To learn how to improve your results in the market dramatically by buying options on stocks like Ford and Tesla, take a two-week trial to my special service, Tactical Options: Click here. Members have made more than 5x their money this year
Imagine a store without lines or checkouts. You walk in, tap your smart phone, pick up he items you want. Then you leave. You know, like in the future.
That’s the shopping experience Amazon wants to bring to customers starting next year. Recently the company unveiled the ambitious new Amazon Go concept store. It will use machine learning, computer vision and sensor fusion to add shoppers’ physical choices to a virtual shopping cart. The cost of the items is automatically charged to your Amazon account when you leave. By design, it’s just like shopping online. That’s the Amazon genius.
A pedestrian passes in front of the new Amazon Go grocery store in Seattle, Washington, U.S., on... [+]
Most people don’t understand Amazon. They wonder why a successful online retailer would fiddle with low margin, real world stores – even if it developed technology to eliminate much of the labor.
That’s the wrong question. Amazon isn’t really concerned about margins. It's selling the ecosystem: Amazon Prime, a subscription cash cow that has swollen to an estimated 63 million members.
Will the convenience of avoiding checkout lines push people toward Prime membership? Probably. And once they’re inside the ecosystem, Amazon knows they will spend.
A 2015 research report from Consumer Intelligence Research found Prime members outspend nonmembers than more 2-to-1. They’re also far more likely to buy Amazon branded goods. And they pay $99 a year for the privilege.
“Prime is a somewhat different service than it was two years ago,” said Mike Levin, partner and co-founder of CIRP, in the report. “Amazon has expanded its media offerings greatly, including exclusive video content, streaming music, and now personal photo storage.”
Just Walk Out Shopping would be a cool addition. It would also put a huge amount of pressure on traditional grocery stores like Kroger Co (KR) and longtime rival Walmart (WMT). Both have struggled to use technology to enhance traditional retailing.
Amazon wants to execute a quantum leap. The corporate press release says the technology is a mashup from the world of self-driving cars. That is understated. JWOS software needs to see what shoppers are looking at and understand what items are leaving the store. And with whom. It’s complex computer science.
“If I were creating supermarkets from scratch, I would have done something like this,” Brent Franson, chief executive of Euclid Analytics told Wired. “I think this is the future of retail. I just expected, until we heard about this, that it was a little further out than it seems -- or that Amazon is making it seem.”
Amazon already bet the future of retailing was Prime. Everything else is just a sideshow. That focus, and other stuff, is why the shares remain a buy on pullbacks. It's just getting started.