amazon go case study pdf

Airport Biometrics: A Primer (2021)

Chapter: appendix a - case study: amazon go cashierless retail experience.

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135   Summary Initiated by Amazon, the Amazon Go retail experience (see Figure A-1 and Figure A-2) uses a combination of cameras, sensors, computer vision techniques, machine learning, and artificial intelligence to create a cashierless retail experience; the first airport location will be at Newark Liberty Inter national Airport (EWR) (Amazon Go 2020). This technology, called “Just Walk Out,” requires customers to identify themselves when they enter the store (Amazon 2020). The customer’s identity is verified either by scanning the Amazon Go mobile app (in the case of an Amazon Go store) or their credit card (for other retailers equipped with the Just Walk Out technology). A biometric variant also exists, where instead of a QR code or credit card, customers enroll at the storefront enrollment kiosk by scanning their 3D hand palm biometric and linking that to their account. The Just Walk Out technology leverages computer vision and machine learning to distinguish between customers and the items picked out and added to their virtual cart. The system does not rely on facial recognition but relies on movement tracking. Each customer is associated with a name, an account, and a consumer profile that reflects all interactions with items on the shelves (which items are stared at, picked up, or bought). Future use of the customer’s data is still undefined. However, the initial patent application included some examples where the customer’s purchase history could be used to confirm which items were picked by the user. The main benefits are significant time savings for customers and financial savings for retailers (reduced to no cashiering cost) (Bishop 2020b). The system architecture relies on Amazon’s A P P E N D I X A Case Study: Amazon Go Cashierless Retail Experience Source: Adapted from Amazon Go 2020. Figure A-1. Amazon Go shopping experience.

136 Airport Biometrics: A Primer What? ● Cashierless retail technology ● Project implemented by Amazon Where? ● 26 Amazon Go stores across the United States (e.g., Chicago, New York, Seattle, San Francisco) ● Deployment at a few airports across the United States in stores of retail chain OTG (On-the-Go), including at EWR (OTG Management 2020) Customer process steps ● To access Amazon Go stores: – Create an Amazon account – Download Amazon Go app – The Amazon Go mobile app interface will generate a QR code, or the user may add a hand palm scan to the account at an enrollment kiosk. – Customer enters the store by scanning the QR or hand palm (or credit card for other retail stores with Just Walk Out technology) – Just Walk Out technology tracks the customer and the interaction with store items. – Virtual cart validation – Exit Who? ● Amazon patented the Just Walk Out technology. It provides the hardware (camera and sensors) along with the software. Why? ● Amazon’s goal is to create a seamless shopping experience where customers do not have to wait in line. How? ● The concept relies on the combined use of cameras, sensor fusion, computer vision, and deep-learning algorithms to track customers during their time in the store, noting each item picked up, put back, or added to their virtual carts. For the biometric hand palm variant, 3D hand palm scanners and a palm recognition software are used. Enrollment/digital identity creation and verification ● An Amazon account can be made online, and enrollment is done in the storefront at the enrollment kiosk. The online Amazon account can be linked to the hand palm biometric by scanning one's hand at the kiosk. Verification of identity how? ● Customers are identified by either a QR code generated by the Amazon Go app in Amazon Go stores or their credit card in third-party retail stores where the Just Walk Out environment is available. For? ● Amazon account holders Table A-1. Key facts for the Amazon Go case study. Just Walk Out technology and includes the camera and sensor hardware as well as the software system. Table A-1 contains a summary of the Amazon Go case study. How Does It Work? Before the Customer Journey • Amazon Go relies on sensor fusion (analyzing and aggregating data from multiple sensors, including weight and movement sensors), advanced data hosting services through Amazon Web Services, and advanced computer vision–based machine learning (Amazon 2015). • The hardware includes electronic shelves, cameras, fixtures, and a facility management system. • The inventory management involves data storing and item identification. • In the case of Amazon Go stores, customers create an Amazon account and download the Amazon Go app. • In the case of Just Walk Out–enabled stores, customers access the store with their credit card.

Case Study: Amazon Go Cashierless Retail Experience 137   The Customer Journey The customer journey can be described by the following: • Each shopper (and that shopper’s party) enters and is identified with a QR code generated by the Amazon Go app, biometric hand palm, or a credit card in the case of stores equipped with the Just Walk Out technology. • The technology tracks the customer’s movements and interactions with the different store items. As customers remove items from the shelves, those items are added to their virtual cart (Kumar et al. 2013). • The customer receives a receipt and is charged when exiting the store. Retention and Storage Account data are saved on Amazon’s own servers. • Cameras track throughout the store in real time using the video feed streaming from a ubiquitous network of cameras (Bacco and Hiatt 2010). • Amazon Go stores retain data on the interactions of individual customers with the items on the shelves. These data are used to further train the artificial intelligence running the architecture. • Account data are retained and stored at Amazon until the passenger opts for the deletion of the account. • Customers can elect to delete their biometric data. System Architecture Flow Diagram The flow diagram for this case study can be found in the Amazon Go Cashierless Retail Experience case study of Chapter 2. Source: Amazon 2020. Figure A-2. Just Walk Out enables seamless store experiences for other retailers as well.

