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Will Amazon's (AMZN) Convenience Stores Transform Retail?
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The so far online-only retail giant Amazon.com, Inc. (AMZN - Free Report) is reportedly planning to open a brick-and-mortar grocery store by early 2017. Known as Amazon Go, the first store will open in Seattle, Amazon’s hometown.
The Wall Street Journal reported yesterday that the company has a broader plan of opening over 2000 brick-and-mortar stores in three different store formats, depending on the success of the initial stores.
Notably, the new Amazon exclusive store format that the company calls “Just Walk Out” will be devoid of cashiers and check outs and thus will not have long customer queues.
How Does it Work?
Amazon would be the first major retailer to transform the line-free store concept to reality. Customers will have to download an app and get their smartphones scanned at the store entrance.
As they start shopping, the app will add every item they pick up in their virtual carts and delete the ones that are put back.
As the customers exit, the technology will enable the calculation of the total bill, generate a digital receipt and charge customers from their Amazon account.
Before coming to that, a few more questions need to be answered. The first one is how efficient the system is? The technology is at a primary stage and Amazon may have to face a number of consumers’ complaints in case they are overcharged.
Amazon has said that the technology is based on machine learning, computer vision and artificial intelligence, but has not revealed much. So there are still a lot of uncertainties related to its execution.
The next question is will the convenience of no queues come at the cost of cashiers? According to The Bureau of Labor Statistics, cashier is the second-biggest occupation, with 3.5 million employed in the U.S. So, if the new technology works out and gets widely accepted in the retail industry, the job scenario will undergo a drastic transformation.
Nevertheless, the technology will eliminate checkout queues, one of the frustrating parts of shopping in store, saving shoppers a lot of time and effort. Amazon will have the first mover advantage with this system.
What’s on Amazon’s Platter
This is undoubtedly a clever move on part of Amazon to steer its business into the $800 billion grocery space. The move will help the company wrestle market share from peers such as Walmart (WMT - Free Report) , Kroger (KR - Free Report) and Target (TGT - Free Report) .
The move also appears to be a part of Project Como, Amazon’s plan to enhance food sales, to help it extract more dollars from the retail market. Shares of Amazon have been steadily treading higher on a year-to-date basis. The stock generated a return of 12.35% compared with the Zacks Electronic Commerce industry gain of 6.49%.
Amazon has already gone brick-and-mortar with books and it seems that it is treading the same path with other merchandise as well, targeting the considerably large customer base that still prefers to shop at physical stores. We note that every industry matures and falls. Amazon seems to be gearing up well in advance should online retail ever bottom out.
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Will Amazon's (AMZN) Convenience Stores Transform Retail?
The so far online-only retail giant Amazon.com, Inc. (AMZN - Free Report) is reportedly planning to open a brick-and-mortar grocery store by early 2017. Known as Amazon Go, the first store will open in Seattle, Amazon’s hometown.
The Wall Street Journal reported yesterday that the company has a broader plan of opening over 2000 brick-and-mortar stores in three different store formats, depending on the success of the initial stores.
Notably, the new Amazon exclusive store format that the company calls “Just Walk Out” will be devoid of cashiers and check outs and thus will not have long customer queues.
How Does it Work?
Amazon would be the first major retailer to transform the line-free store concept to reality. Customers will have to download an app and get their smartphones scanned at the store entrance.
As they start shopping, the app will add every item they pick up in their virtual carts and delete the ones that are put back.
As the customers exit, the technology will enable the calculation of the total bill, generate a digital receipt and charge customers from their Amazon account.
AMAZON.COM INC PE Ratio (TTM)
AMAZON.COM INC PE Ratio (TTM) | AMAZON.COM INC Quote
Will it Revolutionize Retail?
Before coming to that, a few more questions need to be answered. The first one is how efficient the system is? The technology is at a primary stage and Amazon may have to face a number of consumers’ complaints in case they are overcharged.
Amazon has said that the technology is based on machine learning, computer vision and artificial intelligence, but has not revealed much. So there are still a lot of uncertainties related to its execution.
The next question is will the convenience of no queues come at the cost of cashiers? According to The Bureau of Labor Statistics, cashier is the second-biggest occupation, with 3.5 million employed in the U.S. So, if the new technology works out and gets widely accepted in the retail industry, the job scenario will undergo a drastic transformation.
Nevertheless, the technology will eliminate checkout queues, one of the frustrating parts of shopping in store, saving shoppers a lot of time and effort. Amazon will have the first mover advantage with this system.
What’s on Amazon’s Platter
This is undoubtedly a clever move on part of Amazon to steer its business into the $800 billion grocery space. The move will help the company wrestle market share from peers such as Walmart (WMT - Free Report) , Kroger (KR - Free Report) and Target (TGT - Free Report) .
The move also appears to be a part of Project Como, Amazon’s plan to enhance food sales, to help it extract more dollars from the retail market. Shares of Amazon have been steadily treading higher on a year-to-date basis. The stock generated a return of 12.35% compared with the Zacks Electronic Commerce industry gain of 6.49%.
Amazon has already gone brick-and-mortar with books and it seems that it is treading the same path with other merchandise as well, targeting the considerably large customer base that still prefers to shop at physical stores. We note that every industry matures and falls. Amazon seems to be gearing up well in advance should online retail ever bottom out.
Zacks Rank
Currently, Amazon is a Zacks Rank #3 (Hold) company. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>