
Amazon Go and the Future - misiti3780
https://stratechery.com/2018/amazons-go-and-the-future
======
PuffinBlue
The impressive thing about Amazon to me is that it thinks/acts for the longer
term. I guess it's Bezos that's the driving force behind this (he funds the
Long Now 10,000 year clock project after all, so must have some interest in
the long term).

Very many things become possible when you think on long timescales. Things
like space travel.

I know Elon Musk is the poster boy for it at the moment, but it's comforting
to me at least that In Bezos there's another 'moon-shotter' who thinks on the
timescales required to actually achieve such long term goals.

I know that's a bit of a tangential leap from retail stores to becoming an
interplanetary species but the long term mindset behind achieving the two the
same.

~~~
TheOtherHobbes
The smart way to become an interplanetary species would be to throw money at
physics research and AI.

The technological payback from an automated grocery store is unlikely to help
us get to Proxima Centauri.

That sounds harsh, but I think there's a fallacy in believing that
technological progress is cumulative, and each small step - no matter how
tangential - gets you closer to the big goal.

It's like arguing that if you keep developing steam engines you eventually get
a modern airliner.

In fact you only get a modern airliner with completely new technologies,
including GPS, composites, fly-by-wire, digital airflow modelling, and so on.

You can't build an A380 with Victorian sheet metal and rivets, no matter how
many times you iterate.

And there's something Victorian about Amazon's need to dominate and mechanise
every possible consumer market. The single-pointed focus makes it smarter than
legacy corps when it comes to retail, but it absolutely does not follow that
this proves Amazon is smart enough to invent its way out-of-system.

~~~
neuland
I don't know anything about physics research, but it would seem that there is
a more nuanced balance between basic research and things that can be applied
soon. Basic research requires a high risk tolerance and deep pockets, but a
potentially huge return.

For example, I can't imagine how much money Google has sunk into self-driving.
And, it's now looking like they'll make it back thousands of times over. But,
years ago, it could have failed after a 9 or 10 figure investment. To sustain
that (outside of government funding), you have to be doing something else that
pays the bills.

------
thisisit
I like reading stratechery time to time for tech related strategy writeups.
But this writeup somehow loses plot. The focus is too much on what are fixed
and variable costs and the repeat of Amazon's buyout of Kiva.

What would have been an interesting discussion is to look at how the retail
market is actually unfolding:

[https://www.bloomberg.com/graphics/2017-retail-
debt/](https://www.bloomberg.com/graphics/2017-retail-debt/)

And whether cutting out the variable costs of a cashier etc is really worth
the trouble in R&D and systems.

Edit: After reading some of the responses, I wanted to add something. If we
look at the linked article above, retailers are taking in loans to open more
and more stores. The idea being more stores = more customers = more profit.
But that is not materializing at all. The question becomes - where does the
issue lie really? Are variable costs the reason? What does Amazon Go solve
really?

Sure, some might say better software is the whole point of Amazon Go. But,we
are not talking about a SaaS where the cost of delivery is nearly negligible -
it takes nearly the same amount of real estate and fixed costs to deliver 1 or
1000 of a SaaS product. That is not true for B&M. If they want to ramp up then
they will need to open more stores - that requires real estate and other fixed
costs.

~~~
jjallen
There's not just the reduced cashier costs, but the vastly increased revenue
per foot of store that will come about when customers know they don't have to
wait in line.

The store will also be less empty per dollar of sales; or, said another way,
shoppers will spend less time in store, creating the appearance of an emptier
store for shoppers walking by, making it less time-consuming to enter.

Oh, and don't forget those prime signups just for people who want to try the
store (though the number of non-prime subs when these stores rollout will be
not huge).

~~~
Gargoyle
I must be weird. At no time has the idea of a line ever influenced my decision
to go into a convenience store.

~~~
reaperducer
I agree with you, and go one step further. I refuse to use self-checkout. For
two reasons.

1\. I don't like the thought of contributing to a system that costs people
(cashiers) their jobs. 2\. The whole reason I go to a store is for customer
service. If I wanted self check-out, I'd order online from one of the same-
day-delivery outfits.

~~~
onion2k
_I don 't like the thought of contributing to a system that costs people
(cashiers) their jobs._

People in boring, low paid jobs shouldn't be there. There are far better
things people can be doing than working a till. The idea that we're doing
people a favour by 'enabling' them to have a job when that job is tedious
menial work a tiny compute can do is nonsense. We need to automate those jobs
away to free people to do more interesting, fulfilling things.