138 Airport Biometrics: A Primer System Specifications The system relies on an artificial intelligence (see Figure A-3) to track the customer in the store. The artificial intelligence architecture relies on Amazon Web Services for streaming services as well as advanced computer vision–based machine learning. Computer Vision–Based Machine Learning To associate the right items with the right customers, the technology relies on aggregating data from different sensors linked with the location information of the sensors. The artificial intelligence driving the architecture tracks the customers in the store by aggregating data from different sensors through sensor fusion and solving different identification and linking problems to associate customers, their location, and their interactions with items in the store. Person Detection The Just Walk Out technology does not use facial-recognition technology but relies on red- green-blue cameras equipped with depth- and distance-sensing capabilities. Each customer is associated with a general profile and an anonymized 3D point cloud. During the customer’s time in the store, a deep-learning algorithm predicts the customer’s location and associates that location with actions and interactions with store items (see Figure A-4). System Architecture, Pre-Existing Systems, and Databases The following explain the buildup of the system and its processes: • Customer information and biometrics are collected at the entry gate. • The identification of distinctive features on the hand(s) of the customer relies on a propri- etary algorithm, with distinctive features of the hand specific to this proprietary technology architecture (see Figures A-5 through A-7). • Hand biometrics data that are collected are either stored, if the customer has an Amazon account, or are deleted once the customer exits the store. • The customer holds his or her palm over the device to opt in. Source: Amazon 2019. Figure A-3. Amazon artificial intelligence for the Amazon Go retail experience.

Case Study: Amazon Go Cashierless Retail Experience 139   Stakeholders and Responsibilities Stakeholders The main stakeholders of Amazon Go concept are Amazon and the third-party retailers who have purchased Just Walk Out technology services. Responsibilities Amazon owns the Just Walk Out concept, which builds on a series of patents submitted by Amazon Technologies since 2013 (Puerini et al. 2014). Case Study Review Benefits The Just Walk Out technology presents benefits both for the customer and the retailer. Benefits to customers include: • Improved customer experience over time with deep learning allowing for faster tracking and more accurate identification of interaction with store items, • Limited contact and interaction with store employees, • Reduced time spent in the store, and • No use of facial recognition. Benefits for the retailers providing the Just Walk Out–enabled experience include: • Adaptability of the Just Walk Out technology to different store layouts, • Financial savings due to reduced staff cost related to cashiering or inventory, • No use of facial recognition, • Improved customer experience, and • Detailed consumer profile data. Source: Amazon 2019. Figure A-4. Logic structure of Amazon Go and technology components.

140 Airport Biometrics: A Primer Source: Kumar et al. 2018. Note: Numbers in figure are part of the patent application and are not relevant to this discussion. Figure A-5. Hand biometrics identification process.

Case Study: Amazon Go Cashierless Retail Experience 141   Source: Kumar et al. 2018. Note: Numbers in figure are part of the patent application and are not relevant to this discussion. Figure A-6. Hand biometrics characteristics identification.

142 Airport Biometrics: A Primer Source: Kumar et al. 2018. Note: Numbers in figure are part of the patent application and are not relevant to this discussion. Figure A-7. Person detection based on hand biometrics identity.

Case Study: Amazon Go Cashierless Retail Experience 143   Responses From Customers Crowd-sourced reviews for individual stores rate on average more than 4 stars out of 5. A stated choice survey conducted by the Shorr group in 2018 found that “84% of respondents to a survey said that they see Amazon Go as a ‘type of grocery shopping experience’ they’d enjoy more than traditional grocery shopping” and “over 25% of respondents said that they would pay more for grocery products if it meant they didn’t have to wait in line at checkout” (Shorr 2018). System Performance and Specifications Review The Just Walk Out technology requires an approximately $1 million investment in hard- ware. Customers spending less time in the store allow for higher customer throughput per hour compared to a traditional store (Cheng 2019). The system is designed for 99% accuracy, including during the busiest periods. On average, Amazon Go stores process 550 customers per day and as many as 90 people at any given time. Fall-Back Options • Despite the absence of cashiers, a few store staff members are present to assist customers with any technical issues, answer questions, and process cash transactions. • If customers are incorrectly charged for an item, they can contest the charge and be reimbursed. Concerns • Privacy and use of collected data: There is a lack of transparency on how the collected data factor into the overall Amazon personalized marketing strategy. The architecture relies on deep learning, and data mining of the customer’s activity in the store would improve the experience and accuracy over time. • Lack of transparency around the use of data slowed the adoption of the technology in Europe because of confrontation with GDPR regarding consent to the processing of personal data. In the context of the regulation, every consent request must state the precise purpose for which the data will be processed (Walters 2020). Lessons Learned The Just Walk Out technology initially relied on motion tracking and an anonymized cloud of data to identify individual customers. However, in December 2019, Amazon submitted a patent for a non-contact biometric identification system to identify customers by their hands (Kumar et al. 2018). Introducing hand biometrics as one of the identifying features of each customer is expected to simplify the person-detection component of the Just Walk Out architecture. Findings and Trends Findings The Just Walk Out technology is a potential template for future models of touchless and cashierless retail at airports and other shopping locations. The use of biometrics for identifica- tion, camera tracking devices, image analysis software, and a program that automates product billing has proven to create a new user-friendly experience that is more efficient and is touch free and seamless. Amazon now has several versions of this retail technology in operation, and future revisions of the concept will only improve accessibility. Enrollment challenges may be resolved with biometric palm geometry recognition, which is also being trailed, or with a simple

