Walking out of a store without paying used to be called shoplifting. At Amazon Go, Amazon's cashier-less convenience stores gradually popping up in cities across the country, it's called "walk-out shopping" -- and it's an illuminating look into how Amazon sees the future of retail.
I visited the new Amazon Go store in San Francisco that opened in late October, one of just six in the United States so far. Nestled in the heart of the financial district, the store is small but stocked with an array of classic convenience store fare -- basic food, drink and drugstore items -- plus some prepared food including salads, sandwiches and take-home dinner meal kits.
Browsing the oddly generic inventory, I racked my brain over what existing shop Amazon Go could possibly be designed to compete with. Unlike a 7-Eleven for example, they don't sell beer or cigarettes or lottery tickets. The wares are far more limited than a drugstore like CVS (CVS) or Walgreens (WBA) , or a full grocery store. And the food, while looking relatively fresh and healthy, is undoubtedly less appealing than many "fast-casual" eateries in San Francisco.
There were certainly plenty of customers -- as well as tourists and curious onlookers mainly there for the novelty -- and a worker told me that the shop gets very busy around lunchtime. That mix may be one way of looking at Amazon's plans for Amazon Go, said eMarketer retail analyst Andrew Lipsman.
"Is this going to compete with grocery, convenience stores, or grab-and-go [lunches]?," Lipsman said. "In Chicago it competes most directly with grab-and-go -- the lunchtime places that have lines out the door between noon and 1 pm every weekday."
Amazon Go isn't the only instance of Amazon expanding into the physical world. It also maintains a few dozen 'pop-up' stores in the U.S. acting as a sales floor and show room for a limited selection of Amazon products. And this holiday season, it's sending out a a holiday catalog -- yes a real paper catalog, sent to your home.
What does this all add up to? In part, borrowing 'old retail' tactics is a defensive strategy against big-box competitors' growth in online sales, according to Brittain Ladd, a logistics consultant and former Amazon executive.
"Amazon is no longer an online retailer, it is an omni-channel retailer that has embraced traditional retail strategies for attracting as many customers as possible," he said. "Walmart, Target (TGT) and other retailers have increased their focus on closing the gap with Amazon, and it's working."
But unlike your average big-box store, Amazon Go is just as much a test ground for the technology that powers the 'walk out' experience. An extensive network of sensors, cameras and computer vision software stitching the data together make the experience possible. That's how Amazon tracks what item you've picked up, or put back, in lieu of old-fashioned checkout scanners.
"It shows that past investments in AI and computer visions, which are allowing for the walk-in/walk-out functionality in stores, are really starting to pay off," said Zev Fima, research analyst for Jim Cramer's Action Alerts Plus portfolio, which owns Amazon. "This will likely allow Amazon to offer exceptionally competitive prices while outperforming other brick-and-mortar retailers in terms of margins and experience."
There's a good reason why Amazon Go stores feel oddly small and limited right now, Lipsman added.
"The camera and sensor technology is probably only equipped to handle more discrete, smaller environments, but you can certainly see this as an incremental step along the way to having a full size grocery retail environment," he said, "And when you remove the checkout line, that's a game changer." In addition, there may potential avenues for Amazon to license out the technology for other environments, Lipsman noted.
While Amazon hasn't said how many Amazon Go stores it plans to open, a recent Bloomberg report said that it plans to open 3,000 locations by 2021. Other analysts have offered more conservative estimates, but in any case, many experts agree that Amazon Go is poised to expand quickly.
And since it's hard to talk about automation without also bringing up prospective job loss, there was little trace of a robot apocalypse -- at least at this point. While there were obviously no cashiers, there were at least a dozen or more employees at the small shop -- mainly meticulously stocking and re-stocking the inventory.
Amazon also isn't the only one in this race. Arch-nemesis Walmart (WMT) , for example, is testing its own version of automated shopping as part of its Store 8 division, its in-house tech incubator. According to a report from The Information, Walmart is testing automated checkout among other applications at a 50,000-square-foot store outside New York.
It might be too soon to tell who will win this retail technology race. But it's clear that in the near future, Amazon wants you to just walk out.