On this episode of The Digital Life, we discuss Amazon Go and the future of retail. As e-commerce continues to rise in popularity, retail stores are taking a huge hit, losing billions of dollars in transactions which have migrated online. What should physical retail look like then, in the 21st century? Ironically, Amazon, the e-commerce giant, might have the answer.
Amazon Go, the company’s new retail offering being beta tested in Seattle, is a IoT-enabled grocery store which forgoes the checkout line. Customers can walk in, grab what they like from the shelves, and just walk out again — no waiting in line required. How does Amazon Go work? When customers walk in, they tap their mobile phones on a turnstile, which logs them into the store’s system. It connects them to their Amazon account via an app. Amazon Go uses machine learning, sensors, and AI to track the food items that a customer selects and adds them to the app’s virtual cart. If the customer picks up an item and puts it down again, the item is likewise removed from their cart.
Amazon Go is just one of a host of ideas for retail store formats that re-define that experience: product curation, showrooms (a la the Apple Store), immersive environments, etc. Join us as we discuss the evolution of the retail store.
Jon: Welcome to episode 190 of The Digital Life, a show about our insights into the future of design and technology. I’m your host, Jon Follett, and with me is founder and co-host, Dirk Knemeyer.
Dirk: Greetings listeners.
Jon: On this episode of The Digital Life, we’re going to talk about the future of retail as well as the new offering from Amazon called “Amazon Go.” I think I’d like to start by describing what I see as the economic realities of retail these days which is eCommerce is just continuing to rise in popularity, billions and billions of dollars being spent every year online, and Amazon for instance, continuing to rise as the choice of many for purchasing whatever it is they need, from things from your pantry to I don’t know, snow blowers, to where they started with books, right?
Retail stores as a result are taking a huge hit. I mean, what do we need physical retail for anyway, in the 21st century? I’d like to dig into that.
Dirk: Well, you need physical retail for some things, but we can talk about that.
Jon: Yeah. I’d like to dig into that question a little bit by starting off with looking at what retail experiences we really want to preserve or things that are good for us that we love about retail. I’m going to start with me, Dirk, but I want you to think about that question, too.
Jon: I’ll tell you, if you get me into a bookstore, whether it be a used bookstore or even your standard Barnes & Noble, and I don’t have some place to be, I can spend a lot of time. I can spend hours and hours in a bookstore and part of the reason is that they’ve created an experience which you’re surrounded with books that you can investigate, that you can take off the shelves, maybe grab a coffee, sit down and look through this pile of books that you’d like to own. Additionally, you can investigate their nearest neighbor, right?
If you’re in the science fiction section, it’s very different from getting a recommendation on Amazon, like, “If you liked this book, maybe you’ll like this next one.” When you’re surrounded by the physical objects, and looking at all the spines of the books, and just going through them one by one, it’s really different. Of course, navigating that space versus navigating via the Amazon website, so whether it’s used books which sometimes the stores are less organized than others, or you’re big box Barnes & Noble or independent bookstores, they all have their own personality, there’s an element of curation there, that I find that retail experience to be something that I treasure and enjoy.
Very similar actually to the way I used to dig through CDs if our listeners remember CDs. They used to have used CD stores, I don’t know if those are still around, but I had that same sense of being surrounded by the objects that were somewhat curated by the owner of the store and just being able to really dig into those. I like those experiences very much, and I’d be disappointed if independent bookstores, if used bookstores went away as a result of eCommerce. On the other side of things, I do enjoy going to the Apple Store to check out the latest gadgets, so I don’t know what you call that, that retail experience, almost like the lab or something like the display that you can play with, but those two experiences for me I think are pretty fun.
In contrast, I could do without some of the grocery stores experiences that I have, waiting in long lines, bumping into people, getting in other people’s way. You have the cart there and someone parks the cart in the middle of the aisle and you can’t get by, and they’re bent over looking at something on the shelf so you can’t shove your way by, so there’s lots of awkwardness there. There’s definitely retail experiences I could do without. Dirk, I mean, do you have any retail experiences do you like? I’m sure we could all share plenty of experiences about negative retail experiences, but do you have some positive ones, as well?
Dirk: To be honest, I can’t think of any positive … There’s not retail that I look forward to doing, but there’s plenty of retail I feel like is necessary today, and technology in the future could make it not necessary, but we’re a ways away from it. Let me talk about a few examples. One is buying a car. I want to sit in the car, I want to look at all of the displays and what are the sight lines like, and I want to drive the car and see how it feels. I can’t do that from home, I can’t do that virtually, and even if car companies were leveraging currently virtual reality technology, those are so relatively low res that they certainly wouldn’t get me there, so a car is one example.
Another is clothes shopping. I actually do some clothes shopping online but it’s common when I do, the things aren’t fitting right. I should bought one size bigger, one size smaller, or maybe that particularly garment just didn’t fit me really well. Now, the model of there’s small through XL, there’s four basic sizes that clothes are broken into, that is to some degree a product of the old retail environment, right? There’s certainly ways around that. There’s other ways to think about how to size clothes up to and including having them all be custom made which probably isn’t going to work for every income bracket but it’s one of those things that’s solvable, but today, no way.
Like, if I want something that’s definitely going to fit, I want to go to a store. Like, right now I need a new hoodie and I’m trying to figure out which store to go to buy one, to try them on, because I know if I order it online, it’s just not going to fit quite the way I want. Even if it technically fits, I want one that feels a certain way and it simply requires trying it on. A third category I think about are groceries, and like I know how I want an avocado to feel, and if I’m buying avocados, assuming I’m buying for multiple days and not just one day, I want one that’s ready to go today, I want a couple that feel like they’ve got a day or two still to go.
