber water again. It is not a premium price retailer. Expect the same approach. Ask the US mid-market retail ecosystem what that means.
What about the people? – The labor dynamic does change significantly. There are of course no checkout operators. There are still, in the beta at least stocking requirements that require human labor. There is food preparation, (it is focused on fresh food/meals and lunch given the location in the centre of the Amazon ecosystem and CBD centre). On floor resources have the chance to play a more proactive role. They can upsell; they can advise on food selection, what is new, what is fresh. This is a changing role for retail.
I liken it to the barista. 15 years ago, a person made you coffee. Overnight, again, thanks in part to a Seattle firm, that changed and the Barista was (re)born. Skills didn’t change, but the perception did, and it became a premium retail role. I see the same thing potentially happening in Amazon Go. It highlights the importance of training and reskilling for any role, let alone retail
AI and automation will take jobs, but it will transform all, and create more. I am increasingly frustrated by headline-grabbing, end of the world predictions for employment in the AI age. The lack of training and skilling is a greater problem if the machines take over. If they do, it will reflect a lack of employee skilling and vision, alongside public policy more than anything else.
Traditional retailers are doing similar things on a scale or two down from Amazon Go. I have written before about Waitrose in the UK. There are still human elements, but they are automating the retail experience, albeit in a way that uses less technology and requires more honesty at this stage than Amazon Go.
The point has to be made that the ambition is strong but, as with most radical innovations, real-time deployment has been more difficult. It struggles with large numbers in the store, but that is why you have a beta. Traditional retail struggles with queues in many situations, so that is not new. Once the improvements are made, expect a roll out to key inner-city markets in the US. Whether it goes global or not is a worthwhile discussion, but do not be surprised if Alibaba has a similar plan for China.
As it likes to prove constantly, Amazon is again on the cutting edge of the consumer world. When Amazon Go comes to a local city near you, it will transform at speed the retail environment will not change. Skills and training will be important, but as with all of these innovations, it is the customer that will make the decision as to how they want to shop.
If you require further information, please contact Phil Hassey, CEO of capioIT. capioIT is an advisory firm focused on helping organisations to understand emerging technology as the world becomes Digital. Phil may be contacted easily in the digital and real world.