144 Airport Biometrics: A Primer two-step authentication process. Another option is the use of not just one biometric, but two or more, thereby providing options for customers to choose from. The main benefits behind using this type of software are significant time savings for customers and financial savings for retailers through lower operational expenditures on employees (e.g., labor wages, benefits). Some enrollment challenges may be resolved with simple two-step palm enrollment, which is interesting because it may seem less invasive when compared to a picture of one’s face. Furthermore, this type of software presents a potential alternative to current and future models for touchless retail for airports and airlines. Future Situation and Broader Implementation Amazon submitted a patent application for a touchless hand scanning system named “Amazon One” and started implementing it in Amazon Go stores in October 2020. Customers scan their hands at the entry gate to enter the store. Trends Identified A trend identified in the Amazon case study is that the use of hand biometrics is aimed to facilitate a more efficient, user-friendly (retail) experience. In the cashierless system, time is saved, shopping requires less fumbling of personal items during payment, and simplicity for the user can bring satisfaction. In this specific case, it is not only the biometric technologies enabling this, but also the camera tracking system and software, which allow for the automatic charging of customers to their accounts. This is a trend that will likely expand to other sectors outside of retail and airports. Similarly, the retail experience removes the need for contact points and human interactions, which has the added benefit of reducing the risk of transmissible diseases, which is especially beneficial in the COVID-19 era. The camera system and the 3D hand geometry scanners allow for tracking and identification without customers needing to touch any surfaces.

Biometrics is one of the most powerful, but misunderstood technologies used at airports today. The ability to increase the speed of individual processes, as well as offer a touch-free experience throughout an entire journey is a revolution that is decades in the making.

The TRB Airport Cooperative Research Program's ACRP Research Report 233: Airport Biometrics: A Primer is designed to help aviation stakeholders, especially airport operators, to understand the range of issues and choices available when considering, and deciding on, a scalable and effective set of solutions using biometrics. These solutions may serve as a platform to accommodate growth as well as addressing the near-term focus regarding safe operations during the COVID-19 pandemic.

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Polacco, Backes / Journal of Business and Management, 24 (1), March 2018, 79-92

The Amazon Go Concept: Implications, Applications, and Sustainability

Alex Polacco Kayla Backes

Amazon opened its first Amazon Go sans-checkout grocery store in Seattle , WA in early 2017. Having worked out the bugs, Amazon plans to fully open the store in early 2018. The experience is designed for those who do not like to stand in a checkout line. Amazon benefits by eliminating the cost of checkout personnel. Customers use an Amazon Go app and scan their I-phones on entering the store. Sophisticated technology tracks their purchases, allows them to exit the store without a physical check-out, and automatically charges their account. This paper explores implications, applications, and sustainability within the industry, and in other industries. Included are also the results of a survey conducted with management of six grocery stores in a city in the Midwest.

Keywords: IT (information technology), Amazon Go, machine vision, artificial intelligence, EPOS (electronic point-of-sale).

Reference to this paper should be made as follows: Polacco, A. & Backes, K. (2018). The Amazon Go concept: Implications, applications, and sustainability. Journal of Business and Management, 24 (1), March, 79-92. DOI: 10.6347/JBM.201803_24(1).0004. 80 Polacco, Backes / Journal of Business and Management, 24 (1), March 2018, 79-92

Introduction

In early 2017, Amazon opened its sans-checkout grocery store, Amazon Go on a pilot basis. The experience is designed for those who don’t like to stand in a checkout line. Sophisticated technology tracks their purchases, allows them to exit the store without a physical checkout, and automatically charges their account. With lessons learned Amazon Go plans to open the store fully in early 2018.

In order to fully understand the implications of this new technological and operational model, we must first look at how the shopping process will shift with Amazon Go. We will examine the type of technology being used such as computer vision and weight sensors. Then will we explore the industries that are currently exploiting these innovations.

Once we have reviewed how the sans-checkout grocery store concept works, we will look closely at the impacts on the retail operational model. We will examine the evolution of self-checkout processes over time. Then, we will investigate the potential for sustainability within Amazon Go’s supply chain.

We will delve into the effects on the community at large. Focus will be on the current employment landscape and how it may be impacted by this new technology. We will also touch on any sociocultural implications that may exist.

After we have discussed Amazon Go’s potential impacts on the community, we will switch gears and consider the possibility of using this concept in other industries. We will take care to examine how similar technology is currently being used, and what industries will most likely be affected by these recent developments. For example, how the payment method could possibly impact banks and financial institutions.