I’m somebody who won’t buy a bruised banana. There’s other people who are happy to buy bruised bananas. Can machine learning and intelligence figure this out? So, I’m a non-bruised banana person, somebody else is, sure, they can, but right now it’s all just very generic. If you’ve used the Peapod or the different drive through style grocery pickups, they’re just chucking the normal groceries in there. There’s no care taken and we know, if you go and look at tomatoes, some of those tomatoes look great, some of them fine, some of them are questionable. The people filling those orders are not carefully curating what they’re putting in there. They’re just going into the stock, the same stock that would put out for people to pick from and, “Cachunk, cachunk, cachunk.”
If I want good tomatoes, I need to go in there, look at those tomatoes and pick out the right ones, and it would be prohibitively expensive for them to make sure that everybody who ordered tomatoes online got good tomatoes because that’s a tremendous amount of product that then can’t be monetized, that doesn’t reach up to that level and that category. From the standpoint of my shopping and my expectations both in shopping but then also in the products that I end up with, today there’s just no way for online ordering to make up for a lot of that stuff.
Jon: Yeah. I was really intrigued by this Amazon Go initiative, which is their retail offering which is being beta tested currently in Seattle. It’s basically a grocery store with no checkout line. The way they run it is when you go into the store, you tap your mobile phone on a turnstile which logs you into the store’s system and connects you to your Amazon account. Then, you can go and pick up the food products and put them down again if you’re not wanting to take them, and then at the end of the shopping experience, you just put everything in the bag and walk out of the store and the sensors and AI have been tracking the items that you’ve picked up, so then they’re added to a virtual cart on your app and then it goes through the eCommerce process that way.
I thought that was pretty clever way of using this plethora of sensors that are cheaply available now, sort of the promise of the Internet of Things in a contained environment that made a lot of sense to me. I could see myself maybe shopping more frequently for groceries instead of going once a week to the grocery store and getting everything at once, if I need I could just fly in and grab what I needed for the night for dinner, and then fly right back out again.
Dirk: Yeah, but I’m not sure if you’re flying if everyone’s doing that, right?
Jon: Mm-hmm (affirmative).
Dirk: If right now you go to the grocery store every four days, and you change the behavior to one day, if your behavior is typical of other consumers, you’re going to have 4X number of people in there everyday, albeit for a shorter period of time, but you’re still going to have these weird congestion moments with so many more people shopping if they follow that behavior at scale.
Jon: Yeah, that definitely could be a problem, or you walk in and you’re sitting there tapping your phone on the turnstile and you’re not logging in because I don’t know, your credit card expired or some other problem with the electronic side of it. There’s certainly places for there to be problems but the promise of Internet of Things as being this magical technology where the digital and physical intersect and then there’s these interactions that just feel natural but are also connected to your digital life.
I think Amazon is definitely pursuing that strategy. We’ve talked before on the show about the Amazon Echo is controlling for your smart home. Amazon is going whole hog into the Internet of Things and looking for those magical interactions, and I love the concept, I love the big idea. Execution wise, I absolutely want to try it out. It’s too bad it’s obviously near their headquarters in Seattle right now, so they can control the beta test there, but I definitely want to try it out now. Whether it’ll be like a Disneyland trip, you do it once, you’re like, “Okay, that’s enough,” who knows? But I really like the thinking behind that.
Dirk: Yeah, it’s a good concept. I mean, at least on paper it’s a really smart use of IoT technology and it’s thinking about how to have the best possible retail experience in a good way, so again, I don’t know what the actual experience is like, but kudos to Amazon for problem solving, I think in the right space for the context that they’re solving for.
Jon: Yeah. I really see this intersection of physical and digital in the retail space being able to enhance and improve retail and really preserve some of those experiences. I started off by yammering about how I like to go to used CD stores and used bookstores, or just bookstores in general. I could imagine that there could be very highly curated spaces say this Amazon Go technology is something they can package up and give to other retailers, à la their eCommerce solutions they do. A lot of people do eCommerce with Amazon’s engine, right?
Imagine this IoT solution in a few years can get rolled out to some local guy who’s able to curate all the books that design geeks, whatever, want to have and with this tech, potentially he doesn’t even need to be in the store the whole time because I could walk in and find this lovely book on design and say, “Hey, shoot. I’m just going to walk out with it now,” and boom, it goes through my Amazon cart. The idea that with Amazon, they’re not just creating this as an experiment. They’re looking to make this into a platform, I could almost guarantee it.
My imagination runs wild with the possibilities of preserving some of these physical retail experiences that I love and maybe reducing the cost of owning those kinds of spaces with this technology. Who knows if that’s going to be possible or not, but it definitely tickles my imagination.
Jon: Listeners, remember that while you’re listening to the show, you can follow along with the things that we’re mentioning here in real time. Just head over to thedigitalife.com. That’s just one “L” in thedigitalife, and go to the page for this episode. We’ve included links to pretty much everything mentioned by everybody. So, it’s a rich information resource to take advantage of while listening, or afterward if you’re trying to remember something that you liked. You can find The Digital Life on iTunes, SoundCloud, Stitcher, PlayerFM, and Google Play. If you want to follow us outside of the show, you can follow me on Twitter @jonfollett that’s j-o-n f-o-l-l-e-t-t. Of course the whole show is brought to you by Involution Studios, which you can check out at goinvo.com. That’s g-o-i-n-v-o dot com. Dirk?
Dirk: You can follow me on Twitter @dknemeyer that’s @d-k-n-e-m-e-y-e-r. Thank you so much for listening.
Jon: That’s it for episode 190 of The Digital Life. For Dirk Knemeyer, I’m Jon Follett, and we’ll see you next time.