We also need to do things to work out how to enable those people to do more
interesting work, like figuring out how to pay people if the free market
fails, but that's a separate issue.

~~~
neonnoodle
>We also need to do things to work out how to enable those people to do more
interesting work, like figuring out how to pay people if the free market
fails, but that's a separate issue.

Seeing as the free market has deeply failed many, MANY people (and stands to
fail even more in the near future), I would hesitate to put more people out of
work before addressing this "separate issue." Lots of people can have their
lives ruined before those in power decide it's time to think about how to
ameliorate the damage done.

~~~
throwawayjava
In the history of economics and politics, that has never happened. Tumult
creates unacceptable carnage, and the solutions fall out of the carnage.
Furthermore, we don't always correctly predict the form that carnage will
take, so it's not even as if we know what acceptable solutions might be until
things are already in freefall.

So although it's a nice sentiment, I'm not so sure it's realistic.

~~~
JoeAltmaier
When textiles automated in England, the carnage included a generation of
weavers starving to death.

Consumerism and technology have coincidentally grown to provide a few more
generations of employment. But now that's ending.

And sure its not happened in history, because we've never been exactly here
before. But we're here now! And there's no sign that solutions will fall out
of the sky to fix things. I for one don't want to wait for starvation or
revolution.

~~~
jtmcmc
then don't wait for it - ontario NDP adopted basic income as a platform point,
basic income tests are happening in a number of countries. Advocate for it or
something else that is attempting to solve that problem.

------
losteverything
I wish there was a mention that 5 people can buy the same milk and all can
each pay a different price (and none know what the other paid either)

I always thought it would be something to charge a wealthy person more since
they can afford it. With GO franchise i could charge $20 for milk to the
teacher pensioner backed by my tax dollars; $0.50 to the poor mother of 3
kids, and $10k to jeff bezos. Then I could stop subsidising farmers.

Of course my points are extreme but we never had a way to charge different
people this easily

~~~
chrisseaton
Are there no prices on the shelves in an Amazon Go store? Surely people want
to know the price before they buy an item? Not having a checkout doesn't
change that does it?

~~~
bloat
Yes there are prices on the shelves.

[https://www.recode.net/2018/1/21/16913984/what-does-
photos-a...](https://www.recode.net/2018/1/21/16913984/what-does-photos-
amazon-jeff-bezos-seattle-new-no-cashier-line-grocery-story-amazon-go)

~~~
chrisseaton
So what is losteverything talking about? How do they charge people different
prices if the prices are printed right there on paper?

~~~
losteverything
Not this specifically, but with a totally electronic system and no point of
sale to anchor there is large opportunity to easily and programatically have
dynamic pricing at the known individual level. Supply, time of day, whatever
can be instantly baked into a pricing system.

And why not? No humans needed to change pricing. Plus i would think you could
scan to get "your" price. Prime member $x. Etc..

I hope i did not imply this was happening now..

~~~
chrisseaton
Aaaah... you said

> I wish there was a mention that 5 people can buy the same milk and all can
> each pay a different price (and none know what the other paid either)

And the answer why it isn't mentioned in the article is... because it's not a
thing that's happening.

~~~
Johnny555
It's hard to do that in a physical store since everyone can see the same price
display. I doubt many people would be happy in a store where they need to look
up every single price on their mobile device.

~~~
grapeshot
Kohl's seems to be doing pretty well with that system. They print a high price
on the tags, then discount it by rack, and mail out 30% off coupons with short
expiration dates to some of their rewards card holders every month.

------
peterkshultz
When Amazon Go was first announced, my guess was that they were using RFID
tags on every item in the store.

I now understand why that was misguided: the cost of RFID tags would scale
linearly with the amount of goods sold. With Amazon's camera/ML technology,
they can reproduce this store wherever they want for just the cost of the
hardware and maintenance.

I really appreciated the article for explaining that.

------
steve-benjamins
> Well, I would ask, what about the labour of Marx’s day, the factory workers
> borne of the industrial revolution that he thought should overthrow the
> bourgeoisie?

From what I understand, Marx's contribution to political thought is his
philosophy of history. it's not that the proletariat would overthrow the
bourgeoisie in his day— but rather that it was simply an inevitability.
History was marching towards it.

I know Ben was using it as a way to tie-together political implications— I'm
just clarifying.

