The impact of Amazon Go and the future of payments
Amazon Go has captured the imagination of retailers and consumers alike. What could the future of shopping look like if the checkout line goes the way of the dinosaurs and becomes extinct? Does the consumer-controlled checkout Amazon Go offers hold revolutionary potential, or is it a blip on the radar before a newer, hotter trend dominates the popular narrative? In reality, it's a bit of both.
This shift is easier to comprehend if we consider Amazon's seamless payments promise in the same context as the Apple Store phenomenon, which had a similar disruptive impact on in-store retail models. Everyone's CEO fell in love with the idea of doing checkout on a mobile device; the simplicity, convenience, and personal touch were hard to ignore and it set the gold standard in these areas.
The first adopters
For those following Apple, and those following Amazon today, advantages of early adoption exist. If consumers perceive that convenience and speed is better in your location than elsewhere, then those shoppers will come to you, and they'll stay with you because you're innovating in order to make their experience better. They see it as consumer focused innovation, and that goes a long way towards earning their loyalty.
Initially, the most nimble and innovation-minded retailers – the "fast followers" – will fuel adoption. Their mission is to appeal to the cutting-edge mentality that draws so many shoppers, using seamless checkout as part of a progressive retail experience.
With Amazon Go, however, the fast followers will discover that their own stores, products and in-store processes ultimately get in the way of copying the new, hyped model. From the technology investment to the type of products being sold, to managing the relationship with consumers, most retailers have a long way to go before their processes and infrastructure will allow them to copy what Amazon is doing. But like mobile checkout at the Apple Store, elements of Amazon Go's model will creep into the retail segments that it matches most closely, as retailers step up to compete directly for market share (and media buzz).
The actual payments process is the other roadblock to widespread adoption. Besides a few options such as Apple Pay, Google Pay or Samsung Pay, which don't incur interchange fees, there is a question of how newly introduced and future payments systems can identify a payment as 'card present' or 'card not present' and what the interchange fee to process those payments will be. With rates being much higher for CNP than card present, seamless payments may be slower to come into favor in segments like grocery or dollar stores that operate on high-volume, low- margin models.
On the consumer side, it will be challenging to convince consumers to hand over their bank account information so that they might process free ACH transactions – even harder than it is to get their credit card information. This is the exact dilemma that killed the fingerprint scanner that was so hyped a few years ago. It promised the same levels of speed, convenience and security, but the interchange fees retailers faced were simply too high.
Hype versus reality
The most important thing to understand through all the hype, organization and process obstacles is that what Amazon is showing us is nothing new. For example, European retailer Metro Group was the first to implement a form of self-checkout via RFID technology, way back in 2004. So while the technology isn't new, it is becoming increasingly more affordable. That makes it much more of a viable option to retailers needing to rationalize an infrastructure investment without significant levels of proven results. It just is yet to be seen if it will be enough.
It's no question that sensor technology, which requires no scanning, is the future of checkout. Scanning is time consuming and annoying, creates the conditions for checkout queues and is one of the least enjoyable parts of in-store shopping. It has to go, and in its place will be a simpler, faster and more rewarding in-store shopping experience that benefits consumers and retailers alike. But the jury is still out on whether the Amazon Go model is the answer.
Michael Jaszczyk / As CTO of GK SOFTWARE AG since 2011 and a Member of the Group Management Board, Michael Jaszczyk manages the development of the Company's many software solutions. Since 2013, Michael has also headed the North American business entity as CEO of GK Software USA.