Amazon Go stores reportedly coming to San Francisco, Chicago


Dive Brief:

  • Amazon representatives recently notified San Francisco city officials of plans to open a cashier-free Amazon Go store near Union Square, according to the San Francisco Chronicle. A formal announcement is expected within weeks. 
  • If these rumors are true, it would mark the second Amazon Go store. The first location opened in Seattle in January after a year of testing, and Recode reported that a Chicago location is also in the works. 
  • Amazon Go bills itself as the first cashier-less store in the world. Shoppers download the Amazon Go app, enter a code that identifies them and lets them start shopping, grab their desired items and leave. Amazon’s proprietary technology, including sensors and cameras throughout the store, identifies what users take from the shelves and debits their accounts accordingly. 

Dive Insight:

When the Amazon Go concept first opened, analysts rushed to weigh in on whether or not such a concept could expand, and whether it was actually “the future of retail.” There were certainly challenges for the new model, including some technical problems that delayed the store opening. Concerns also emerged about how steep the consumer learning curve would be with its “just walk out” shopping experience. The idea of literally grabbing and leaving felt uncomfortable to some shoppers accustomed to finalizing the deal formally via a checkout channel. NPD’s Darren Seifer described it as an “odd feeling that I was doing something wrong.” 

If these latest rumors are true and expansion is imminent, that would suggest that Amazon has ironed out those initial technical kinks. It also suggests the company’s confidence in consumers’ ability to overcome non-instinctive habits; after all, it wasn’t until recently that shoppers began to regularly have products delivered to their homes with the click of a mouse.

But a major barrier to Amazon Go’s expansion isn’t fixable technology glitches or human conditioning — it’s cost. As Seifer notes, the technology is expensive, and cost becomes an even bigger factor when considering retrofitting stores.

For Amazon Go’s success, the market has to justify that cost. For example, the tech-savvy, pedestrian-heavy San Francisco and Chicago markets make plenty of sense, as does Seattle, which was ranked No. 1 by WalletHub as the best metro area for the tech professional. Would this same concept translate in Jackson, Miss., or Memphis, Tenn., however? It seems a bit of a stretch, but it’s too early to tell. For now, dense urban markets full of wealthy, younger shoppers certainly seem to be a good place to break ground and fine tune any remaining bugs. 

In February, Recode reported that six additional stores — beyond Seattle — were planned. If that is the case, the concept will eventually have to prove sufficient revenue to cover high technology costs, not to mention the real estate prices in cities such as San Francisco or Los Angeles. 

However, as Christopher Walton, an independent consultant and former vice president of Target Store of the Future, recently wrote: “If Amazon begins to open more Amazon Go stores within the year, it likely portends that Amazon does not care how expensive these stores are and that it will stop at nothing to flood the market with them …” If Walton’s right, there will be a mad dash to see which company can play catch up.