Upon reviewing how this technology may influence the retail operational model, the community, and other industries, we will look at the specific threats and opportunities that may arise. Focus will be given to the work force, new industry standards, and concepts of trust. Once all of these topics have been covered, managers may better prepare themselves for the potential threats and opportunities that could lie ahead. We will also include the results of interviews conducted with managers of several grocery stores in the Midwest. 81 Polacco, Backes / Journal of Business and Management, 24 (1), March 2018, 79-92

Methodology and Research Questions

This study was conducted on current literature in the library and from online resources. The managers of six major retail and grocery stores were also interviewed:

1. Jon. Assistant Manager at St Cloud, MN Target on February 28, 2017. 2. Forsell, P. Assistant Manager at St Cloud, MN Walmart on February 28, 2017. 3. Gruber, K. GeneralManager at St Cloud, MN Lund’s & Byerlys on February 28, 2017. 4. Lachmansingh, R. Store Director at St Cloud, MN Cash Wise on February 28, 2017. 5. Rick. A. Assistant Manager at St Cloud, MN Walmart on February 28, 2017.

The managers were given the following information and asked the following questions: In early 2017, Amazon plans on making their sans-checkout grocery store, Amazon Go, available to the public. The experience is designed for those who don’t like to stand in a checkout line. Sophisticated technology will track their purchases, allow them to exit the store without a physical checkout, and automatically charge their account.

Survey Questions:

1. What would some of the pros and cons be in the adoption of this technology? 2. Do you think it could benefit your chain of stores and your particular store? 3. Do you believe that Amazon Go’s new technology will be adopted by other food chains? 4. Do you believe that this new technology is sustainable? 5. What are the greater effects that you think this technology will have on their respective communities if implemented into food chains? 6. Could this new concept make Amazon Go a major player in the grocery business in the future?

Amazon Go Review

Shopping Process

In order to shop at an Amazon Go store, the consumer must first create an Amazon account, have a smart phone, and download the Amazon Go app. Once these 82 Polacco, Backes / Journal of Business and Management, 24 (1), March 2018, 79-92

items are in place, the customer scans their Amazon Go app, located on their smartphone, upon entering the retail store. At this point, the customer is free to walk around the store, shop, and add and replace items to or from their virtual cart (Amazon Go Editorial Staff, 2017).

For Amazon Go to accomplish this paradigmatic shift in the operational model of retail shopping, it relies heavily on technological innovation. The technology Amazon Go uses automatically senses when an item is picked up, put back on the shelf, and tracks who committed the action. Once the customer is satisfied with the items they have chosen, they simply walk out the door - no lines, no checkouts, and no waiting. The purchased items are charged to the customer’s Amazon account and a receipt is sent to the Amazon Go app (Amazon Go Editorial Staff, 2017).

Technology Used

Amazon Go uses what they call, “Just Walk Out Technology”. This technology is responsible for keeping track of items taken from, and in some cases, returned to, the store’s shelves. It also keeps track of the individual’s virtual cart (Amazon Go Editorial Staff, 2017).

For this to be possible, Amazon uses technology similar to that of self-driving cars. The system relies heavily on sensor fusion, computer vision, and deep learning algorithms (Amazon Go Editorial Staff, 2017). While they have not revealed too much about their technological advancement, it appears that Amazon plans on making cameras central to their operational strategy. These cameras will track not only the products and their placement, but also the individuals who do the shopping (Swanson, 2016).

Industries with Similar Technologies

Amazon states that the technology behind their cashier-less operating model is the same technology prevalent in driverless cars (Amazon Go Editorial Staff, 2017). However, the automotive industry isn’t the only place that this type of technology is being used. Vision technology is also extensively used in manufacturing industries to assure quality, and to inspect, test, and sort parts (Dipert, 2017).

Computer vision and machine learning have become so prevalent across industries that it can even be seen in the scientific study of animal behavior. 3D Computer vision software has already been developed that scans the subject animal’s behavior in order to try and measure the quality of life of the animal. It is capable of learning and differentiating normal behavior from abnormal behavior. This allows for 83 Polacco, Backes / Journal of Business and Management, 24 (1), March 2018, 79-92

an objective analysis of how the animal is coping in its captive environment (Barnard, Calderara, Pistocchi, Cucchiara, Podaliri-Vulpiani, Messori, et al. , 2017).

In addition to the automotive, manufacturing, and scientific industries, the hospitality industry is no stranger to the type of sensor technology potentially used by Amazon Go. A similar concept is used at some hotels that have condiments and drinks on the counter or in the refrigerator, known as a mini bar. These snack trays have motion sensors and electronic scales built in, that at times, may automatically charge the consumer if something is moved (Laasby, 2014).

Survey Responses

Q1: What would some of the pros and cons be in the adoption of this technology?

Pros cited by the respondents:

All six respondents said that automatic self-service will save the customer time. Jon and Lachmansingh said that more interesting jobs would be created, while Sorenson, Gruber, Rick, Forsell, and Lachmansingh said that entry level jobs would be eliminated. Sorenson, Gruber, and Rick said that product and coupon pricing would be more accurate. Rick felt that costs, product price, and safety costs would go down.

Cons cited by the respondents:

All six respondents said that the cashier-less service will eliminate staff- customer interpersonal communication and limit service levels. Jon felt that personal safety would be affected, while Rick said that a lot of jobs would be lost.

Q2: Do you think it could benefit your chain of stores or your particular store?

