Will Amazon Go ever get going?
Photo: Getty Images

Will Amazon Go ever get going?

Amazon.com announced last week that it plans to permanently close eight of its 28 Amazon Go convenience stores, representing its latest brick-and-mortar retail operations pullback.

“Like any physical retailer, we periodically assess our portfolio of stores and make optimization decisions along the way,” an Amazon spokesperson said in a statement first reported by GeekWire.

The closures come on the heels of a January announcement the online retail giant would be eliminating as many as 18,000 corporate jobs, with Amazon Stores among the departments affected. It also said it would slow warehouse growth as it rewinds an aggressive build-up during the pandemic.

Amazon, on its fourth-quarter analyst call, said it recorded impairments of property and operating leases, primarily related to Amazon Fresh and Go stores.

In March of last year, Amazon announced it was closing all 68 of its Amazon Books, Amazon 4-Star, and Amazon Pop Up locations across the U.S. and the UK to focus on its Fresh, Whole Foods and Go.

The first Go opened in January 2018 and featured the debut of its “Just Walk Out” technology. The technology is now used in Amazon Fresh locations, two Whole Foods, sports arenas and a few third-party locations.

The number of Go units is well below Amazon’s original growth projections calling for around 150 by the close of 2020, although the pandemic might have interrupted expansion. In early 2022, Amazon opened some slightly larger formats to target suburban markets and last week indicated more expansion was in the works.

Amazon said, “We remain committed to the Amazon Go format, operate more than 20 Amazon Go stores across the U.S., and will continue to learn which locations and features resonate most with customers as we keep evolving our Amazon Go stores.”

CEO Andy Jassy, in January, expressed confidence in Amazon’s brick-and-mortar grocery opportunity. He told Financial Times, “We’re hopeful that in 2023, we have a format that we want to go big on, on the physical side.”

BrainTrust

"I doubt that going physical in a big way was ever Amazon’s strategy. They will do best to leverage the tech and license it out, using the Go stores as a proof of concept."

Brian Delp

CEO, New Sega Home


"I think we should consider the possibility that Amazon JWO has scored a tech win combined with a shopper experience fail."

James Tenser

Retail Tech Marketing Strategist | B2B Expert Storytelling™ Guru | President, VSN Media LLC


"The most time-intensive, and therefore expensive, part of BOPIS is the picking process — not the checkout. "

Susan O'Neal

General Manager, Promo Intel & Insights, Numerator


Discussion Questions

DISCUSSION QUESTIONS: Are the Amazon Go closures likely more related to challenges at Amazon Go and its Just Walk Out technology or a broader overhead reassessment? How would you evaluate Amazon Go’s strengths and weaknesses?

Poll

25 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Neil Saunders
Famed Member
1 year ago

Just Walk Out technology is fantastic and interesting. However it was developed by people who work in tech, not by people who understand what customers want. As such, the technology isn’t a differentiator and doesn’t provide a reason to visit Amazon. It is basically a very expensive lame duck. What Amazon should have done is think carefully about what consumers wanted from a modern grocery or convenience store and develop the proposition accordingly. That they didn’t means they need to go back to the drawing board to develop a food concept that is competitive and compelling.

Paula Rosenblum
Noble Member
Reply to  Neil Saunders
1 year ago

On this rare occasion, we disagree. I think Just Walk Out is a job killer, a theoretical (really theoretical) expense manager and takes the work that is rightly done by a retailer in a timely fashion and lays it on the consumer. Then of course, there’s the “Spy vs. Spy” game of shrink-shrink-who’s-got-the-shrink. And the customer service calls where it is claimed someone was wrongly charged. Nope.

Mark Ryski
Noble Member
1 year ago

This is not entirely surprising, but it is a blow for Just Walk Out technology. From the very start, this concept was fraught with overburdened technology requirements. Not only the upfront cost of deploying this technology but also the ongoing expense of maintaining it. And while Amazon’s recent financial challenges were the catalyst, I suspect that it was simply lack of market acceptance that drove this decision.

Gene Detroyer
Noble Member
1 year ago

Despite all the words to the contrary, I believe the entire Amazon Go effort is to prove the technology. The efforts and investment in this retail endeavor make little sense to me. The ROI of proving and licensing the technology throughout retail far exceeds that of operating retail stores.

