Late last year we noted Amazon's efforts to 'disrupt' the traditional grocery retail model by introducing small format stores that allow customers to simply walk in, pick up what they want and walk out. The concept store, dubbed AmazonGo, tracks a customer's every move, including each item they remove from store shelves, allowing them to skip long, often frustrating, check out lines (see: Amazon Goes Offline With Bricks-And-Mortar Grocery Chain; Envisions Opening 2,000 Stores).
Now, after nearly a full year of testing their Seattle concept store with employees, Amazon says their cashier-less grocery store is just about ready to go live. As Bloomberg notes this morning, the company has already begun hiring construction managers and marketing staff to build out a store base.
The e-commerce giant unveiled Amazon Go last December, saying it planned to open the store to the public early this year. However, the company encountered technical difficulties and postponed the launch to work out the bugs, The Wall Street Journal reported in March.
Seven months later, challenges remain, but the “just walk out” technology has improved markedly, says the person, who requested anonymity to speak freely about the project. And in a sign that the concept is almost ready for prime time, hiring for the Amazon Go team has shifted from the engineers and research scientists needed to perfect the platform to the construction managers and marketers who would build and promote the stores to consumers.
Of course, many analysts expect that Amazon will eventually roll out their grocery technology in the ~350 Whole Foods stores that they just acquired for $13.7 billion. That said, implementing the technology in a 40,000 square foot grocery store might be a little more difficult than their current 1,800 square foot concept store so we won't hold our breath on that one.
For those who missed it, here is a look at AmazonGo in action:
So, why is this important? Well, beyond the time it will save us from having to wait in frustrating checkout lines, there are nearly 40,000 grocery stores in the U.S. employing roughly 3.5mm people, many of whom are cashiers.
As we've noted before (see: 4 Signs That Spell Doom For Traditional American Grocery Chains), grocery stores operate on razor-thin margins that hover around 1-3% leaving the entire industry completely incapable of absorbing even the slightest financial shock...like the financial shock that might occur when a new competitor comes along and eliminates one of your highest cost buckets and allows them to drastically undercut you on price...
Of course, while the demise of the traditional grocery store will undoubtedly take time (recall that people were calling for the demise of Blockbuster for nearly a decade before it finally happened), make no mistake that the retail grocery market 10-15 years from now will not include many of the well-recognized companies that consumers visit weekly as of today.
Meanwhile, we're almost certain that this lower demand for minimum wage labor will prompt Bernie and his "Fight for $15" crew to argue even harder for higher minimum wages...after all, the cure for lower demand is just higher supply...it's simple economics 101 really.