Respondents had different opinions: Jon and Forsell said there would be more work but it would be more efficient. Sorenson had no comment. Gruber said that there could be labor-savings, but it would help as it is hard to find employees these days. Lachmansingh said that only a couple of departments would take advantage, such as end of line cashiers. Rick said that it could because Sam’s Club and Amazon are big competitors, although he couldn’t see adopting it very soon, and the closest technology currently used was the in-store scan and self-checkout.

84 Polacco, Backes / Journal of Business and Management, 24 (1), March 2018, 79-92

Q3: Do you believe that Amazon Go’s new technology will be adopted by other food chains?

All respondents said – yes. Jon said that is the future and more customers will be served. Sorenson said it would take time to adopt. Gruber, Forsell, and Rick said that the main driver will be savings in labor costs and time. Lachmansingh said that it will take time to follow up with this technology.

Q4: Do you believe that this new technology is sustainable?

Jon said - yes. It will work perfectly with the new generation. Sorenson said - sure. It will help in other parts of the store such as inventory. Gruber said that more proof was needed that it works from a customer perspective. Lachmansingh said that he was not sure, and that more time was needed. Rick said that he needed to see it in action and that there is always someone who will try to hack the technology. Forsell said that time would tell.

Q5: What are the greater effects that you think this technology will have on their respective communities if implemented into food chains?

Jon said that small businesses cannot afford this technology. Sorenson said that it will force others to adopt, and that it will save time and money. Gruber said that time is important to everyone and that the average customer would be pleased because they will no longer wait in line to checkout. Lachmansingh said that it would be an extension of how people do things at the moment. There are phones, laptops, tablet that can help to shop faster, cheaper, and delivered to their homes. They only need to visit stores to check the price and order the products. Rick said that there would be time savings.

Q6: Could this new concept make Amazon Go a major player in the grocery business in the future?

Jon said that it would. Sorenson said – absolutely. Tracking will have to be adopted by the other food chains. Gruber said - absolutely. With this type of technology, customers will save a lot of time and money too. However, with good technology like that, someone will always try to do one better and will take advantage of it. Lachmansingh said –yes. With this technology, Amazon will fill customers’ needs for faster checkout and time savings. Rick said that he thought so. Amazon was already a major player and with this technology they would take off to a new and different level. Forsell said – yes. 85 Polacco, Backes / Journal of Business and Management, 24 (1), March 2018, 79-92

Operational Evolution

Movement Towards Self-Checkout

The Amazon Go concept is an evolution from the self-checkout operational model that is used at Walmart and other grocery stores. However, self-service in the retail arena has been evolving for over a hundred years. In 1916, Piggly-Wiggly made the innovative decision to allow customers to explore the aisles of products without the assistance of an employee. Then, in 1992, some of the first self-checkouts debuted (NCR, 2014).

Since then, the self-checkout model has been widely accepted and immensely popular. According to a study conducted by computer and point-of-sale terminal company, NCR, those who use the self-checkout indicated that they appreciate the convenience and ease of use that it provides. One interesting note of those surveyed, was that they indicated that they still liked knowing an attendant was nearby to provide help if needed (NCR, 2014).

Paul Forsell, an Assistant Manager with a major retail and grocery store, estimated that roughly 20 to 30 percent of customers prefer self-checkout. The rest give preference to the traditional cashier check-out method. He indicated that while self- checkouts are popular, some people prefer to not have to deal with the technology themselves. In fact, Walmart’s attempt to have customers in 200 stores pre-scan their purchases using their “Scan & Go” app failed when customers could not figure how to use it. Walmart discontinued the experiment (Anderson, 2014).

Sustainability of Supply Chain

With all of this next generation innovation associated with Amazon Go, we must also look at any potential strides in supply chain sustainability that may also be occurring. It’s no surprise that Amazon does have sustainability initiatives that span many of its different services and products. From Amazon Wind Farms in Texas, to its innovative approach to recycling energy of nearby data centers, it’s clear to see that Amazon has been making great progress in its efforts to build upon the best energy and environmental practices. However, one initiative of particular relevance is the work being done with AmazonFresh, Amazon’s grocery delivery service for Prime Members (Amazon Go Editorial Staff, 2017).

AmazonFresh’s initiative with Feed America, a nonprofit organization tasked with feeding America’s hungry through extensive national cooperation of food banks, has led AmazonFresh to donate food to these food banks from its distribution centers. While it is unclear if Amazon Go will incorporate a similar model as Amazon Fresh , 86 Polacco, Backes / Journal of Business and Management, 24 (1), March 2018, 79-92

the partnership with food banks appears to already exist and could potentially be duplicated. In addition, Amazon has stated that the efforts it makes towards energy and environmental practices are intended to be implemented throughout Amazon (Amazon Go Editorial Staff, 2017).

Community Impact

Impact on Workforce

According to the Bureau of Labor Statistics, in 2016, there were 2.7 million people identified as being employed by retail grocery stores, 856,850 of whom are employed as cashiers (Bureau of Labor Statistics, 2017). This number doesn’t even reflect the 3.5 million cashiers that are employed across all industries, not just the retail grocery industry (Bureau of Labor Statistics, 2016). With so many people being employed in this industry, and in jobs that this disruptive technology may make obsolete, it follows that one may be curious how these individuals will be affected by Amazon Go and its cashier-less operational model.

