Is Amazon’s Just Walk Out Too Expensive To Be Profitable?

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Is Amazon's Just Walk Out Too Expensive To Be Profitable?

While Amazon can benefit from the technologies it’s implementing in its stores, the model seems too expensive for a traditional retailer.

Sigurdur Ari Sigurjonsson raised the alarm in a LinkedIn post. According to the business development director of LS Retail, an Icelandic commerce software solutions company, Amazon’s “just walk out” model – its cashless stores – would not be profitable. “Obviously, experiments like Amazon’s will never work on a larger scale for a normal retailer. You’re probably wondering why? One of the main reasons is that the technology costs are way too high to begin with. Investing in AI, in safety equipment and the rest of the hardware means that you have to have a lot of visitors in your store or have high margins,” explains Sigurdur Ari Sigurjonsson in detail.

The Icelandic example of Nær

To support his point, the business development director of LS Retail takes the example of Nær, an Icelandic company that opened its first concept of a self-contained store without a cash register in July 2022. “The challenge is not the same here in Iceland. “Because the company has made the choice to trust its customers to a certain extent. They have invested in an extensive system of HD security cameras to see what is happening in the store. But this investment technology is microscopic compared to the technology investment represented by an Amazon Go or Amazon Fresh concept,” continues Sigurdur Ari Sigurjonsson.

Amazon presented its first Amazon Go, a cashier-less store, in Seattle in 2016. The concept is simple: the customer enters by scanning their Amazon application or by identifying themselves and makes their purchases without going through a physical checkout at the store. leave. This technology, developed under the name of just walk out, also rests on the company’s Amazon Fresh concepts. According to the American site Supermarket News, Amazon has 39 of its Amazon Fresh in the United States and about 20 in the United Kingdom, mainly around London. This concept was born in 2020 and bears the former name of Amazon’s meal delivery service.

Last February, just walk out technology was also installed in a 2,000 square foot store of the Whole Foods Market chain. Amazon bought this chain of organic supermarkets in 2017 for $ 13.7 billion.

Amazon is slowing down deployments

After the United States, the Amazon Fresh concept has also made its appearance in the United Kingdom. Since then, Amazon management has halted cross-Channel deployments and halted discussions on a dozen new sites, as Business Insider reported in August 2022. The existing Fresh stores would not have met the sales forecast while the construction costs would be much higher than those of a traditional convenience store.

Amazon is also starting to feel the effects of the economic crisis and plans to cut 10,000 jobs. The company has confirmed departures in its Kindle and Alexa teams. There is no indication that the just walk out division, or JWO as it is called by Amazon employees, will be affected. Especially since the web giant seems to have strong ambitions in physical retail. He opened a new concept of clothing stores called Amazon Style with two stores in California and Ohio. In June 2022, Amazon had also rebranded its global customer management to Global Amazon Stores and therefore plans to give prominence to its store section.

Technologies have already made money

The Seattle-based company also continues to develop its technologies. Amazon is already marketing “just walk out” innovations, such as the palm-based payment that equips Seattle’s American football stadium. In addition to the Amazon One payment system, in June 2022 the company presented Store Analytics, its solution that allows it to provide brands with data on their sales and the performance of their promotional campaigns, thanks to the information collected in its Amazon Go and Amazon Fresh stores in the United States . All the more reason to keep opening them.

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