E-commerce has been causing trouble for physical stores and retailers for quite a while. People no longer want to queue at the checkout with tons of goods, so the experience is slowly becoming an unnecessary hassle. After recognizing the danger of digitization, retailers were in a rush to catch up and create grocery delivery services, programs, and other digital tricks to retain customers.
Even though big retailers have resources and influence, they can become vulnerable when something new and better appears in the market. Unlike small businesses, in order to adjust their strategy to a market change, incumbents require well-thought out approaches and forecastable plans to ensure their strategic adjustments are capable of protecting them from disruption. Considering that creation of any new strategy takes time, when new initiatives are released, there may already be another problem to deal with. For grocery retailers, it may be exactly that time, as the tech and e-commerce behemoth Amazon is about to enter the brick and mortar grocery industry.
It seems like now is the best time to move into the market for Amazon. The company figured out a way of practicing continuous innovation that works, and in case it doesn't (Amazon Fire Phone, Amazon Destinations), they move on and experiment again. So, after taking strong positions in digital TV streaming (Amazon Fire TV, Prime Instant Video), hardware (Kindle, Tablets, virtual assistant), Cloud solutions (AWS), and delivery services (Prime, Now), they are expanding from the digital space to gain a physical presence as grocery stores.
But Isn't it a step back?
No, because in typical Amazon fashion, they came up with something that is likely to revolutionize grocery shopping. The company's new creation - Amazon Go – who’s beta-version has been recently opened in Seattle, WA, offers a shopping experience with no lines, checkouts, or registered cashiers, so people essentially 'pick and go'. The checkout procedure is available through the Amazon Go app, where account holders can scan and pick items from the shelves, and once they leave the store, the app automatically charges their account. The store is equipped with sensors that detect each item and the amount of groceries a customer picks up. At first, the experience may feel like shoplifting, except it's legal.
Reportedly, 'the smart store' has become possible with the help of machine-learning, although the details of Amazon's unique approach are not currently known.
Amazon Go is a continuation of the company's attempt to enter the grocery market. Amazon Fresh, the online grocery delivery service has managed to offer some alternative to conventional shopping, but with the wide range of already available food delivery services, opportunities are limited. With Go, however, Amazon is not rushing to building big stores, but is initially aiming for the convenience store sector, which according to the National Association of Convenience Stores, serves 160 million customers per day.
As with many innovations, there are many benefits for society but there are downsides too. One of the key ones being the absence of in-store cashiers and the likelihood that other retailers will adopt a similar concept putting thousands of jobs under threat. It's not only incumbents but also the wider labor market who should start preparing for the upcoming turbulence.