- Amazon has chopped the cost of its Go cashierless store technology by 96% since 2017.
- An internal document obtained by Insider projects even more savings through 2023.
- Amazon is focused on growing sales and profitability while creating more third-party partnerships.
Amazon has radically reduced the cost of its “Just Walk Out” cashierless store technology, a testament to the company’s ability to turn long-term experimental projects into more affordable business offerings.
Amazon estimates the operating cost for the technology behind a 1,000-square-foot Go cashierless store has dropped to $159,000 a store this year, a 96% decline from $4 million in December 2017, a month before it opened the first location, according to an internal document from August that Insider obtained. Even more savings are forecast by the end of 2023.
The costs include payments for using Amazon Web Services cloud technology and hiring remote employees who manually verify the accuracy of checkouts in the stores, among other tasks. It doesn’t take into account operating costs such as marketing or merchandising fees, so the total expenditure to run each location is higher. The original Go store cost more than $10 million to operate, according to Brad Stone’s book “Amazon Unbound.”
“Our vision is to further reduce annualized JWO costs (Opex and Capex depreciated over 5 years) for all store sizes,” the document said. Amazon’s representative didn’t respond to a request for comment.
The declining cost of this technology may help Amazon as it expands from e-commerce into physical retail where established companies have been operating successfully for decades. Amazon debuted its Go cashierless store in 2016, creating a convenience store where customers could purchase items through an app without having to go through a checkout aisle.
Earlier this year, Amazon rolled out the JWO technology to its larger Fresh grocery stores, while also selling the service to other retailers, including Hudson Nonstop and TD Garden. The internet giant has projected similarly steep cost reductions for these Fresh locations, as Insider previously reported.
Amazon’s physical-stores vice president, Dilip Kumar, highlighted the improved JWO technology in an interview with The Wall Street Journal last year, saying it could work in much larger store formats. “There’s no real upper bound,” he said. “It could be five times as big. It could be 10 times as big.”
Key to the cost savings is a new camera system with an increased field of view, which lowers the number of cameras needed per store, according to the document. Amazon is also designing remote switches and “on-premise edge compute” services expected to significantly reduce certain expenses. Additionally, Amazon expects improvements across its computer-vision technology to reduce the number of remote employees needed to monitor some of the complex in-store transactions.
Simultaneously, for this year, the Amazon Go team is focused on increasing sales and getting to profitability, the document said. It also wants to create more store-format opportunities, like the partnership idea with Starbucks, which Insider previously reported. Amazon estimates a normalized revenue of $2 million a store for the Go stores, according to the internal document.
To improve profitability, Amazon wants to increase the frequency of in-store promotions, such as customer-targeted deals and Prime member-specific discounts. It’s also giving managers more leeway to run “shrink reduction” promotions, a discount applied to products nearing expiration dates.
Another focus area is supply-chain optimization. One initiative pushes HMR, an Amazon food partner, to reduce the time to ship its product to stores. That reduction, to three days from eight days, is expected to save almost $1 million annually and thousands of hours in store labor, partly by limiting the amount of food that expires, the document said.
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