Amazon has flourished by making it extremely easy for their customers to give them money. So much so, that over 90 million Americans are Amazon Prime members. They continue to push the envelope with retail spaces such as Amazon Go powered by their Just Walk Out technology. This accumulates into a simple, yet defensible moat that solidifies their place at the top of everyone’s shopping minds. But, how did they get here and how will they dig a deeper moat?
1-Click Ordering
19 years ago, Amazon introduced shoppers to an entirely new way of online shopping known as 1-click ordering. By saving a customer’s payment method and shipping preferences, Amazon empowered impulsive shoppers by allowing any item to be bought with one simple click of the mouse.
Although it doesn’t seem like a very advanced idea, their swift patenting of the digital shopping method in 1999 helped create an e-commerce moat that couldn’t be beaten.
You see, e-commerce’s biggest enemy is the abandoned shopping-cart, which is basically talking yourself out of a purchase midway through the checkout process. Several studies claim that the average shopping cart abandonment rate is around 70 percent!
Amazon’s 1-click ordering button leaves shoppers little opportunity to “get cold feet” with their purchase. It’s harder to turn back once that button has been clicked.
I’m guilty of overusing that 1-click ordering button from time to time. Just a couple months ago I bought an unnecessary laptop bag on a whim because Amazon recommended it and I liked the way it looked. Not more than fifteen minutes later I had buyers remorse since I didn’t really need another laptop bag.
Right or wrong, Amazon exploits impulsivity with 1-click ordering, which basically eliminates the online shopping equivalent of standing in checkout lines. Now, they are bringing the technology to the physical shopping world.
Amazon believes that checkout lines should be a thing of the past. That we shouldn’t have to read People Magazine’s Kardashian headlines as we wait three people deep in the checkout line or frustratingly watch the new cashier struggle to type in the correct produce codes.
And they are solving this issue with the Just Walk Out Shopping experience.
Grab and Amazon Go
Using the same computer vision, sensor fusion, and deep-learning technology as self-driving cars, Just Walk Out is a smart-store technology that charges your account as you pick an item off the shelf (subtracting it if you put it back, too). The moment you walk into the store, it recognizes your Amazon Go account and begins billing you accordingly.
This simultaneous choosing and paying for an item alleviates us from shopping carts and checkout lines since you can literally Just Walk Out without seeing a cashier.
Taking a trip to the grocery store will feel more like walking into your own pantry than it does running errands.
In many ways, it’s like being a member of a country club. “Country clubbers” never worry about taking out their wallet to pay the bill since everything is charged directly to their member account. It’s an intimate experience where you feel important and known – not just another person buying something. For this reason, I believe it’s a shopping evolution that will quickly catch on with other brick-and-mortars.
If Amazon decides to license the Just Walk Out Shopping experience, it could easily be applied to a retail store like Macy’s. Shopping for clothes with Just Walk Out technology would be as easy as going into your closet for an outfit. Whichever scarf you chose to carry out of the store would be charged to your account.
Nearly every brick-and-mortar store is afflicted with the cashier conundrum. Employ too many cashiers and they lose money. Employ too few cashiers and the customers have a horrible experience.
Amazon Go technology sidesteps this problem altogether by relinquishing cashiers from the registers to serve us in better ways. And this solution could potentially deepen Amazon’s shopping moat.
A Tax on Traditional Commerce
Essentially, Amazon is creating the retail brick and mortar Point of Sale (POS) system of the future. Walk into any store, grab what you need, and walk out. Rather than spend resources on cashiers that are confined to the front of a store, those employees could roam the aisles, providing customer assistance.
As the POS system of brick and mortar commerce, Amazon capitalizes on the profits of others. They get to “wet their beaks” with 1-5% of all sales (or whatever they’d charge to license it) while allowing stores to sidestep the cashier conundrum. Thus, providing value for all parties.
This wouldn’t be the first time that Amazon pulled a move like this.
Chamath Palihapitiya, former VP of User Growth at Facebook, eloquently described the position that Amazon created with Amazon Web Services (AWS):
“AWS is a tax on the computing economy. Whether you care about mobile apps, consumer apps, IoT, SaaS, etc, more companies than not will be using AWS [rather than] building their own infrastructure. E-commerce was Amazon's way to “dogfood” AWS, and continue to do so so that it was mission grade. If you believe that over time the software industry is a multi, deca-trillion [dollar] industry, then ask yourself how valuable a company would be who taxes the majority of that industry. 1%, 2%, 5% - it doesn't matter because the numbers are so huge - the revenues, profits, profit margins etc.”
What Amazon did with AWS, they could potentially do with Just Walk Out technology. Thus, creating a “tax” on traditional commerce, shifting future behaviors, and digging a deeper moat.
I applaud Amazon’s understanding of human behavior as it relates to the shopping experience and how they are making it easier and more convenient. However, the main reason we can even discuss the possibility of Just Walk Out technology is our collective impatience.
An Era of Impatience
Convenience is an effective business plan because we’ve become increasingly impatient. We fill our days with so much angst for the next thing we have to do, that waiting for mere minutes is a trillion-dollar problem.
But, I’m more curious as to why we are always in such a hurry? Can we really not handle standing idle for a few minutes here and there?
Perhaps this is a larger problem among my generation, the Millennials. Regardless, we should all learn to enjoy the monotonous moments of waiting.
Frustration appears when you are in a hurry. In all honesty, most of the time we are just in a hurry to get home and relax.
Why not relax while you’re waiting?
It’s a simple mindset shift to realize that the slow cashier or the slow car ahead of you is going at their comfortable pace. Just because it’s not comfortable to you doesn’t mean they should adapt to your needs. In fact, you can learn from them.
“The calm and balanced mind is the strong mind. The hurried and agitated mind is the weak one.” – Wallace D. Wattles
Thanks for tuning in to this week’s Quick Theories. Please feel free to shoot me an email with your thoughts on Amazon Go.
