Retail is Detail-- these slides describe a store visit to the Amazon Go flagship store in Seattle, and discuss whether the approach is a disruption or a gimmick
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Amazon Go store walkthrough from an operations perspective
1. Dr. Joseph Taylor
California State University, Sacramento
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Observations at the Amazon Go Store
INDUSTRY STUDIES CONFERENCE
SEATTLE 2018
2. What is Amazon Go
• Amazon Go is a convenience store format that uses technology to
completely automate the check out process
• The first store is located in downtown Seattle, next to the Amazon
Spheres work environment
• The store is ~1800 sq. ft and carries a relatively large assortment
of ready to eat foods
• Amazon’s description of the store can be found at
– https://www.amazon.com/b?ie=UTF8&node=16008589011
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3. How does it work?
• Customers download the
Amazon Go app to their
phone, and log in with
their Amazon account.
• When the customer
prepares to enter the
store the Amazon Go
app presents a QR code
that the customer scans
at a control gate
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4. • The QR code must be scanned for
each entrant to the store– but more
than one individual may be tied to
the same account
• All items taken from the store are
charged to the Amazon account
associated with the QR code
• Once in the store the customer can
shop as they would in another
store, and items that they take are
added to their virtual “shopping
cart”
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How does it work?
5. • Every shelf is includes
technology to track product
(likely by weight and location)
and has a wired connection to
store infrastructure
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How does it work?
6. • Stereoscopic cameras track
customer movement
around the store
• The store appears to
include two camera units
for every 4-foot section of
modular
• Cameras are mounted in
the store ceiling
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How does it work?
7. How does it work?
• When a customer leaves the store
through the marked gates, any items
that they carry will be automatically
charged to the Amazon account
associated with the QR code they used
to enter the store
• An electronic receipt is provided ~5
minutes after exit
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8. Is Amazon Go a scalable operation or a gimmick?
Observations from a former operator
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9. Visit Description
• We visited the store at ~7pm on a weekday evening. Likely
shortly after the post work rush had completed
• During our visit the 1800 sq ft store had ~25 customers present
and 5 visible associates working on the sales floor
• 2 sales floor associates were conducting “check out” like
activities– 1 as a greeter and the other checking IDs to support
alcohol sales
• 3 sales floor associates were participating in stocking activities
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10. Visit Description
• Although not in use during our visit,
the exterior of the store had signs
set up to direct customers to form a
queue to wait to enter the store
• I expect that the camera tracking
technology of the store has a limit to
the number of customers it can
effectively track, and this
mechanism allows the store to stop
the entry of new customers if there
is a threat of system overload
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11. Visit Description
• Despite not having a checkout,
substantial space at the front end is
dedicated to entry and exit controls
• 4 entry gates are provided, and two
exit gates-- separate gates are
required for each function
• An associate “greeter” mans the
front end for shrink control and
customer service
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12. Visit Description
• The in-stock levels of the store
were poor, with some labeled
shelves nearly completely empty
• The store has a very high SKU
count relative to its squ. footage,
with most items having a single
item facing
• Managing the high SKU count in
limited space likely contributes to
the out of stock issues due to low
holding capacity
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13. Visit description
• Each section of the modular
is separated by metal
fencing– likely part of the
way the shelf keeps track of
inventory and identifies if
items have been replaced in
the right section by
customers
• This limitation may be why
items have a single facing
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14. Visit Description
• Stocking at the store was dramatically
different than traditional retail
• Items were brought to the salesfloor in
plastic totes on a rolling rack, not in original
cases
• The “break pack” approach means that the
product needed to be picked from cases and
put into totes earlier in the supply chain
• Totes appear to be consolidated with product
related to sections of the store
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15. Visit Description
• The associate stocking the shelf takes
out each individual item to from the
plastic tote, then has to find where that
item goes on the modular.
• For every item (as opposed to every
case) the stocker needs to find a new
shelf location.
• The associate moves all around the
modular to find and stock each unit of
product (while holding other individual
products in their hand)
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16. Visit Description
• The “eaches” based approach to
stocking (“as opposed to the
“cases” based approach in physical
retail) is likely due to the
differences in which e-commerce
firms track warehouse inventory
• I estimate that “case based”
stocking of traditional physical
retail would be ~2-4x more
efficient in terms of cases of goods
stocked per hour worked
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17. Visit Description
• The technology generally works in the
background– but can lead to some
confusion
• Although all gates appear largely the
same, they only work one way
• Here, I accidently tried to exit through the
wrong gate having not noticed the “do not
enter” sign on the unit
• The “greeter” associate appears to spend
most of his time telling customers how to
use the automatic checkout
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18. Amazon Go: Scalable operation or gimmick?
• Amazon Go is an interesting store concept, that allows Amazon to
showcase some of the types of technology that can be used in a
high traffic environment
• The Go store showcases this technology in a reasonably
accessible way, and builds on Amazon’s identity as, ostensibly, a
retailer
• The technology showcase also supports Amazon’s strategy and
image as a technology provider
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19. Amazon Go: Scalable operation or gimmick?
• This is a flagship store, useful for brand development but not
necessarily geared towards profitability
• The “no checkout” front end is interesting for customers, but still
required 2 associates related to checkout, and with 6 entrance bays
occupying as much squ. footage as traditional or self checkout units
would take
• The technology structure currently required support inventory and
customer tracking appear to make it difficult to address issues like
shelf capacity necessary to support high volume/peak-time customer
traffic associated with convenience retail
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20. Amazon Go: Scalable operation or gimmick?
• The “eaches” item based stocking techniques make sense in a
warehouse environment (where practices like pick-to-light, or
automation are possible because there is no customer foot traffic) but
for in-store operation they were very labor intensive
• This format appears to require dramatically higher stocking costs
(there were at least 3 associates stocking a fairly small sales floor 2
hours before closing and still substantial out-of-stocks on the shelf)
• Overall payroll to sales costs are likely over 300 basis points more
than comparable stores due to inventory management inefficiency and
limited front-end labor savings
• Technology depreciation would also be higher due to the
infrastructure required
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21. Summary
• This is an interesting format, which showcases some of the different ways that
technology could be used in physical store environments
• The effect of the technology is to create a “wow” factor regarding customer
simplicity rather than an effective physical retail operation
• The approach seems to attempt to make the digital shopping experience
physical– but fails to recognize that from a customer experience standpoint the
digital and physical are NOT the same
• Lack of the tools, systems and processes necessary to make the physical
activities of retail work (moving boxes, stocking shelves, carrying goods, etc.)
efficiently keep this version of the store from being scalable
• To be scalable, future develop would likely need to focus on operational
efficiency, not just customer simplicity
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