In this year’s letter to Amazon (AMZN) shareholders, released earlier this week, CEO Jeff Bezos extolled the value of high expectations. “We didn’t ascend from our hunter-gatherer days by being satisfied,” he wrote. Among the products that Bezos summarized was the company’s new shopping concept, Amazon Go.
“Since opening, we’ve been thrilled to hear many customers refer to their shopping experience as ‘magical,’” Bezos wrote. “What makes the magic possible is a custom-built combination of computer vision, sensor fusion, and deep learning, which come together to create Just Walk Out shopping.”
Innovation is a tricky thing. Too much change too quickly, and consumers will shun the advancement. Microsoft (MSFT) knows this well, having unsuccessfully launched the Tablet PC nearly a decade before iPads hit shelves.
Going too far or arriving too early is just as bad as arriving late to an industry trend—your company’s expectations can’t overshoot the customer’s expectations. Bad timing leads to losses. To disrupt the marketplace, businesses must show consumers the obvious value of the innovation before they make them feel comfortable enough to try it.
Bezos is right: The new Amazon Go store absolutely nailed that execution. The cashier-less shopping experience is a (rather obvious) next step toward automation, but it’s not so shocking that customers feel uncomfortable with the experience.
The real innovation of Amazon Go, however, is not the lack of cashiers. Amazon’s true endgame is what comes next: the end of the traditional grocery store.
A world without grocery stores
The usefulness of grocery stores is based on outdated thinking and old technology. We travel to hubs to buy food because we are used to it, but it makes little sense to ask customers to congregate in modern-day market squares. Convenience has become increasingly important to shoppers over the years, and consumers would rather select items online and have them delivered right to their doors.
Stores don’t bring goods to consumers; they bring consumers to goods. Combine Amazon’s shipping and subscription power with its acquisition of Whole Foods and add a dash of drone delivery and smart doorbells, and the result is a more sensible, convenient alternative to traditional retail.
Amazon Go took one small step toward convenience, but its true purpose is expanding the company’s footprint to get people comfortable with Amazon-provided food. Once people get used to the idea of dinner from Amazon, they will begin to wonder why they even need to go to the store. Why not make a few selections from home? Why not have the fridge automatically reorder staple items?
Grocery operations, too, could benefit from this change. Delivery-oriented services would allow stores to spend less money on prime real estate. Perhaps grocery stores would invest in warehouses outside city limits, using fleets of delivery drivers and drones instead. Whatever the result, the future of groceries looks nothing like the present.
Time for a change
Lovers of the grocery store experience can rest easy for now, though. Consumers are not yet willing to change their behavior so drastically. Amazon will use this opportunity to gather data on behavior and product complements, feeding that data to artificial intelligence to design a more intuitive experience.
Of course, Amazon is not likely to shut down its Whole Foods locations or stop opening new stores—it still needs to compete in the current model. Instead, Amazon will cut costs and test new technology along the way. Perhaps Amazon will open its warehouses for customers to pick up items without any need to interact with workers.
Grocery stores will not disappear tomorrow, but the way we buy food will change sooner than many realize. In the future, traditional stores will continue to exist as luxury options. In the same way that people pay for private tutors and small-class education over public schools, some consumers will opt for the traditional grocery experience. Service-oriented stores feel familiar, but they are an increasingly inefficient way to buy goods as distribution logistics improve.
We already buy everything online. With the Internet of Things revolution gaining steam, why shouldn’t our cabinets and refrigerators stock themselves? Why should we waste our time? Amazon understands this shift, and its debut of Amazon Go stores is the beginning of the end for grocery stores as we know them.
Per Bylund is assistant professor of entrepreneurship and Records-Johnston Professor of Free Enterprise in the School of Entrepreneurship at Oklahoma State University. His areas of research are entrepreneurship, management, and economic organization. Connect with him on Twitter.
