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By Sebastian Herrera and Aaron Tilley | Photographs by Jovelle Tamayo for The Wall Street Journal
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 26, 2020).
Amazon.com Inc. rolled out its checkout-free "Go" technology in a large grocery store and plans to license the cashierless system to other retailers.
Amazon Go Grocery opened in Seattle on Tuesday. It uses an array of cameras, shelf sensors and software to allow shoppers to pick up items as varied as organic produce and wine and walk out without stopping to pay or scan merchandise. Accounts are automatically charged through a smartphone app once shoppers leave the store.
The company has operated a string of Go-branded convenience stores since 2018 but improvements in camera technology and its use of algorithms have allowed it to build a 10,400-square-foot market, said Dilip Kumar, vice president of physical retail and technology at Amazon. That is about five times bigger than the largest existing Go store and Mr. Kumar said the technology could be deployed on an even larger scale.
"We've learned a lot," he said. "There's no real upper bound. It could be five times as big. It could be 10 times as big."
Amazon hopes the grocery store will serve as a showcase for its technology as it seeks to sell its system to other businesses. The company has recently been in talks with potential partners and is targeting retail options including convenience stores and shops in airports and sports arenas, according to people familiar with the matter. Amazon has discussed multiple revenue models, including a fixed licensing fee or a revenue-sharing agreement, one of the people said.
Mr. Kumar declined to comment on how many Go Grocery stores are planned or plans for licensing.
The Go licensing plans are Amazon's latest effort to partner with some of the same traditional retailers it has long disrupted, and who regard the e-commerce giant as a fierce competitor and threat. In recent years, Amazon has also signed deals with Rite Aid Corp. and Kohl's Corp. to handle delivery pickups or returns that help drive foot traffic to their stores.
Amazon has considered offering to install and set up equipment to enable its cashierless technology and market it as a service, according to a person familiar with its plans.
Retailers could use the technology for a variety of purposes, including to track inventory or customer habits, that may stop short of having a full-scale cashierless store, said Joanne Joliet, a technology analyst with Gartner Inc.
But Amazon's size and clout could scare off some potential partners, and concerns over how their data is safeguarded may make some hesitant, Ms. Joliet said. Amazon would likely have to promise to set up a firewall that prevents its other business units from accessing potential partner data for them to feel comfortable, she said.
Amazon operates 25 Go stores in Seattle, New York, Chicago and San Francisco, which range in size from about 450 square feet to 2,300 square feet. The Go Grocery in Seattle is about the size of typical urban grocery stores, which average between 5,000 to 15,000 square feet, according to research firm Kantar.
Amazon's cashierless stores have inspired other retailers and tech startups to explore similar technology, including models that feature smart shopping carts. Some startups, such as Berkeley, Calif.-based Grabango Co., have signed deals with regional grocery chains, while others are working in sports arenas. In Europe, retail giant Tesco PLC has tested similar technology.
However, while cashierless stores have proved popular with customers, some retail analysts have questioned whether the cost of deploying the technology for a typically low-margin industry is worth it. Some cashierless tech suppliers say costs to set up and maintain the systems can easily reach into the millions.
Equipment prices continue to fall and Amazon's software has grown more efficient, allowing the company to control costs, Mr. Kumar said. The Go team handled a "vast increase in complexity in the way shoppers interact with items" without a significant increase in costs, he added.
Andrew Lipsman, an e-commerce analyst with eMarketer, said Amazon's Go stores are unlikely to be profitable at the moment, but the investment could pay off through licensing agreements or other means.
"Amazon has more leeway to run this business unprofitably because they've proven with other businesses that they can turn a profit long term," Mr. Lipsman said.
In Amazon Go stores, when customers scan a phone app and pass through gates, the system recognizes them as they pick items and leave. They are sent a receipt shortly after through the app.
At the new Go Grocery store, customers can take unpackaged produce items such as pears or apples, which are sold per-item rather than per-pound, and walk out. The system's cameras are particularly important for fresh produce that requires regular misting, such as lettuce, which makes it more difficult to use weight sensors, according to Amazon.
The Go Grocery store stocks roughly 5,000 items, Mr. Kumar said, far more than its smaller stores. That includes products from the 365 label of Whole Foods, which Amazon bought in 2017 for $13.7 billion, as well as local suppliers. Items also include pet supplies, packaged meats, cheeses, toilet paper and many other common grocery products.
"We tried to go department by department to be able to say, 'What do people really look for in a neighborhood grocery store?'" Mr. Kumar said. "We felt like the just-walk-out shopping experience in a residential neighborhood, in a residential grocery store, would resonate very well."
Go Grocery is part of a broader expansion of Amazon's presence in grocery. Aside from more than 500 Whole Foods stores, the company recently confirmed plans to start a separate grocery chain with human cashiers, with the first store planned for the Los Angeles area this year.
Grocery delivery has also been a growing focus. Amazon has used the Whole Foods locations to deliver food to customers, and the company also offers delivery in some areas through its Amazon Fresh unit.
As Amazon has gained a foothold in the industry, Walmart Inc. and Target Corp. have also ramped up grocery delivery efforts. Walmart this month said online grocery sales helped boost its U.S. e-commerce revenue by 35% in the fourth quarter.
Mr. Kumar said Go Grocery wouldn't initially offer delivery and that the company had no plans to put cashierless technology in Whole Foods stores. While Go Grocery is aimed at quick and convenient shopping in urban areas, suburban locations could be possible one day, he added.
--Dana Mattioli contributed to this article.
Write to Sebastian Herrera at Sebastian.Herrera@wsj.com and Aaron Tilley at email@example.com
(END) Dow Jones Newswires
February 26, 2020 02:47 ET (07:47 GMT)
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