Why Amazon Go is a ‘No-Go’ for Most Retailers

As Nick Wingfield, technology correspondent for The New York Times described in his vivid, first-hand account of shopping at the Amazon Go store, it’s hard not to get excited about the future of retailing.

And while the retail industry can use all the good press it can get, I’m not sure this is it.

It was a strange juxtaposition to see giddy customers line up for hours for the privilege to "grab and dash" a box of granola bars and a vanilla soda only to avoid a checkout line in the store — an ironic twist that was amusingly lampooned on a recent episode of "The Daily Show with Trevor Noah."

As much as checkout lines are the bane of retailing — a legitimate friction point that causes some shoppers to switch from bricks to clicks and buy online — cashier-less checkout isn't a panacea for the challenges brick-and-mortar retailers are facing.

Cashiers Aren’t the Problem — a Lack of Cashiers is

While some retailers are quick to blame diminishing mall traffic or confounding millennials and their erratic buying behavior for their same-store sales woes, they need look no further than their own stores. It’s obnoxious to make customers wait an inordinate amount of time to hand over their hard-earned money, but that’s exactly what happens in retail stores every hour of every day.

The checkout problem so many retailers seem to have is largely self-inflicted. Retailers, it seems, are genetically conditioned to cut expenses, and as every retailer knows, store labor (including cashiers) is the largest expense. It's utterly blasphemous for a well-intentioned store manager to ask for additional labor hours, even when she witnesses disgruntled shoppers storming out of the store in disgust, leaving abandoned shopping carts in their wake.

Part of the problem is that many retail executives today believe that they can algorithm their way to success. If artificial intelligence and machine learning can help cure cancer, then surely they can solve the comparatively trivial issue of improving the shopper experience in retail stores. But it’s as close to reality as humans living on Mars — with all due respect to Elon Musk. It’s theoretically possible, but mind-bogglingly impractical.

Sensors vs. People

The 1,800-square foot Amazon Go store is chock-full of hundreds of sensors, cameras and scanners, according to Devin Coldewey, a writer for TechCrunch. While the details of exactly how all this technology works and what it costs wasn't disclosed, it’s hard to image that it was nothing short of a small fortune. Furthermore, the ongoing expense of maintaining this supercomputer disguised as a convenience store would likely consume a substantial portion of a sizable retail chain’s entire annual IT budget.

While the technology overhead alone would exclude virtually every brick-and-mortar retailer from an Amazon Go-esque deployment at scale, there’s another issue that would be troubling to most retailers — theft. According to TechCrunch’s Coldewey, “a certain amount of ‘lossage’ is anticipated [by Amazon] … and if you manage to get out without paying for something, the company doesn’t officially care.” Well, most retailers do care about theft and the impact it has on their bottom line. Bill Turner of Loss Prevention Magazine raises some interesting questions on this matter in a recent post.

There’s no doubt that the "cool factor" and publicity Amazon receives makes the return on investment more than acceptable. However, when you consider that a typical 1,800-square foot convenience store might have two cashiers being paid $12 per hour (if they’re lucky), it would be impossible for even the largest, most successful retailers to make a rational financial case for this — at least not using the current technology available.

Frankly, I doubt that Amazon will expand its Go concept any time soon or very far. Furthermore, I’d bet my 401K that there’s close to a 0 percent chance that it will roll out the Go platform to its 474 Whole Foods stores, which average 39,000-square feet in size. Simple math says these stores would require five thousand to six thousand sensors — each. Even the mighty Amazon, awash in cash from its wildly successful web services business, would have a hard time getting the numbers to make sense.

Retailers High Jump and Amazon Pole Vaults

Amazon’s relentless pursuit of innovation is truly impressive and even inspiring, but it's playing an entirely different game than most every other retailer. Brick-and-mortar retailers that try to chase Amazon are destined to fail. They can’t possibly sustain the retail moon-shots Amazon seems to make every other quarter.

And yet, the retail industry is undergoing cataclysmic change. Business results are challenged and stores are being shuttered. Traditional approaches and strategies that have worked reliably in the past do not today. As one retail executive confided, “nothing seems to be working … we’re questioning everything.”

The allure of technology as the panacea for all that ails brick-and-mortar retailing, like the type epitomized by Amazon Go, is compelling. But technology is hardly a panacea. And for some retailers, too many misplaced technology bets could exacerbate an already precarious financial situation and waste precious time as the next earnings call approaches.

My advice to retailers is to simply install a single sensor at the entrance of their stores so they can know exactly how many shoppers are visiting and when. Then, they should hire enough store staff to serve shoppers in a way that delights them and causes them to happily make a purchase and return again and again. Retailers don’t need Amazon Go to be successful. It’s a no-go for most of them anyway, maybe even Amazon too.

Mark Ryski is author of "Conversion: The Last Great Retail Metric" and "When Retail Customers Count," as well as CEO and founder of HeadCount Corporation.