While there could be an obvious adverse impact on cashiers, there could also be an increased demand for technical people to design, implement, and maintain this new technology. Supervisors and customer service personnel would be needed to answer questions, handle returns, and handle quality related issues. Security and anti- theft employees would also be needed to prevent shop-lifters (Rash, 2016). It appears that people will still be needed in retail, perhaps just in different capacities.

Forsell’s take on this new technology appears to reinforce earlier theories. He indicated that if technology was implemented, it would free up the cashiers to perform other duties. He also alluded to the probable increase in demand for individuals with computer maintenance skills, and individuals to help in the validation of purchases prior to leaving the store.

Sociocultural Implications

With all of this fear that Amazon Go’s new “Just Walk Out Technology” will eliminate the jobs in retail stores, it should remain top of mind that humans are still emotional creatures. We are hard-wired to crave human interactions. An example of this can be seen in the increase in popularity of farmers’ markets that provide a more personal experience (Merholz, 2011). 87 Polacco, Backes / Journal of Business and Management, 24 (1), March 2018, 79-92

In addition, an Accenture study found that 77 percent of U.S. consumers would rather interact with a human than with a digital channel to solve service related issues (Davis, 2016). The desire towards personalization in retail shopping would almost inherently require a unique experience that, at this point, may only be possible through dynamic human interaction. At the end of the day, the consumer will decide what type of shopping experience will win out in the retail industry, not technology. Boyle reported that consumers are more concerned with shopping convenience and price, than wait time in a queue (Boyle, 2017).

Impact on Other Industries

There are many industries that are likely to be impacted by the technology and operational model of Amazon Go. For starters, it is believed by some that Amazon intends to increase the number of Amazon Accounts. This could have many benefits besides data-collection; it could also increase the adoption rate of its Amazon Payments platform. If this is the case, it could greatly increase competition for payment platforms such as PayPal, Square, and Visa (Melville, 2017).

This sans-checkout model could be easily implemented across various retailers. While retailers and grocers more than likely don’t have the funds available for research and development like Amazon does, if Amazon Go’s technology were to be offered to the masses this could cause widespread change (Pasquarelli, 2016). As previously discussed, this could potentially cause increased profits, faster shopping experiences, and job role changes. This could mean instead of cashiers, we will have concierges, greeters, and sampler staff (Solomon, 2016). With a little creativity, one could also imagine similar models in non-retail settings such as libraries, check-ins at doctors’ offices, and restaurants.

Walmart announced its adoption of no-checkout technology in December 2017. Dubbed Project Kepler, the technology and concept are similar to that of Amazon Go, and will be beta-tested in an incubator facility. Code Eight, a subsidiary of Walmart, is currently testing a personal shopping service targeting busy New York City moms. The service allows those women to make purchases through text messages (Del Rey, 2017).

In November 2016, leaked documents from Amazon showed its plans to open 2000 grocery stores with a “no line, no checkout” strategy, CA in early 2017. FutureProof Retail launched its first grocery line free checkout in November 2016 in San Luis Obispo, CA. It uses cloud computing, line free mobile technology (Line Free Checkout Provider FutureProof Retail Reacts to Amazon Go, 2016). 88 Polacco, Backes / Journal of Business and Management, 24 (1), March 2018, 79-92

Managerial Implications

The potential threats for retailers, grocers, and their employees, in the event of a widespread implementation of a technology similar to that of Amazon Go, are numerous. This technology threatens those working in cashier positions, gives rise to theft and fraudulent activity concerns among retailers, and could possibly widen the competitive gap between small and large retailers with a potentially large investment. If Amazon were to expand their payment platform, this could create increased competition for companies like PayPal, Square, and Visa (Melville, 2017). In addition, if Amazon chooses to implement sustainability efforts into Amazon Go, like it has with its other business units, it could increase the sustainability standard among retailers (Amazon Go Editorial Staff, 2017).

With potential threats, come potential opportunities. The advent of Amazon Go and the evolution of the self-checkout bring many benefits for both the consumers and retailers alike. For consumers, the decrease in waiting time, and the ease of use are very attractive benefits. For retailers, the ability to reduce lines, relocate personnel resources, and gain the customers trust to provide quick service could prove to be profitable.

Current Status

In November 2016, Amazon Go announced its plan to open its first store for beta testing in Feb-March 2017. The convenience store opened in March with employees simulating customers and service. Important technical and protocol information was obtained which showed that the store would not be ready to serve the public for a while. The system could only handle 20 customers at a time and had problems when the store was at capacity. It also had difficulty tracking merchandise moved to and from shelves (Lamm, 2017).

The technology crashed when the store was too crowded, and required quality control personnel to ensue people were being charged correctly (Boyle, 2017). The system worked well with standard scenarios, but failed when faced with atypical scenarios and distinguishing among similar shaped items, or identifying customers who change apparel such as caps or coats. By the end of March, it became apparent that formal opening to the public would have to be postponed indefinitely.