Brad Halverson
Active Member
Reply to  Gene Detroyer
1 year ago

Agreed. This is the key to what’s ultimately going on. While the demise of some Go stores is making news, the real growth upside is licensing the tech with others. Performance of the tech recently launched in stadiums and airports already appears to be going well for customers and the partnerships.

Dion Kenney
1 year ago

In sci-fi, this would be a great concept. In reality, the margins and day-to-day operational messiness of c-stores is not a good fit for a conglomerate built on tech and data. Big business has to explore ways to grow the enterprise, but sometimes the implementation can’t hit the minimum IRR.

Christine Russo
Active Member
1 year ago

It could be considered a distraction from the main business which is in trouble and they may have called an all-hands to focus on righting the ship.

Karen S. Herman
Member
1 year ago

Amazon is a retailer that understands as today’s shopper grows digitally, they expect a richer and frictionless shopping experience. By testing disruptive retail formats, like pop-up stores and Amazon Go, the company is discovering traits of this evolving consumer. Amazon is spot-on in assessing the U.S. markets where Amazon Go will resonate with consumers. In strategic locations, this retail tech-driven format will prove very successful.

Brian Delp
Member
1 year ago

I doubt that going physical in a big way was ever Amazon’s strategy. They will do best to leverage the tech and license it out, using the Go stores as a proof of concept. The closures however don’t showcase this well. Customers want frictionless shopping experiences, but not at the expense of higher costs and empty shelves, which was my experience when comp shopping Amazon Go stores. The tech is not enough of a driver on its own.

Jeff Sward
Noble Member
1 year ago

Sometimes the math just doesn’t work for what sounded like a great idea. Time and time again, convenience turns out to be incredibly expensive. And the incremental improvement of the shopping experience at this level might not be worth the investment — at this moment in time.

DeAnn Campbell
Active Member
1 year ago

Scan and go technology is on the cusp of going mainstream, but only retailers who have aligned this tech with the customer’s experience will succeed. Amazon has invested heavily in the tech piece but has not spent enough time understanding the heads and hearts of the customer. For example – underestimating the importance of a physical checkout point as the customer exits. Even if they prepay by app, the presence of the station as a customer exits the store gives them a sense of closure, which has proven to increase customer satisfaction and recurring use exponentially. Amazon needs to decide whether to retain a presence in brick-and-mortar and, if it does, spend time and money on truly understanding it.

Lisa Goller
Trusted Member
1 year ago

These Amazon Go closures reflect short-term contraction to optimize resources for future growth.

Strengths of Amazon Go:

  • Globally-recognized retail innovation;
  • Perfect for places where customers feel acute urgency (sports venues, airports);
  • Helpful to minimize everyday lineups (partnership with Starbucks);
  • Acts as a testing lab that shifts consumer habits and expectations of retail ease;
  • Showroom to help Amazon sell its proprietary tech to other businesses.

Weaknesses of Amazon Go:

  • Expensive overhead;
  • Market factors have changed dramatically since its 2018 debut (now affordability outweighs innovation);
  • Some customers may be wary of privacy issues.
Richard Hernandez
Active Member
Reply to  Lisa Goller
1 year ago

Yes thank you. This was very much like electronic shelf labels 20 or so years ago. The technology was too expensive to implement and costly to maintain. The Go technology is the same at this early stage. It will take some time before the technology is more widely used, when it becomes cheaper to implement and maintain. I believe Amazon is still in the learning phase. It seems like they had to install the technology to test it and the store was an afterthought.

Camille P. Schuster, PhD.
Member
1 year ago

People really like shopping at Amazon because they can shop from wherever they are without going out. That poses a challenge for any Amazon stores. On the other hand, more people are beginning to shop in retail stores again. But which people are shopping? Younger, older, working people, etc.? And why are they shopping? For entertainment, for specific items, for just a quick stop, etc.? Amazon needs to keep experimenting. If Amazon has a plan for the next test before closing stores, it might be less disruptive to their workforce.

Ryan Mathews
Trusted Member
1 year ago

First of all this isn’t equivalent to Kroger closing a third of its stores. I think that the Amazon Go stores are learning labs so I don’t necessarily think the closings are a challenge to the format or the technology. And, yes, when you are looking for places to cut costs, experiments are often the first casualty. I don’t think they will all go away, and if they do they will be replaced by another learning-based format.

