As 2017 draws to a close, what do Amazon’s plans really mean for the future of traditional retail?
When Amazon announced its Amazon Go store concept back in December 2016, it made global news. The ‘grab-and-go’ store had been a much-discussed idea in the technological community, but now the idea was finally coming to fruition thanks to the online retail giant. Amazon’s launch video (below) was a slick production, dropping major buzzwords like ‘deep learning algorithms’ and ‘sensor fusion’. With no check-out staff in sight, economists began to predict the beginning of the end for retail as we know it. But as 2017 concludes, where are all the Amazon Go stores, and how are they impacting on the traditional retail model?
The respective answers thus far are: nowhere, and hardly.
Amazon opened its first bricks-and-mortar location in Seattle in December 2016, allowing only company employees to shop there as part of a trial. What they discovered from this beta-testing phase was that the technology struggled to cope when more than twenty customers entered the store, and when a customer did not replace an item in the exact spot where they found it. The grand opening to the rest of the public was supposed to occur at the beginning of 2017, but these aforementioned technological difficulties mean that Amazon has postponed further launches indefinitely.
The grocery industry found Amazon’s $13.7 billion acquisition of Whole Foods back in June troubling, as Amazon’s transition into the selling and delivery of groceries began to take shape. Once again, this merger was also the catalyst for further concern that human workers were going to become obsolete. Amazon Chief Financial Officer Brian Olsavsky confirmed the company’s new goals at a recent earnings call, saying that “We are experimenting with a lot of (physical) formats…. I think Whole Foods really gives us a vast head start on that and a great base”.
However, these fears of human redundancy were again quashed when Whole Foods announced its intentions to hire an additional 6,000 workers, in addition to Amazon requiring an additional 12,000 seasonal holiday employees. If anything, the tight labour market is making life a little difficult for the companies, with the Bureau of Labour Statistics putting American unemployment at 4.2% as of September (the lowest percentage in a decade).
While claims that Amazon Go spelt big, bad news for retail may have been premature, no can deny the slow and painful deaths of the department store and the mall. Since 2002, US department stores have lost at least 25% of their jobs, and between 2010-2013 alone mall visits during the holiday season dropped by a whopping 50%. All the while, the e-commerce sector continues to grow. Will 2018 will be the year that Amazon Go stores perfect their computer vision and finally launch into the mainstream? It is difficult to say. What is certain is that Amazon has by no means failed in its attempts to radically change retail; it has merely stalled. As Jeff Bezos, the company’s CEO, says “Failure and innovation are inseparable twins”.
Amazon, at long last, has arrived in Australia. The rumours were finally confirmed last week, when Amazon emailed its sellers informing them of the impending Australian “soft launch”. Amazon’s lone Australian warehouse in Dandenong South has become a hive of activity ahead of its debut. This will surely have Australian department stores quaking in their boots considering the fate of their American cousins, and the fact that we are now weeks away from Christmas.
No one can predict how this new way of buying goods will affect Australian retail, or how quickly we will start to see any potential changes in consumer behaviour. It has taken 20 years for Amazon to touch down in Australia, so it is unlikely that the company will immediately follow this up by building Amazon Go stores. Perhaps Amazon will take the time to gauge the reception it receives from Australian consumers this year, before considering whether the nation is ready for Amazon Go stores. Yet, Amazon is famous for its motto “It’s always Day 1”. So, perhaps not.
By Nital Shah, CEO and founder of Octos digital marketing agency