After a year’s rehearsal, the first AmazonGo was opened to the public last Monday, on the Seventh Avenue of Seattle, on the ground floor of Jeff Bezos giant business’s headquarters. Great fuss, first impressions and comments.
The first ‘brick and mortar convenience store’ by Amazon is described by visitors as a high-tech version of a Seven-Eleven. A prêt-a-manger sandwich store, with a wide assortment of salads and ready meals added to a selection of beer and wines, fruit, vegetables and meat. A part from the Amazon meal-kits and other amenities. Thanks to the recent purchase of Whole Foods, a series of other products are also available – from chips to biscuits and baked goods – under a 365 Everyday Value own label.
Technology. The technology applied by Amazon, of which only a few generic details are known to this day, allows the checkout process to be eliminated and therefore the cost of cashier personnel. Two very much appreciated features for their innovation by consumers and also industry analysts. AliBaba and JD indeed are both trying to adopt the same solution in China. Even though the technology used, by either, is still not clear.
AmazonGo is the proof that resources available to the new bosses of the economy allow investments unreachable to traditional retailers. Margins for profitability in the grocery sector industry are in fact among the lowest in commerce – 1-3%, on average – and this matter has so far inhibited actual native retailers from having to deal with significant investments to digitalize their business, online and offline.
Artificial Intelligence (AI). AmazonGo’s cameras are fueling data for mapping either displayed and purchased products, which are processed and updated in real time with a likely optimization of orders and stock. The use of RFID tags was waved, but its remains out of the question for grocery products. And the reliance of these tools remain anyways uncertain under actual conditions of trade and stress, including possible mistakes in purchase registrations by the automatic cashier. (1)
The purchasing experience of the physical store is digitalized, essentially reducing checkout timing. This innovation was financed through the elimination or reduction of roles such as the cashier, that in the US represents the second occupation in absolute figures (3,5 million workers). And the obvious question – that is most being discussed in these days in Davos, at the World Economic Forum, in macroeconomic terms (2) – concerns the social impact of this phenomenon. On a labour force that is destined to succumb, and perhaps also on the purchasing experience. Which, apart from the immediate drive-in experience with automatic registers, may then suffer a loss of human relationships that is still now rooted in everyone’s habits.
Italian retailers GDO do not seem amazed nor influenced by the AmazonGo phenomenon. The supermarket of tomorrow model developed by Coop Italia at Expo Milano 2015 after all follows a different model, if not opposite, which reflects the needs of a customer that is more attentive to substance – in terms of integration and integrity of the supply chain (3) – rather than the express checkout. In the sense of giving priority to reception and interaction of the consumer with the data which give value to the products. The relation of proximity – as well as the trust and fidelity towards the distribution chain – allow to preserve this assurance, at least for the short-to medium term.
The risk of anti-competitive maneuvers from who is now in control of the online market and Big Data must be considered, anyhow. Disruptive operations, fueled by extraordinary resources, could indeed eat away market shares even in the grocery field overnight, as it has already happened in electronics and other fields. Also through unbeatable promotions, difficult to counter with the legal tools available. (4) Well, it’s time to move!
Dario Dongo and Fabio Ravera
(1) See in this respect the exemplary case of the yogurt pot missed by the reporters slip of CNBC, with results to shopping in AmazonGo, on www.cnbc.com/amp/2018/01/22/amazon-go-grocery-store-opened-and-we-accidentally-stole-a-yogurt.html
(2) One of the most optimistic interventions, on https://www.weforum.org/agenda/2018/01/heres-what-robots-mean-for-the-future-of-work. Minor optimism is revealed in the reports of the Boston Consulting Group on the impact of robotics on employment
(3) The integrity of the supply chain – intended as ethical in the respect of rights, even before rules – taking a closer look is just what is missing to Jeff Bezos model. Already been distinguished in Europe as the most dubious exploitation of workers and for its large-scale tax evasion
(4) Some precious suggestions on opportunities for action towards Amazon, Google and Facebook by Anti-trust authorities have been recently offered by The Economist, on https://www.economist.com/news/briefing/21735026-which-antitrust-remedies-welcome-which-fight-techlash-against-amazon-facebook-and
For our part we have limited ourselves to ask the Italian Anti-trust authority. In order to make sure that Amazon is at least in compliance with the rules regarding consumer information, having found numerous irregularities and omissions on products offered in the Amazon Pantry service