Although the beta test was necessary to glean information for improvement of the system, critics pointed out that using employees for simulating actual customers was neither credible nor valid due to the inherent bias (Hofbauer, 2017). The report 89 Polacco, Backes / Journal of Business and Management, 24 (1), March 2018, 79-92

also showed that sensors and algorithms inadequately captured couples or families with children who eat products or take items off the shelves. Amazon Go has been using the feedback for focus groups to improve the system in how to handle returns, defective products, or customer service questions (Hofbauer, 2017). In December 2017 Amazon Go announced that it would open to the public in early 2018.

In April 2017, Amazon acquired Whole Foods for $13.7 billion which demonstrated its presence as a major player in the grocery business (Bowman, 2017). Bowman speculated that Amazon was motivated by its difficulties with Amazon Go, but considering the size and timing of the acquisition, it is more probable that the strategy was in the works for more than a few months. Bowman cited Whole Foods plan to hire 6000 more people, and concluded that Amazon will focus on traditional labor service rather than on Amazon Go’s automated processes. It is more probable that Amazon embarked on the Whole Foods and Amazon Go ventures to seize the opportunities in the grocery business and to incrementally automate service processes through its Amazon Go pilot program.

Amazon Go plans to fully open its checkout-free grocery shopping concept in early 2018. The strategy is an evolution from the self-checkout version that is used in many grocery chains today. Advanced technology and computer integrated inventory management systems enable the customer to take products off the shelves, put them in their carts, and leave the store without going through a checkout line. Besides the convenience to the customer, Amazon evidently plans to benefit through a reduction of checkout clerks. The cost of implementing, maintaining, and sustaining the system may offset or exceed cost-savings through reduction of checkout clerks. It is unclear as to whether the new concept will be adopted fully or partially by Whole Foods, other grocery chains, and similar industry applications.

Acknowledgements

This paper is a revised and expanded version of a paper entitled The Amazon Go Concept: Implications, Applications, and Sustainability presented at WDSI 2017 International Conference in Vancouver BC, Canada, in April 5-8, 2017.

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Amazon Go Editorial Staff (2017). Amazon Go, Retrieved from https://www.amazon.com/b?node=16008589011. Anderson, G. (2014, August 14). WalMart’s Scan & Go is a no-go. RetailWire. Retrieved from http://www.retailwire.com/discussion/walmarts-scan-and-go-is-a-no-go/ Barnard, S., Calderara, S., Pistocchi, S., Cucchiara, R., Podaliri-Vulpiani, M., Messori, S., and Ferri, N. (2017). Amazon Go. Retrieved from https://www.amazon.com/ b?node=16008589011. Bowman, J. (2017, November 3). Whatever happened to Amazon Go? Retrieved from https://www.fool.com/investing/2017/11/03/whatever-happened-to-amazon- go.aspx Boyle, A. (2017, March 21). Reports point to caution signals for Amazon Go store. GeekWire. Retrieved from https://www.geekwire.com/2017/caution-amazon-go- checkout-free/ Bureau of Labor Statistics (2017, February 8). Labor force statistics from the current population survey. Retrieved from https://data.bls.gov/cgi-bin/surveymost?ln Bureau of Labor Statistics (2016, March 31). Retail salespersons and cashiers were occupations with highest employment in May 2015. Retrieved from https://www.bls.gov/opub/ted/2016/retail-salespersons-and-cashiers-were- occupations-with-highest-employment-in-may-2015.htm Davis, L. (2016, March 23). U.S. companies losing customers as consumers demand more human interaction, Accenture strategy study finds. Accenture. Retrieved February 25, 2017, from https://newsroom.accenture.com/news/us-companies- losing-customers-as-consumers-demand-more-human-interaction-accenture- strategy-study-finds.htm. Del Rey, J. (2017, December 20). Walmart is developing a shopping service with no cashiers. Recode. Retrieved from https://www.recode.net/2017/12/20/ 16693406/walmart-personal-styling-jet-black-amazon-go-prime-no-checkout-store Dipert, B. (2017, January 23). Visual depth sensors: Multiple applications and options. Vision Systems Design. Retrieved February 25, 2017, from http://www.vision- systems.com/articles/2017/01/visual-depth-sensors-multiple-applications-and- options.html. Hofbauer, R. (2017, November 22). Is Amazon Go nearing public debut? Progressive Grocer. Retrieved from https://progressivegrocer.com/amazon-go-nearing- public-debut Laasby, G. (2014, September 10). Hotels use sensors to bill for uneaten snacks, hit guests with unexpected charges. Milwaukee Wisconsin Journal Sentinel. Retrieved 91 Polacco, Backes / Journal of Business and Management, 24 (1), March 2018, 79-92

