B2B Supply Chain Lessons from Amazon Go (Part 1): Initial Take

There’s been a lot of hoopla on Amazon Go, Amazon’s foray into brick-and-mortar retailing, especially due to its recent video commercial.  

To summarize, Amazon is experimenting with some highly automated small format grocery stores. Think of them as a cross between a Trader Joe’s and a food kiosk at an airport, except without all the humans. One of the larger format stores has a grocery pick up capability, with a pilot store in Seattle. Amazon employees are beta testing it and rollout plans will be communicated in early 2017.

The best analogy for the smaller format Amazon Go store is a supersized hotel minibar. But the sensors don’t just monitor when you grab the $9 bag of nuts, they use your smartphone’s Amazon app to identify you upon entry (it quite literally becomes a walled garden) and then actively monitor your every movement with AI-based vision systems. Such visual sensors are then combined with RFID — Amazon probably gets a good deal on low-cost RFID tags — or NFC to “fuse” these sensor systems, which is why Amazon calls the technology approach “Sensor Fusion” (not to be confused with Gillette’s razors of course).

It all adds up to a promised near-frictionless experience for consumers to just swipe into the store, grab what they want and walk out with waiting in line or self-scanning items at a checkout counter.

What could possibly go wrong?

Well, lots of things, actually, if you think through the operational details. If you want to check out the various reactions and scenarios, look no further than Reddit discussions here and here, complete with great video links to an IBM commercial talking about this 10 years ago, a hilarious Robocop clip, and even Wallace and Gromit.

But this will all get worked out, and I expect that Amazon will choose safer, smaller formats (i.e., high density/volumes and low SKU count) in large cities to cater to the hyper-busy millennial / yuppie crowd and reserve the larger formats for the “click and collect” grocery pickup model.  As a sidebar here, don’t expect the hipster sandwich chef in the video to actually be anywhere in this supply chain. Humans don’t seem to figure prominently in this supply chain, although there’s obviously going to have to be some customer service and security folks in the store to help ensure a controlled “grab and go” scenario promised in this new model.

If this whole thing freaks you out, don’t get too mad at Amazon. This level of tracking is coming to a big retailer near you anyway if you use one of their apps, and this is just Amazon trying to, in addition to dominating some on-premise retail segments, gather data — lots of data — that they can use later, such as AI-based vision systems that can help in the broader Amazon supply chain or consumer pathway/preference tracking to help fine tune assortments and shopper flow.

In a follow on post, I’ll dive into some of the learnings that any supply chain organization can learn from Amazon’s latest initiative. Stay tuned!