~~~
throwawayjava
The last section of this piece is funny because the first 3/4ths of the essay
is fundamentally Marxist in its descriptive characterization of the role of
technology in capitalist economies. In particular, this part of the last
section is straight-up wrong:

 _> Marx saw a world where capital subjugated labour for its own return;
technologies like Amazon Go have increasingly no need for labor at all._

First, because even the author's idealized view of Amazon Go does require
labor (the author even discussed this at length; that labor takes the form of
R&D). Second, because Marx _did_ see this possible world, and even wrote about
it extensively in chapter 15 of Capital.

I find that happens a lot in articles like this one -- ideas that originated
with Marx are parroted by an author who doesn't realize that Marx wrote
extensively on the role of technology in capitalism.

General advice on articles like this one: If you're going to write about labor
and technology in capitalist economies, and don't want to unknowingly parrot
lots of Marxist ideas, you should read capital. Capital certainly contains
some _prescriptions_ you may disagree with, but it also contains a lot of
_descriptions_. If you're thinking about labor and technology, there are
better than even odds that you're re-inventing one of Marx's _descriptions_.
He was the first one to say a lot of the obvious stuff.

Even more general advice: western stigmas aside, familiarity with Marx's
writing is as indispensable to understanding modern economic thought as
familiarity with Smith, Hayek, Keynes, et al.

------
pdgupta
At Amazon, the debate to set up brick and mortar stores used to come up at
every year's planning session. For Amazon it was never simply about doing
brick and mortar stores for the sake of having brick and mortar presence, but
categorically how would our stores be fundamentally different (experience,
value to customers). If there was not a clear answer to this, the discussion
was punted to next year.

With their bookstores they have fundamentally altered the buying experience.
And now with their grocery store too, they have fundamentally altered the
experience. They only open it up to public once the "experiment" has worked.
Expect this to be just the beginning. But over the "long-term" this will
become the new normal. There is no question about that.

It is the long-term thinking that leads to these experiments and initiatives
in the first place. Not all long-term thinking is alike (comparing Amazon with
other companies). At Amazon, it manifests into every aspect of business,
strategy, and operations.

------
hodder
I wish the author would skip the accounting and econ 101 segments that eat
half of this article. The author's writing is usually kind of fun, but it is
unfortunate he feels his readership doesn't understand the difference between
fixed and variable costs.

~~~
prepend
I liked these sections.

It’s always amazing to me how many developers don’t understand marginal cost
and opportunity cost and therefore misunderstand the true economic power and
forces behind software.

I like how Microsoft, Google, and Facebook were framed and it was essential
for the author’s point on how Amazon is trying to do for reality and real
stuff what others did for digital.

~~~
jamestimmins
This is also a key piece to understanding why developer salaries can be so
high. Revenues can grow much faster than costs, which makes the high salaries
economically possible.

------
themark
The line to get in reminds me of how the line for self checkout is sometimes
longer than the staffed lines.

~~~
huhtenberg
Self-checkout lines usually move much faster though.

~~~
Falling3
That seems to be a function of the number of items that people bring to those
checkouts rather than anything else. All things being equal, it's always been
my experience that the self-checkouts are slower, not faster.

~~~
jonknee
Sure, but there's one line for 4-8 self checkouts which makes the line move
faster even if everyone is a technophobe.

------
skywhopper
It's tiresome to read articles like this that just accept these loss-leader
vanity projects as real, impending culture shifts. This is a clever
convenience store built to test and more importantly showcase Amazon's ideas
for automation and machine learning. But it's not a grocery store, and it's
not yet anything close to a scalable business. The idea the author floats that
this type of place could ever be open with no staff present is ludicrous.

To get a bit more specific, this Recode article has actual pictures from
inside: [https://www.recode.net/2018/1/21/16913984/what-does-
photos-a...](https://www.recode.net/2018/1/21/16913984/what-does-photos-
amazon-jeff-bezos-seattle-new-no-cashier-line-grocery-story-amazon-go)

The store has a bunch of ready-to-eat and semi-prepared bundles that hit a
very narrow niche in the grocery market. There are a few pre-packaged name-
brand products, but everything is arranged in a highly regimented manner, and
the store is very small. It's revealing to note what's missing: any fresh
produce whatsoever.

What I'd rather see from these articles is a bit more of a critical eye on the
claims. Does the company actually think they could leave the store open with
no employees present? Do they even have a reasonable premise that fewer
cashiers even means fewer employees? (Someone needs to be there to help people
who don't have the app, or to watch that no one jumps the turnstiles, or to
keep the place clean, or to restock the shelves.)

And what about the software itself? Do the cameras keep track of the inventory
correctly? What if a customer puts a product back down in the wrong place? How
much awareness does the software actually have? Is it tracking your phone or
you? Does it attempt to deal with scams (can you bring an empty boxed meal kit
into the store, replace a new one from the shelf with the empty, and then walk
out)?

Maybe these aren't big concerns for this single store, but they are huge
concerns if you want to scale this to compete with 7-11 or Pret a Manger, both
of which, I will note, have more fresh fruit available for sale.

Now, I don't think Amazon is really thinking that sort of thing is imminent,
or that they are actually going to make money from this store. This is a
vanity experiment, nothing more. They are getting lots of free advertising
from a credulous press, and that's plenty sufficient for them.

