Amazon defines its Amazon Go check-out free grocery stores as the closest thing to legal shoplifting. Customers in possession of a smartphone use the Amazon app, which is linked to their Amazon account and credit card, scan a QR code and access the shop. Cameras and sensor technologies such as pressure plates detect when customers pick up items and take them out of the shop, without requirements for serviced tills.
First launched in 2018, Amazon Go has opened or is planning to open around 26 stores in major US cities such as New York City, San Francisco, Seattle and Chicago; with plans to make London the birthplace of its first European store, according to an announcement back in February 2019.
Alongside the automated shopping process offered at Amazon Go stores, the internet giant has announced that selected Amazon Go stores in New York and San Francisco will now double drop-off points as e-commerce returns. Under the trial, consumers will make use of their existing Amazon accounts and smartphone apps to start the returns process. Unlike the shopping experience, however, they’ll need an in-store employee to take custody of the returned goods.
An estimation in 2018 highlights that 61% of shoppers preferred to return their goods in a traditional retail store, therefore, this move not only meets customers’ preferred option, but also brings people back into the shop where a hyper-personalised and customised experience can be offered. Due to the increased footfall into the stores, the likelihood of further purchases is potentially increased. Last but not least, it is also likely to slash costs for returns for Amazon.
Reports suggest that returns process are much cheaper when carried out in store rather than via carriers. It has been estimated that retailers spend around $3 per package when customers return goods to a store, but pay up to $6 per return shipped back via carriers. UK retailers also estimate that the process of packing and delivering an order costs between £3 and £10, and could cost up to two or three times more to be processed on the way back.
Thus it is worth wondering whether Amazon has found a winning strategy. By introducing the hyper-personalised Amazon Go experience, Amazon has found a way to reproduce its online competitive advantage – the ability to accumulate and exploit data – in brick-and-mortar retail, with the added result of reducing traditional operating costs such as staffed checkout counters. Furthermore, by allowing in-store returns, the e-commerce retailer is tackling an area which, as highlighted above, can be quite costly for online retailers; according to Business Insider, Amazon’s reverse logistics costs are extremely high, especially when compared to its sales, “Amazon’s worldwide shipping costs have grown fifteenfold from 2009 to 2018, while net sales have only increased by sevenfold in the same time”.
Source: Transport Intelligence, January 30, 2020
Author: Caterina Ciccone
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)