Amazon Hits Roadblocks in Pursuit of Retail Grocery Business

Amazon’s plan to open Amazon Go, a convenience store without a cashier, has suffered a setback. In beta since December, the first store was scheduled to open to the public by the end of March, but sources reported that there are problems with the technology used to automatically charge customers when they leave the store. Brick-and-mortar stores are key to Amazon’s desire to enter the food sales market in earnest. The company is also exploring the possibility of retail stores to sell furniture, appliances and other items.

The Wall Street Journal reports that senior vice president Steve Kessel leads the Amazon Go project. The delay highlights “new challenges the retail giant faces due to its limited experience in anticipating and managing the flow of customers and products in a physical space.”

The beta version of Amazon Go in Seattle relies on video streaming as well as “cameras, sensors and algorithms to watch customers and track what they pick up,” according to sources. Tracking more than 20 people at a time is problematic, however, as well as “the difficulty of keeping tabs on an item if it has been moved from its specific spot on the shelf.”

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Even after the stores open, they will still require employees “for the near future,” to make sure the technology works properly. Amazon has opened five bookstores, with plans for another five, and has about 30 mall pop-up stores, with two drive-up, grocery-pick-up stores due to open soon in Seattle.

The New York Times explains that though Amazon’s work to enter the retail grocery space gets most of the buzz, “the company has a more ambitious collection of experiments underway,” which could have a profound impact, “putting traditional retail jobs in jeopardy” and helping “Amazon further its ambitions of delivering Internet orders within hours.”

The company is looking into brick-and-mortar stores that would serve as showcases to sell furniture, home appliances, and electronics. According to sources, Amazon is considering the use of augmented reality to help customers see how furniture would look in their homes. The electronics stores would be similar to Apple stores, with “a heavy emphasis on Amazon devices and services.” The company is “quietly targeting India for new brick-and-mortar grocery stores,” with the codename Project Everest.

“The mother of all shopping categories,” NYT points out, is groceries, a $770 billion industry. Bloomberg reports internal documents reveal that Amazon may open as many as 2,000 Amazon Go stores, in an attempt to capture more of this market. One source stated that, “Amazon’s goal is to become a Top 5 grocery retailer by 2025.”

Cowen & Co. stated that Amazon earned $8.7 billion in 2016 from Amazon Fresh and “all other food and drink sales.” To reach the status of Top 5 grocer, the company would need to reach $30 billion in annual sales.

Related:
Amazon to Launch Grocery Pickup Stores in Seattle, The Wall Street Journal, 3/28/17
Amazon’s Time-Saving Trick For Groceries: You Drive To Us, Wired, 3/28/17