Personal Finance

Small Amazon Go Stores Represent a Big Opportunity

Young woman looking in refrigerated section of a convenience store (NASDAQ: AMZN) has presented a number of challenges to the existing retail paradigm, as the growing adoption of e-commerce continues to displace brick-and-mortar sales. Not content to merely control the majority of digital sales, the company has continued to intrude on physical retail as well. Amazon began its invasion of traditional retail by opening bookstores , ironically the first industry to be disrupted by the "Amazon Effect."

The company has captured the public imagination with Amazon Go, the company's AI-infused grocery store without cashiers. The first location opened to the public earlier this year , and since then, Amazon has opened seven of these stores. Reports indicate that the company may be targeting as many as 3,000 stores by 2021 .

In order to achieve its lofty ambitions, Amazon may be planning stores with a smaller footprint that could pop up in a variety of locations as the company continues its path to retail dominance.

Young woman looking in refrigerated section of a convenience store

Image source: Getty Images.

Smaller may result in greater options

Like the company's inaugural location that opened in 2016, the latest Amazon Go store isn't currently open to the general public, but rather to employees at the company's Seattle office complex. This allows the company to experiment with the choices and the technology. At just 450 square feet -- or about the size of a college dorm room -- the new store pales in comparison to other Amazon Go locations, which clock in at between 1,450 and 3,000 square feet. This focus on a smaller profile provides insight into how the company could plan to ramp up its expansion.

Amazon plans to put these more diminutive stores in the lobbies of office buildings and hospitals, or anywhere large quantities of time-strapped people might converge. The smaller versions are modular, allowing them to be set up in a number of weeks, rather than months or even years.

The company may also be targeting airports, according to a report by Reuters. Amazon has initiated meetings with several high-profile airports on the west coast, with the aim of installing its cashier-less stores in these high-traffic locations, according to the report. This would facilitate purchases and ease long lines for travelers looking to grab a bite, particularly those on a tight schedule. It would also serve to build brand awareness for these cutting-edge stores of the future.

A brief refresher

Similar to its larger predecessors, this pint-sized store is blanketed with host of sensors and cameras, which employ a combination of computer vision, data fusion, and artificial intelligence (AI) to track items as they are removed from (or replaced on) shelves. Customers with the Go App can scan their smartphone to gain entry to the store, then place items in their shopping basket just as they would during a regular store visit. Once they've picked up all of their items, shoppers can leave the store, and they will be charged for the products they purchased with their payment method on file with Amazon.

The smaller locations will still retain the focus of their larger brethren, targeting middle-class consumers "anywhere where there's a lot of people who are hungry and in a rush," according to Amazon Go vice president Gianna Puerini. The stores will stock a variety of fresh fruit, salads, sandwiches, drinks, yogurt, and other staples of the lunchtime crowd.

Exterior of Amazon Go store at night, with the Seattle Space Needle in the distance

Image source: Amazon.

Just one piece

Sales from convenience stores in the U.S. (excluding sales of fuel) topped $237 billion in 2017, and food-service sales accounted for more than 22% of in-store sales and nearly 34% of gross profit. Prices at convenience stores are notoriously high, making them ripe for competition.

Amazon's plans for world domination have the company working across a variety of fronts. This includes e-commerce, cloud computing, smart speakers, artificial intelligence, streaming video, electronics, and physical retail. With so many irons in the fire, Amazon doesn't have to succeed in every one of its endeavors to achieve its lofty goals, but the fact that it's doing well in so many of them shows that it would be a (small-f) fool's bet to count it out.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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