~~~
debt
Not to mention what happens when this store gets robbed blind and the PR
fallout form that event. I know it’s unlikely, but something like that could
have very damaging effects on whether this will see widespread adoption.

I’m only saying this because I’ve lived in bad enough neighborhoods where I
don’t think just having a single person at the door is going to stop a
robbery. Unless it has some sort of auto locking, store lockdown feature.

~~~
djhworld
Are would be robbers really that interested in stealing tuna nicioise salad
boxes and quinoa wraps? Robbers want cash from the till and things they can
fence quickly, seeing as this store doesn't deal with cash, I suspect the only
petty thefts will be people circumventing the camera/sensor technology to
steal their protein enriched breakfasts shakes

~~~
haspoken
They sell alcohol, I would imagine that would be worth taking to some.

------
adamio
This same article could have been written 120 years ago about Automats
[https://en.wikipedia.org/wiki/Automat](https://en.wikipedia.org/wiki/Automat)

~~~
toastking
Or the tech reinvention of automats:
[https://www.eatsa.com/](https://www.eatsa.com/).

------
petra
One interesting question about this is that of strategy. How will Amazon use
this to strengthen it's power?

One possibility is of course building convenience stores. but the task is
immense - there are 150K conevinence stores in the US, more globally. and they
have only a limited window until competitors copy the tech.

So they will probably want to get the maximum strategic benefits in that time
window.

And while licensing money is nice, that's not the best asset convenience
stores has got. Their best asset is their location and their space. If Amazon
get access to some of that, they could build a distribution network, maybe for
grocery pickups, maybe at a global scale, and at a very fast growth rate.

And somewhere along this process, i suspect Amazon could convince or get
enough power so that convenience store owners will partner with them, for
example on selling Amazon private label.

~~~
ionforce
How "limited" is that window? Let them copy it.

~~~
petra
Surely Google could develop this in less than 5 years - and that's not enough
time to own all the stores in the world.

~~~
dingo_bat
Google won't do it. They are incapable of anything that doesn't involve
selling ads. I think that's a major point in the article. No other company
capable of executing this seems to be interested in doing it! Only Bezos!

------
herodotus
When I got into computers eons ago, I really believed that they would be a
force for social good: relieve tedium, improve the lot of most humans, and so
on. But I really have trouble seeing a huge benefit to the inevitable
elimination of many checkout jobs across the world. Sure, lining up takes a
bit longer, but there is a social aspect to grocery shopping that is
disappearing, and that is not good. I just extrapolate to a world where 3 or 4
companies own everything, and I wonder where that leaves all the other people
on the planet.

~~~
Eridrus
> but there is a social aspect to grocery shopping

What are you talking about? I have never in my life had any meaningful social
interactions with grocery store employees.

~~~
AnimalMuppet
_If_ you shop in a neighborhood store, and your neighbors also shop there, you
run into people you know at the grocery store. Not employees, but customers.

~~~
Eridrus
Will removing a cashier significantly change this?

~~~
herodotus
Yes; there is no line to chat in.

