This week in retail started with the news that Amazon would be opening Amazon Go, a cashier-free, app-based shopping experience concept that I am almost certain will grow into a chain with hundreds, if not thousands, of locations. Amazon pretty much invented e-commerce and now they are sending clear signals that they intend to reinvent physical retail as well.
While the Amazon Go concept is clearly innovative and a great example of competing by creating an effortless experience, it’s not like no one saw this coming. I moderated a conference panel 3 years ago on the blending of physical and digital retail, including app-assisted shopping. Meanwhile, “robot retail” startup, Hointer, (also offering cashier-free checkout) was founded back in 2011. One key tidbit from the Amazon Go promo video that’s not getting noticed in the media coverage, is that Amazon has been working on the design and technology of the store for 4 years.
If Amazon decides to step on the gas with expanding Amazon Go it will take a big chunk of business away from many incumbent convenience stores and small format grocers. If you think the damage will be limited to grocery—don’t be so complacent—Rebecca Minkoff is also piloting a self checkout concept and Amazon is clearly determined to make Amazon Fashion a success in the long run (self-checkout is just one of many innovations they could bring to the apparel category).
Now that Amazon has a 4-year head start (and potentially some patent protection to boot), incumbent retailers find themselves once again trailing behind another technology-led disruption to their business. Why do we keep seeing these cycles of disruptive innovation with incumbents falling further behind? I have a few favorite reasons:
- Status quo inertia – In established industries like retail, the status quo can breed a powerful sense of complacency. I can imagine an internal narrative like this: “Hey we have cashiers and they are not that expensive plus there are those impulse buys of candy and tabloids when consumers get stuck in long lines. We’ll throw up a couple of self-checkout lines to check the tech box.” Fine, until Amazon comes along and completely redesigns the experience to be effortless and data informed from end to end.
- Lack of a disciplined and patient approach to innovation – Experts in the field of innovation point out that coming up with ideas is the relatively easy part, but actually bringing innovations to market is hard. Many retailers who are organized around running their existing businesses don’t have the discipline built-in to filter innovation ideas and test them with consumers. Alternately, they don’t have the patience required for the process and systems changes needed to scale innovations beyond a few pilot stores.
- Quarterly earnings myopia – Investing in the future often involves short-term pain (expense, sales comping down) for long-term gain. Amazon has a deep understanding of this and has never let Wall Street-driven, short-term thinking influence it’s decision making. Sadly, this can’t be said for the majority of retailers, and it’s led them to be gun shy about even small innovations like better CRM or the use of Beacon technology in their stores.
- Losing the talent wars – It takes a lot of really smart people and specialized knowledge to bring an Amazon Go to market. Unfortunately for retailers and most brands the war for that kind of talent is increasingly being won by a very short list of tech companies, including Amazon.
All this isn’t to say that retailers should chase Amazon down the cashier-free rabbit hole. Instead, retailers should assess what kinds of innovation are on-brand for themselves and—critically—which types of innovations are within the scope of their near-future capabilities and investment bandwidth. Ultimately, for retailers to bring pioneering retail concepts to market, they will need to get inside the mind of the customer, elevate their strategic thinking, conduct realistic assessments of their own technology and infrastructure, and develop a rigorous approach to piloting and implementation. These are all things Amazon excels at doing.
That’s my take on why most of retail largely ignored an obvious trend and let Amazon beat everyone to market, again. I’d love to hear your point of view: Is there another way to look at this? Or, if you agree, what other lessons do you think retailers still haven’t learned?
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