Shep Hyken
Active Member
1 year ago

It’s not like Amazon is shutting down the Amazon Go concept. From the commentary in the article, they’re pruning the number of stores by closing ones that aren’t profitable. If you see Amazon shutting them all and pulling the technology out of Fresh and Whole Foods, then we know it’s more than a question of being financially efficient. This technology is part of the future of the retail industry.

Susan O'Neal
Member
1 year ago

The most time-intensive, and therefore expensive, part of BOPIS is the picking process — not the checkout. Surprisingly it’s not Amazon that is leading the investment in that side of grocery BOPIS, but Kroger with their “online only” Florida penetration strategy. I expect whatever format Amazon ultimately goes big with in the future will be 80 percent on the picking process and 20 percent on checkout, and it makes sense that they need to pull back and rethink the physical manifestation in order to do that.

Cathy Hotka
Trusted Member
1 year ago

Just Walk Out is predicated on the idea that checkout is onerous for retailers and for customers. Given its paltry rollout, that assumption seems to be flawed…

Lee Peterson
Member
1 year ago

When are we going to learn? Amazon has NO interest in opening stores on a mass scale. Go provides the possibility of offering “Just Walk Out” technology, fully tested, to every c-store and grocery store in the U.S. and beyond. AWS is their profit engine, which allows them to do retail at VERY low prices and pinch the likes of Walmart. Stores will never be profitable for them, it’s not the point/goal. So look beneath the surface for a repeat of an AWS technology style of money maker, not a cool version of a ’90s retail outlet. That’s the Golden Goose.

storewanderer
storewanderer
Member
1 year ago

Folks commenting here about what great technology Just Walk Out is, when and where did you use the feature? I’ve only used it at Amazon Fresh. 4 hour to 12 hour delay for a receipt. Unacceptable.

Craig Sundstrom
Craig Sundstrom
Noble Member
1 year ago

How do you differentiate between “challenges” (that lead to closure) and “broader … reassessment”? That is to say, if the first thing you cut are the money-losing segments, isn’t this a tacit admission that that’s what “Go!” is?

I was never a big fan of the concept. I thought there were just too many issues related to shrinkage — that real world issue that techies so often like to ignore — and have yet to see evidence that this is or was what the world is waiting for. And if it couldn’t work for something as simple as a convenience store, what’s the likelihood of scaling it up to a store the size of a supermarket … or big-box?

James Tenser
Active Member
1 year ago

The big miss by Amazon with respect to just-walk-out so far has been the misguided hope that customers truly would want to change their shopping behavior to conform with the requirements of the technology.

I think we should consider the possibility that Amazon JWO has scored a tech win combined with a shopper experience fail.

Tony Walker
1 year ago

Amazon Go was never about the assortment of products or a range that met consumer needs; it was experimenting with experience changing technology designed to remove friction from buying. In this case, it was an over engineered solution to a problem that the customers didn’t weight as extremely as Amazon did.

Brad Halverson
Active Member
1 year ago

What’s not said above is that the 6 (of the 8) closing in Seattle and SF are in core downtown areas where foot traffic is down due to work from home, and remaining shoppers experiencing a malaise seeing other stores closed or boarded up. This likely has nothing to do with corporate overhead or lack of confidence. From an economic standpoint, every retail business should shutter stores when numbers don’t make sense.

Conversely, Amazon Go in the Seattle area has just opened or will be opening 2 more suburban locations here. One of them looks to be designed well, is getting plenty of foot traffic and the fresh food offering is good.

Ultimately, these stores are learning grounds for Just-Walk-Out tech. And so critical eyes should be ultimately evaluating the tech and the experience, less so the retail stores.

Oliver Guy
Member
1 year ago

It is important to distinguish Amazon Go from the Just Walk Out technology that powers it. Amazon are still actively selling the Just Walk Out technology platform to retail brands around the world. The concept of the friction-free store — queuing for payment is the biggest form of retail friction — is still desired by consumers.

It is possible Amazon have determined that they attain more returns selling and supporting Just Walk Out technology to established retail brands than what they attained using it for their own brands. This may be because having a standalone store requires the establishment and support of the brand as well as the technology.