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Amazon Go: A Game Changer For The Retail Industry

Amazon.com has been tip-toeing into the world of brick and mortar retailing for some time now. There have been small outposts at colleges and a few beautifully designed bookstores have been popping up in cities with rumors for several hundred more. As I have said before regarding these efforts, they appear to be sleight of hand experiments designed to distract the retail world from the game changing concepts that are to come. Amazon Go is one such idea, one that could drastically change not just food retailing, but every segment of retail.

The premise is simple and the video circulating on-line and produced by Amazon, will surely be among the most watched futuristic retail videos around. But, what should be scarier for retailers is that the future will appear in Seattle early next year in the form of an 1,800 square foot convenience store called Amazon Go. The deceptively simple premise of the proposition is that you simply scan your app upon entry, shop for whatever you like and walk out the door.  No checkouts, no card transactions, no bagging.

The proposition for the consumer is simple—save time and hassle. The proposition for retailers may be even more compelling—save labor on the biggest component of the store (the front end) as well as improve throughput.   In an era where labor costs are increasing and labor availability is scarce, this becomes an incredibly compelling one-two combination.

Amazon Go looks like an upscale convenience store in the initial video, showing a variety of prepared foods and convenience grocery items. The technology will allow this, presumably, to work with any type of retail item with an appropriate sensor. This could easily move to fashion, electronics, home products and any of the other millions of products sold through Amazon. They claim that the Just Walk Out technology utilizes computer vision, sensor fusion and deep learning algorithms to provide this seamless shopping experience.  One can envision a future of Amazon brick and mortar outposts: book stores, beauty stores, drive thru grocery stores and convenience locations all using this technology.

The big question: How far behind is the rest of the retail industry and what can they do in the interim to keep up?

I’ll end with the words of Jeff Bezos in the latest annual report. I think it provides great insight into the mindset of innovation that pervades Amazon and why competition seems to always be a step or two behind:

I believe we are the best place in the world to fail (we have plenty of practice!), and failure and invention are inseparable twins. To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment. Most large organizations embrace the idea of invention, but are not willing to suffer the string of failed experiments necessary to get there. Outsized returns often come from betting against conventional wisdom, and conventional wisdom is usually right. Given a ten percent chance of a 100 times payoff, you should take that bet every time. But you’re still going to be wrong nine times out of ten. This long-tailed distribution of returns is why it’s important to be bold. Big winners pay for so many experiments.

Amazon Go may not work, but I like the odds on this one.  More importantly, the culture of innovation combined with deep pockets makes it clear why Amazon will be the retailer to watch in any category.

Neil Stern for Forbes

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