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Report: Amazon Go could become $4 billion business

Analyst says cashierless retail concept “could be a game changer”

Russell Redman

January 8, 2019

4 Min Read
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The sales opportunity for Amazon Go cashierless stores could top $4 billion by 2021 if reports on the high-tech retail concept’s expansion bear out, according to an RBC Capital Markets analysis.

In a research note, RBC estimated average annual sales of $1.5 million apiece for the current nine Amazon Go stores. A Bloomberg report in September said Amazon.com Inc. may open up to 3,000 Amazon Go outlets by 2021. Based on the per-store sales estimate by RBC, that would translate into a $4.5 billion business over the next several years.

“Amazon Go stores could be a game changer for physical retail experience. Its in-store technology enables shoppers to have a very efficient and pleasant shopping experience. While not a significant financial contributor yet, we believe the overall opportunity is huge,” RBC analyst Mark Mahaney wrote in the research note, released last week.

Based on Amazon Go store visits by its research team, RBC figured an average basket size of $10 per visit and 400 to 700 customers daily, which calculates to $1.1 million to $1.95 million per store yearly.

“Amazon Go store is more than a Pret-A-Manger,” Mahaney explained. “These stores offer a selection of quick, on-the-go-type meals and snacks from local and national brands, in addition to offering a small selection of groceries. This includes meal kits, dairy products (milk, eggs, creamers), frozen foods (pizzas and meal packs), cereal boxes, cold drinks, baked goods, pantry items (bread, tea, coffee, instant soups, condiments, pasta sauce) and essentials (travel items, pain relief medication), among other things.”

Related:Amazon Go goes smaller

Other items at Amazon Go include salads, wraps, sandwiches, deli and meats, chocolates and candy, RBC’s report said.

In addition, RBC’s analysis pegged average sales per square foot at the Amazon Go stores at $853, with a range of $639 to $1,279 per store. Those figures are based on an estimate of 550 visitors per store spending $10 per visit, with the Amazon Go’s current store sizes ranging from 1,200 to 2,400 square feet. That compares to an estimated $570 per square foot for typical convenience stores, excluding tobacco sales, according to RBC.

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The convenience of “enter, shop, exit” also plays a huge role in the opportunity for Amazon Go, RBC noted. The Amazon Go stores employ overhead cameras, weight sensors and deep learning technology to detect merchandise that shoppers take from or return to shelves and to keep track of the items selected in a virtual cart. Shoppers use the Amazon Go mobile app to gain entry to the store through a turnstile. When customers leave the store, the so-called “Just Walk Out” technology automatically debits their Amazon account for the items they take and sends a receipt to the app.

Related:Up to 3,000 Amazon Go stores may be on the way

“The biggest ‘so what’ and ‘aha!’ moment occurred when we had to wait in line at a different convenience store — why could we not just grab what we want and leave?” Mahaney wrote. “It took members of RBC team anywhere between 44 seconds to 4 minutes to grab morning breakfasts and lunch.”

Besides opening more Amazon Go outlets — including in more types of locations, such as airports or college campuses — Seattle-based Amazon could grow the concept in other ways, RBC reported. That includes offering a greater variety of grocery items, which would further boost basket size and snare more wallet share; raise consumer awareness of Amazon Go to drive foot traffic; launch the Just Walk Out technology at subsidiary Whole Foods Market to spur in-store sales; and license the cashierless technology to other convenience retailers.

“Given that Amazon is likely targeting urban locations for its Go stores, they would be less of a near-term threat to suburban convenience stores and more a competitive threat for quick eateries and convenience stores in urban areas (Subway, Pret-A-Manger, Walgreens),” Mahaney observed.

Amazon Go currently has four stores in Seattle, three in Chicago and two in San Francisco. The latest opening was a 450-square-foot, employee-only outlet at the Macy’s building in Seattle, where Amazon has an office. The company also aims to open an Amazon Go at the Illinois Center in Chicago this year and has confirmed plans for a New York City location, though no location or timetable has been specified. Bloomberg’s report said Amazon Go could grow to as many as 50 stores in key metropolitan markets in 2019.

About the Author

Russell Redman

Senior Editor
Supermarket News

Russell Redman has served as senior editor at Supermarket News since April 2018, his second tour with the publication. In his current role, he handles daily news coverage for the SN website and contributes news and features for the print magazine, as well as participates in special projects, podcasts and webinars and attends industry events. Russ joined SN from Racher Press Inc.’s Chain Drug Review and Mass Market Retailers magazines, where he served as desk/online editor for more than nine years, covering the food/drug/mass retail sector. 

Russell Redman’s more than 30 years of experience in journalism span a range of editorial manager, editor, reporter/writer and digital roles at a variety of publications and websites covering a breadth of industries, including retailing, pharmacy/health care, IT, digital home, financial technology, financial services, real estate/commercial property, pro audio/video and film. He started his career in 1989 as a local news reporter and editor, covering community news and politics in Long Island, N.Y. His background also includes an earlier stint at Supermarket News as center store editor and then financial editor in the mid-1990s. Russ holds a B.A. in journalism (minor in political science) from Hofstra University, where he also earned a certificate in digital/social media marketing in November 2016.

Russell Redman’s experience:

Supermarket News - Informa
Senior Editor 
April 2018 - present

Chain Drug Review/Mass Market Retailers - Racher Press
Desk/Online Editor 
Sept. 2008 - March 2018

CRN magazine - CMP Media
Managing Editor
May 2000 - June 2007

Bank Systems & Technology - Miller Freeman
Executive Editor/Managing Editor
Dec. 1996 - May 2000

Supermarket News - Fairchild Publications
Financial Editor/Associate Editor
April 1995 - Dec. 1996 

Shopping Centers Today Magazine - ICSC 
Desk Editor/Assistant Editor
Dec. 1992 - April 1995

Testa Communications
Assistant Editor/Contributing Editor (Music & Sound Retailer, Post, Producer, Sound & Communications and DJ Times magazines)
Jan. 1991 - Dec. 1992 

American Banker/Bond Buyer
Copy Editor
Oct. 1990 - Jan. 1991 

This Week newspaper - Chanry Communications
Reporter/Editor
May 1989 - July 1990

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