------
gkanai
Retail with no employees was done in China last year, fwiw:

[https://www.technologyreview.com/s/608104/in-china-a-
store-o...](https://www.technologyreview.com/s/608104/in-china-a-store-of-the-
future-no-checkout-no-staff/)

~~~
phinnaeus
"Purchases are made using an app to scan a barcode and paying over the phone."

That's like the difference between a fully autonomous car and an automatic
train.

------
femto113
The economics speak in this is just wrong:

    
    
        A cashier is a marginal cost... for a convenience
        store to sell one more item requires some amount of
        time on the part of a cashier, and that time costs
        the convenience store operator money.
    

Since the cashier is paid regardless of whether the item is sold they are
_not_ a marginal cost in this context. If anything other than a publicity
stunt Amazon Go is instead an effort to increase employee productivity,
similar to grocery stores putting in self-checkout kiosks where two employees
can supervise 10 to 20 kiosks instead of staffing one traditional checkout
lane.

~~~
ghaff
>Since the cashier is paid regardless of whether the item is sold they are not
a marginal cost in this context.

They're not a marginal cost but they are mostly a variable cost. Cost
accounting is tricky. Most things aren't pure fixed costs or pure variable
costs but cashiers are pretty close to the latter.

------
ctvo
The points about marginal costs are true, but I would argue the thinking
driving the Amazon Go store is the customer experience:

How do we improve the retail experience for customers and differentiate?

Then they worked backwards to make the economics work.

These stores, if they open at scale, will most likely lose money, but the
customer experience will be so far beyond current brick / mortar stores that
going to a Walmart becomes a jarring experience. Just like Amazon.com vs.
other e-commerce sites. That's the moat.

------
sumoboy
I wonder if Amazon tried other concepts like putting cameras at the checkout
instead so putting all your food on a conveyor and let cameras scan and weight
everything. Similar to that at the airport scanning your carry on items.

Scaling the store size would seem extremely expensive, so much infrastructure.

------
chis
I used this store every day over the summer when I worked in this building.
Don't underestimate the reduced friction of cashier-less shopping: I went to
that store way more often than the alternatives. I was able to get in and out
of the store in around 30 seconds if I knew what I wanted.

------
aviv
First Amazon kills retail stores. Then it opens its own retail stores. Sounds
like a winning strategy.

~~~
JoeAltmaier
They disrupted the space, killing traditional stores. Theirs will not be a
traditional store.

Once upon a time our local small town had a general store. The freeway came
thru, and it went out of business. Then a gas station came in by the freeway.
Then it started offering some groceries, clothing, amenities. Hey Presto! and
we have a general store again.

------
alant
Once other super markets adopt automatic check out, shopping at supermarkets
would be a lot less bad~.

------
shubhamjain
The article doesn't explain why Amazon wants to create a future straddling
both sides of online and offline retail. If drone deliveries are the future,
and VR is going to be as good as real, then, isn’t offline retail headed for a
decline? Isn't that what Amazon wants us to believe?

~~~
cryptoz
> If drone deliveries are the future

Noone thinks this for 100% of deliveries. I think about 98% of my Amazon
orders today would be too heavy for the first 10-20 generations of drones. Not
to mention, many people live in places where drone delivery will never be
allowed by law.

> and VR is going to be as good as real

Noone thinks this either, not for all people and not for all time. Amazon
isn't making financial decisions based on thinking that 100% of people will
eventually be in VR 100% of the time. Even if the technology is massively
successful, that would not happen.

> isn’t offline retail headed for a decline?

Yes of course. It's declining from about 90% of money spent to about 80% over
the next few years or so (estimates)

> Isn't that what Amazon wants us to believe?

What? Amazon wants your money. They don't care what you think the future will
be like.

~~~
shubhamjain
You're right. I wasn't suggesting that VR/AR and drones would take over the
retail landscape in a flash but these developments, combined with the general
convenience of online retail, might make offline buying a highly unfavorable
option for plenty of everyday things. If groceries being sold at Amazon Go
could be bought just as easily through an app and delivered reliably in a
short while with no additional cost, would the sophisticated system remain
just as useful?

------
b4lancesh33t
I have a lot of trouble with hot takes like the quoted tweet. It's not funny.
It's so dumb. It's pointlessly negative. Sometimes I feel like this kind of
midbrow objection is sucking out all the headspace that should be reserved for
thoughtful commentary.

~~~
tylerhou
I don't see the quoted tweet as an pointless, negative objection at all. It's
just pointing out the irony that a supposedly lineless store is so popular
that people are lining up to get in.

