POSTED ON December 07, 2016
Amazon Go: Innovation Will Set a New Standard For Store Performance

The newly announced Amazon Go retail concept is the shiniest new toy that we have seen in retail in perhaps a generation. The concept is a result of the “perfect storm” of digital technology and an ambitious- enormously capitalized, innovation led company. The highlight of the story has been Amazon’s Just Walk Out solution that does away with the traditional check-out lines. The idea that Amazon, THE ecommerce success story, is innovating in bricks and mortar is good cause for retailers everywhere to be concerned.

The technology will be the focus, but the real hero is the breakthrough in creating an easy “frictionless” shopper experience which is at the core of Amazon’s brand DNA. Fresh and convenience items remained the only frontier for Amazon to conquer, businesses antithetical to their 2-day delivery standard, and more spontaneous than Amazon Fresh delivery. But the potential competitive advantage for Amazon in the physical store space is daunting, as they bring their Prime ecosystem to the next level.

By eliminating the barrier between physical and digital, and basing the interaction on Prime membership profiles and shopper data, Amazon will have the ability to establish a new benchmark for retail sales-per-square foot productivity that grocery and convenience stores will not be able to easily match.

Here’s how:

  • Ideal real estate will be identified through Prime member density and activity data, minimizing the risk of “bad locations”.
  • Elimination of cashiers will enable overall reduction and reallocation of labor to more value-creating roles.
  • Hyper-tailored assortments based on real-time monitoring of item-level data.
  • Hyper-targeted promotions to drive traffic and encourage shoppers to visit additional categories per trip.
  • Tailored pricing at the individual level to further personalize the experience and drive loyalty.
  • True integration of user reviews to maintain a high-quality, highly desirable assortment.
  • Ability to allow users to participate in selection of future merchandise- vote on new items before they are stocked in order to model success potential.
  • Much more data driven benefits that will be discovered as they grow.

We will have to wait until early next year to understand the breadth of the offering in Amazon Go, but it appears from their video to be a convenience grocery focus. One thing is for sure, the definition for what digital disruption means in bricks and mortar will be measured against Amazon Go, and now we wait for their next trick.

Bill Chidley is a Partner and Co-Founder at ChangeUp. Creating Innovating Experiences that Drive Growth.

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