Amazon Opening Store That Will Eliminate Checkout--and Lines

(Bloomberg) -- Amazon.com Inc. unveiled technology that will let shoppers grab groceries without having to scan and pay for them -- in one stroke eliminating the checkout line.

The company is testing the new system at what it’s calling an Amazon Go store in Seattle, which will open to the public early next year. Customers will be able to scan their phones at the entrance using a new Amazon Go mobile app. Then the technology will track what items they pick up or even return to the shelves and add them to a virtual shopping cart in real time, according a video Amazon posted on YouTube. Once the customers exit the store, they’ll be charged on their Amazon account automatically.

The concept store and automated checkout mark Amazon’s latest attempt to upend the grocery business. The company began experimenting with fresh food in 2007, when it started AmazonFresh, a delivery service now active in 16 U.S. markets. Amazon has since started opening pickup centers where shoppers can fetch their web purchases. Perhaps recognizing that many people remain reluctant to purchase fresh food online, sight unseen, the company is now testing what looks a lot like a convenience store.

“Most people still have two requirements,” said Forrester analyst Brendan Witcher. “One is, ‘I want something today, I don’t want to wait.’ Number two is ‘I want to touch and feel the product before I commit to it.”’

So if the Amazon Go concept works, will the company build small grocery stores in cities all over the country? Amazon isn’t saying. But some analysts envision a combination pickup center, fulfillment warehouse and small grocery store. After all, Amazon is already building urban warehouses, including a 50,000-square-foot facility in midtown Manhattan, that handle same-day deliveries to local customers.

Selling fresh food is a strategy long employed by retailers to boost foot traffic and get people to buy more stuff.

“I believe you’re going to see growing offline presence in high-turnover goods, which is mostly groceries and household items,” said James Cakmak, an analyst at Monness Crespi Hardt & Co. 

Amazon employees are testing out the 1,800-square-foot store on the company’s campus, where they can buy ready-to-eat breakfast, lunch, dinner and snack options as well as grocery essentials from bread and milk to artisanal cheeses and locally made chocolates. Also available: Amazon Meal Kits, containing all the ingredients needed to make a meal for two in 30 minutes.

The Amazon Go store is just part of Amazon’s broader retail strategy. Another format the company is considering is a larger shop that also has a curbside pick-up component, according to the Wall Street Journal. If this concept pans out, Amazon could potentially open 2,000 locations, the Journal reported, citing people familiar with the matter. That’s similar to an option being developed for customers to pick up items at Prime Now fulfillment centers.

Grocers have been experimenting with automated checkout for years. The stores argue that the idea is not to get rid of workers, but to free them up to mount displays and help customers find what they need. In some Stop and Shop stores customers can use scanning guns to total up the bill as they troll the aisles. But shoppers still have to go to a checkout station at the end to upload their bill and pay, or hand the scanner over to a cashier, which sometimes still entails waiting in line. 

Amazon Go takes the concept to a new level -- much as One Click shopping did when the company introduced it online years ago.

“While it remains to be seen how well the technology works, the experience could be very compelling,” said Michael Chui, a partner at McKinsey Global Institute. “Completely removing the friction associated with checkout has the ability to be a competitive differentiator.”

--With assistance from Lindsey Rupp To contact the reporter on this story: Jing Cao in New York at hcao38@bloomberg.net. To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Robin Ajello, Andrew Pollack