- Amazon has cut the cost of its Go cashierless store technology by 96% since 2017.
- Insider document Gets More Savings Through 2023.
- Amazon is focused on increasing sales and profitability, while creating more partnerships with third parties.
Amazon has radically lowered the cost of its “Just Walk Out” cashless store technology, a testament to the company’s ability to turn long-term experimental projects into affordable business offerings.
Amazon estimates the operating cost of the technology behind its 1,000-square-foot Go cashierless store has fallen to $159,000 per store this year, down 96% from $4 million in December 2017, a month before the first location opened, according to an internal document from August that obtained It’s Insider. Further savings are expected by the end of 2023.
Costs include payments for using Amazon Web Services cloud technology and hiring remote employees who manually check the accuracy of in-store checkouts, among other tasks. It does not take into account the costs of operating a business, such as marketing or trading fees, so the total expenses for operating each site are higher. The original Go Store cost more than $10 million to run, according to Brad Stone’s book “Amazon Unbound.”
“Our vision is to reduce annual JWO costs (Operating Expenses and Capital Expenditures have been amortized over 5 years) for all store sizes,” the document said. An Amazon representative did not respond to a request for comment.
The low cost of this technology may help Amazon expand from e-commerce to physical retail where established businesses have been operating successfully for decades. Amazon first launched its Go cashierless store in 2016, creating a convenience store where customers can purchase items through an app without having to go through the check-out lane.
Earlier this year, Amazon rolled out JWO technology to larger Fresh grocery stores, while also selling the service to other retailers, including Hudson Nonstop and TD Garden. The internet giant has expected similarly significant cost cuts for these new sites, Insider reported.
Amazon physical store VP Dilip Kumar highlighted JWO’s improved technology in an interview with the Wall Street Journal last year, saying it could work in much larger store formats. “There is no real upper bound,” he said. “It could be five times greater. It could be ten times greater.”
According to the document, the key to technical cost savings includes a new camera system with an increased field of view, which reduces the number of cameras required per store. It also designs remote switches and “in-place computing” services that can significantly reduce certain expenses. Additionally, Amazon expects improvements via computer vision technology to reduce the number of remote employees needed to monitor some of the complex in-store transactions.
Meanwhile, for this year, the Amazon Go team is focused on increasing sales and reaching profitability, the document says. It also wants to create more new store coordination opportunities, such as the idea of partnering with Starbucks, which Insider previously reported. Amazon estimates normal revenue of $2 million per store for Go Stores, according to the internal document.
To improve profitability, Amazon wants to increase the frequency of in-store promotions, such as deals aimed at customers and discounts for Prime members. It also gives managers more freedom to run “reduce” promotions, a discount that is applied to products approaching expiration dates.
Another area of focus is supply chain optimization. One initiative is pushing HMR, Amazon’s food partner, to reduce the time to ship its products to stores from 8 days to 3 days. That would save nearly $1 million a year and thousands of hours in store business, in part by limiting the amount of food that expires, the document said.
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