The Ambitions behind Amazon Go

On January 22, 2018, Amazon opened its first Amazon Go store in Seattle. People are amazed by its Just Walk Out technology. The customers enter the store with the Amazon Go App, take everything they want, and simply walk out without going through a check-out point. The cameras in the stores, the weight sensors on the shelves, and the algorithm analyze what the customer takes and what they put back on the shelf. It sounded very promising then. Up to now, it is still considered ingenious in the industry.

Is Amazon Go a profitable business?

The hardware alone costs more than $1million for the first Amazon Go store. Amazon once claimed that they plan for 3000 Amazon Go stores before 2021.  Now at the end of the year, there are only 30 Amazon Go stores in operation. The schedule seems to be way behind.

However, data shows Amazon Go stores generate 50% more revenue than typical conventional stores. The number of customers per day on average is 550. That means that one Amazon Go store brings in $1.5million in annual revenue.

While the usual retailers offer mainly groceries and convenience items, Amazon Go puts its focus on prepared food. In this way, they end up with a higher gross margin.

Simply from the calculation, it is a business that needs quick expansion and takes years till its break-even point.

It is not about the store.

If you think opening Cashierless stores is what Amazon aims for, then you are wrong. It was never about the stores. It was the Just Walk Out technology that matters. In December 2020, Amazon announced to offer their Cashierless technology to other retailers.

Throughout history, the presentation of a grocery store has changed a lot. Yet the procedure to shop stayed the same. It always ended with the physical check-out until the appearance of Amazon Go. It is revolutionary for the industry. The market size of the grocery store and supermarket industry is $758billion worth in 2021. No doubt a fair amount of businesses would love an upgrade with Amazon’s technology. With a two-year operation in the field, Amazon Go offers reliable data for buyers. Many retailers in Canada and Europe have endorsed Just Walk Out in their shops. And the demand is increasing.

The Ambition lies in the data.

The expansion of Amazon Go and the offer of Just Walk Out technology as a product are not the whole story. Amazon’s ambition lies in the data.

Many retailers offer membership cards or store apps to track what and when consumers are purchasing. Just Walk Out technology captures more than that. It captures preciously how many milliseconds customers take to decide to buy a product, which product they checked and left on the shelf and which one they prefer over another.

Amazon or any business using their technology can merge the result of customers’ online preferences with their in-store purchasing behavior. Therefore, businesses can optimize their online recommendations by better anticipating customers’ needs. Conversely, online preference could be a source for in-store promotions. Next time when you log in to your firestick, the promotion of your favorite snack might be on it. With a special price just for you.

All this data will benefit Amazon’s booming advertising business as well. By offering better targeted advertising, Amazon’s market share in advertising will surge as well.

Does Amazon have access to their competitor’s customer data? That doesn’t seem to be the point right now. Similar to Amazon Pay, the set-up seems to be separated from their core business. We will write a separate article on this topic in the future.

Amazon started with Amazon Go. And with its Just Walk Out technology, the whole Amazon empire will benefit from it. In the end it’s all about knowing your customer.