February 25, 2017, from http://archive.jsonline.com/watchdog/pi/hotels-use- sensors-to-bill-for-uneaten-snacks-hit-guests-with-unexpected-charges- b99347028 z1-274623181.html. Lamm, G. (2017, March 27). Amazon Go store could be shut down. Digital Editor. Puget Sound Business Journal. Retrieved from https://www. bizjournals.com/seattle/news/2017/03/27/amazon-go-difficulties-seattle-beta- test.html Line Free Checkout Provider FutureProof Retail Reacts to Amazon Go (2016, Dec 6). NewsWire Press Release. Retrieved from https://www.newswire.com/news/line- free-checkout-provider-futureproof-retail-reacts-to-amazon-go-18151183 Melville, A. (2017, January 20). Amazon Go Is About Payments, Not Grocery. Forbes. Retrieved from http://www.forbes.com/sites/groupthink/2017/01/20/amazon- go-is-about-payments-not-grocery Merholz, P. (2011, December 12). The Future of Retail? Look To Its Past. Retrieved from https://hbr.org/2011/12/the-future-of-retail-look-to-i. NCR. (2014). Self-checkout: A global consumer perspective. NCR, 2014. Retrieved February 25, 2017, from https://www.ncr.com/sites/default/files/white_ papers/RET_SCO_wp.pdf. Pasquarelli, A. (2016, December 5). What Amazon Go means for the future of retail. Adage. Retrieved from http://adage.com/article/digital/amazon-means-future- retail/307020/. Rash, W. (2016, December 8). Amazon Go won't kill many jobs, but it may prove a boon to crooks. eWeek. Retrieved February 25, 2017, from http://eds.a.ebscohost.com. Solomon, W. (2016, December 11). What retailers must remember about customer experience amid the Amazon Go hype. Retrieved from http://www.forbes.com/ sites/micahsolomon/2016/12/11/everyones-learning-the-wrong-customer- experience-lesson-from-amazon-gos-cashierless-retail-model/#6297d0f83f25 Swanson, J. (2016). A first look at Amazon Go. Benzinga, 2016. https://www.benzinga.com/news/16/12/8780759/a-first-look-at-amazon-go.

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About the Authors

Alex Polacco* Herberger Business School, St. Cloud State University, 720 4th Ave S, St. Cloud, MN 56301, 320-308-3935, E-mail: [email protected]

Kayla Backes MBA graduate, St. Cloud State University, 720 4th Ave S, St. Cloud, MN 56301, 320-308-3935, E-mail: [email protected]

*Corresponding author

Alex Polacco (MBA, BSIE, CPIM, CSCP, CMOE, CQE, CQA), is a Professor of Management at St Cloud State University in Minnesota. He has been teaching courses in Operations and Supply Chain Management for the past 12 years. Prior to that, he had worked in industry for 22 years as consultant, manager, and engineer. He was a member of the APICS Academic Committee from 2013-2016, and board-member of the Central Minnesota APICS chapter for 9 years.

Kayla Backes (BS Marketing, MBA) graduated from St. Cloud State University. Her work experience is in marketing analysis, and she is currently an instructor in marketing and management.

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Amazon.com, 2021

By: John R. Wells, Benjamin Weinstock, Galen Danskin, Gabriel Ellsworth

In February 2021, Amazon announced 2020 operating profits of $22,899 million, up from $2,233 million in 2015, on sales of $386 billion, up from $107 billion five years earlier (see Exhibit 1). The…

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In February 2021, Amazon announced 2020 operating profits of $22,899 million, up from $2,233 million in 2015, on sales of $386 billion, up from $107 billion five years earlier (see Exhibit 1). The shareholders expressed their satisfaction (see Exhibit 2), but not all were happy with Amazon's meteoric rise. Many traditional retailers in the United States were going bankrupt, while major competitors such as Walmart and Best Buy were forced to invest aggressively in online retailing to prevent their market share from eroding. Every retail sector appeared to be under threat, fueling anxieties that Amazon and America's other tech giants were becoming too big and powerful. These anxieties were only exacerbated by the COVID-19 pandemic, during which Amazon grew rapidly, while most traditional retailers foundered. Amazon's increasingly clear ambitions in healthcare and autonomous vehicles were also causing concern. In early 2021, Amazon was drawing criticism from across the political spectrum in the United States, with calls for it to be broken up. The European Union was also investigating its practices. Meanwhile, on February 2, 2021, Amazon reported that company founder and CEO Jeff Bezos would step down from his role and become executive chairman of the board. Andy Jassy, the leader of Amazon Web Services (AWS) would become the new CEO. How would Jassy navigate the many challenges to come and continue Amazon's record of success?

Learning Objectives

We describe the history of Amazon from its founding to 2021: its expansion into many lines beyond the original book business, its evolving distribution network, and vertical integration into hardware design and manufacturing. This case is intended to teach students about the strategic challenges that Amazon faced throughout its history and in

• Students should gain a greater understanding of first mover advantage, core competency, and the evaluation of online retail in the 21 century. This case provides a vehicle for discussing the key features of online retail strategy and the way it is disrupting traditional retailing. It also addresses key corporate strategy choices such as whether it makes sense for online retailers to open their platforms to third parties. The case is suitable for courses in basic strategy, strategy and change, disruptive business models, and retail strategy. It can be taught alone or as part of a case pair with "Reinventing Best Buy" (716-455), which describes how Best Buy built a "multi-channel" strategy in response to Amazon. The case can also be taught as part of a six-case module that addresses disruptive retail models in the consumer-electronics sector. (For more information, see the accompanying Teaching Note.)

Aug 3, 2015 (Revised: Jun 6, 2021)

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United States, Washington

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Advertising industry, Consumer electronics, Distribution and logistics industry, Fabrication and manufacturing, Information technology industry, Retail and consumer goods

Harvard Business School

716402-PDF-ENG

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