Why Amazon Reportedly Wants To Open 3,000 Automated Stores
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Why Amazon Reportedly Wants To Open 3,000 Automated Stores


Dennis Green: If you’re
the operator of a local convenience store or
corner shop or bodega and an Amazon Go opens up
just around the corner, you might wanna look over your shoulder. Amazon first announced its
Amazon Go project in 2016. The first store didn’t
open until 2018, January. There are now four Amazon
Go stores in operation. Three of them are in Seattle
and one of them is in Chicago. Reportedly they want to
open at least 3,000 stores in three years. That seems a little optimistic
when it took so long for them to open the first one. They’re pretty small
stores to start out with. They’re only a couple thousand square feet which is kind of closer
to a convenience store than a full-fledged grocery store. Amazon Go stores are the
famous thing that Amazon likes to say is it has
just walk out technology where you can go in, scan your
app, you can take whatever you want off the shelf and
then you just walk outside and then it charges you
for whatever you took. It uses sensors and cameras
to kind of tell what customers are taking in order to
charge them correctly. There’s two kinds of Amazon Go stores. There’s a more grocery-oriented where you can go in and
get some light groceries. And there’s another format
that’s more oriented towards prepared food that’s kind
of like a lunchtime spot. You can just go in and
grab a sandwich or a salad. So this isn’t stuff that
you really wanna wait for. It’s maybe like a candy bar
that you just wanna grab. Something that you’re gonna
go and kind of consume immediately or a grocery item
that you need for a recipe that you wanna cook that night. They also sell their Amazon
meal kits in these stores which are refrigerated kits
with a bunch of different ingredients that you can cook. 90 percent of all retail
sales are offline. It’s kind of staggering
when you think about it. You think about the fast
growth of online is still only amounts to 10 percent even in 2018 so there’s kind of like a
lot of room to run there. Most estimates peg Amazon
as taking up basically half of all e-commerce. There’s some room for them to
grow and estimates by analysts show that they will grow but
they’re looking for other avenues of growth to maintain
the velocity that they have. And the one that they’ve
pegged right now is bricks and mortar. When Amazon moves into a
market they kind of operate with this low margin
mentality where profitability doesn’t really matter until
they kind of achieve mass scale and then they can kind of
tinker with the levers. As far as Amazon making
money off of these stores, that’s kind of TBD. There’s a report that the technology that went into the first one cost a million dollars to install. That adds a big additional cost to opening the store in the first place. As far as the break-even
point, we don’t really know what the economics of these
stores even are, so it’s hard to say if they’re making money,
or they’re not making money. Amazon uses what customers
are already buying online to guess what customers wanna
buy in their Amazon Go stores. So that’s kind of like a reminder
of what they have on you. It’s a reminder of what they
know that you already like to kind of entice you to
buy it again in a store. So if they know that a specific
neighborhood or city likes a certain kind of seltzer
they’re gonna stock more of the seltzer and they’re
gonna have more flavors of the seltzer. Whether or not that’s
a good thing, I mean, it’s serving customers right?
It’s what customers want. It’s putting it in front
of them in a new way. But it might make some
customers uncomfortable. Other retailers are trying
to come up with things that compete with Amazon. A lot of them have new pick up
options where they can order online and then pick up
in store or can deliver right to customers some even with autonomous vehicles. But no grocery stores
have that kind of data to draw from like a big
E-commerce giant like Amazon has.

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