Amazon Go Opportunities and Challenges
By Monica Eaton-Cardone
Amazon recently announced the impending public debut of Amazon Go, a new in-store grocery shopping experience that uses customers’ connected devices and “Just Walk Out Technology” to eliminate the checkout line.(1)
According to Morgan Stanley Research, the U.S. grocery category totaled roughly $675 billion as of early 2016, with online sales accounting for only about 2% of that. However, groceries were “by far the largest of the eCommerce categories surveyed,” representing 19% of consumer spending, and Morgan Stanley predicted online grocery sales would grow to over $42 billion during 2016. The survey results also suggested that U.S. online grocery penetration would climb from 16% to 28% for packaged goods and from 8% to 26% for fresh food.(2)
Among consumers who have never shopped for groceries online, 67% say it is because they like to select the fresh products themselves.(2) Amazon Go will overcome that barrier, while eliminating the need to wait in checkout lines. Shoppers simply scan their mobile device to enter the store; the Just Walk Out Technology uses computer vision and machine learning to automatically detect the items they take from the shelves, and the app totals their purchases and charges their Amazon account when they leave. The 1,800-square-foot Amazon Go pilot store in Seattle will open to the public in early 2017.(1)
Amazon continues to revolutionize the way Americans shop. By eliminating grocery stores’ time-consuming checkout lines, Amazon Go will win over shoppers seeking convenience, ease and speed. At the same time, it’s important to be aware of security vulnerabilities and evolving fraud schemes, such as the return fraud, refund fraud and friendly fraud that followed the launch of Apple Pay, as well as the privacy rights consumers may have to relinquish for the sake of convenience.
A recent Pwnie Express study found that 92% of IT security professionals believe connected devices will be a major security issue in 2017 after witnessing their role in last fall’s distributed denial of service (DDoS) attacks by Mirai malware. Many respondents experienced attacks on their Internet of Things (IoT) devices: 16% were hit with man-in-the-middle attacks, 20% with ransomware and 32% with malware.(3) Hackers and fraudsters are quick to exploit weak links in new technology, and emphasizes that Amazon will need to take steps to address those security vulnerabilities when scaling its new shopping experience.
While Amazon Go is positioned as an innovation designed to improve the customer experience, another motive may be at play: an effort to reduce chargebacks. A growing number of online retailers are raising prices and adding return or restocking fees in an effort to recoup chargeback losses. But these strategies often backfire; by reducing the value of their offerings, merchants may drive customers away and create even more chargebacks. Amazon’s new technology cleverly combats chargebacks by requiring customers to unlock and scan their mobile device upon entry and tracking them as they move through the store, thereby nipping unauthorized transaction disputes in the bud.
Amazon Go is a win-win solution for both the retailer and its customers, but consumers need to be cognizant of the privacy rights they may be giving up in the process. Tech-enabled stores of the future may leverage video capture, facial recognition and other biometrics. Time will tell if consumers are willing to surrender their privacy and personally identifiable data in exchange for a faster checkout process, and whether companies are able to keep that data safe from hackers’ increasingly sophisticated attacks.
- 1. Amazon.com. “Amazon Go” overview page; December 5, 2016. amazon.com/go
- 2. Morgan Stanley Research. “Are Groceries the Next Big Driver of Global eCommerce?”; January 22, 2016. com/ideas/online-groceries-could-be-next-big-ecommerce-driver
- 3. Pwnie Express. The Internet of Evil Things: 2017; February 2017. com/2017-internet-of-evil-things-report
Monica Eaton-Cardone is an accomplished entrepreneur, speaker, author and industry thought leader who is internationally recognized for her expertise in risk management, chargeback mitigation, fraud prevention and merchant education. Today, Eaton-Cardone’s innovations are helping thousands of organizations achieve sustainable growth, and she continues to pioneer loss-prevention best practices as CIO of Global Risk Technologies and COO of Chargebacks911.