3 ways that Amazon Go sets the stage for the ‘store of the future’

The Amazon Go store that finally opened for business on Monday may not be coming to your neighborhood anytime soon, but elements of that bricks-and-mortar shop and the experience of shopping there certainly are. Amazon.com Inc.’s AMZN, +1.75% latest venture, which is located in Seattle and is a year late, does away with traditional queues and cash registers. “This is not a checkout solution. It’s a fully-connected store,” said Brendan Witcher, principal analyst at Forrester, who visited two weeks ago. “This is immersive technology that allows you to continue to shop the way you want to shop but removes a pain point,” he said. To implement this technology in another store would require a complete redesign, he added. Not so long ago, the main objective of a retail store was to sell stuff. Now, the consumer shift to e-commerce is creating new uses for store locations, like click-and-collect, ship-from-store and easy returns. Retailers are also taking steps to mimic the ease and convenience of online shopping while offering the perks of an IRL (in real life) experience. “The trick is to turn those transactions into a loyalty experience,” said Matt Joe, global innovation officer at Avanade, a business technology and advisory company. “How can this new platform engage the customer not just in the store but when they’re at home?” Amazon sets a high bar Between 85% and 90% of all transactions still take place in brick-and-mortar locations, according to Moody’s, though e-commerce is growing. Even with its dominating online presence, Amazon has purchased Whole Foods Market, opened bookstores nationwide, and now has its futuristic Go location. See also: Every time this happens Amazon crushes another legacy retailer See also: Here’s why flagship stores for retailers like Apple and Starbucks have become tourist attractions Like Amazon, other retailers are trying to create the best representation of their brand. “Each store format is trying to find a unique blend of AI [artificial intelligence], human workforce, products and bringing together platforms for customer enjoyment,” said Avanade’s Joe. Building a relationship between the shopper and the brand is key to creating loyalty, he said. Retailers are still building their version of the “store of the future,” but here are three components that shoppers should expect. Inventory, or the lack thereof The Local store that Nordstrom Inc. JWN, +1.82% opened in Los Angeles in October has no inventory but offers plenty of services, like manicures, stylists and wine. The concept is to allow customers to work with stylists to get personalized advice, and then have items delivered to their homes. See also: How Nordstrom is changing the department store game It’s an extreme example, but many retailers have made an effort to shrink their in-store inventories. The Finish Line Inc. FINL,-5.75% emphasized the “discipline” it had in managing inventory during its third-quarter earnings call, with inventory down 2% on a consolidated basis at the end of the period. Edward Record, chief financial officer of Hudson’s Bay Co. HBC, +0.27% highlighted his company’s smaller inventory on its third-quarter conference call in December. Hudson’s Bay’s portfolio includes Saks Fifth Avenue and Lord & Taylor. Inventory management has become critical to retailer efforts to move merchandise more quickly. “Our speed-to-customer initiative, coupled with tight inventory control and adoption of new demand and allocation forecasting tools could afford us the opportunity to reduce total markdowns by several hundred basis points,” said Urban Outfitters Inc. URBN, +2.64% Chief Executive Richard Hayne, according to a FactSet transcript of the November earnings call. Stores are shrinking There has been plenty of coverage of store closures and the “over-stored” U.S. landscape. Not only are stores closing, many are shrinking in size. “Stores don’t need to be the large footprint we’ve seen in the past,” said Jill Nickels, studio director and retail practice leader at Gensler, a global architecture and design firm. “It can be a curated experience in a dynamic environment,” she said. The typical real estate strategy is shifting, with retailers looking at options like pop-ups, which provide the flexibility to be housed in an actual store or even a van or a tent. Locations are moving out of malls and away from the traditional Main Street, where such things as a DJ or food-tasting event can better target customers. Most important is providing the opportunity for customers to spend time with the brand in a fun environment with top-notch customer service. Artificial intelligence (AI) everywhere Artificial intelligence in the form of chatbots and various machine-learning platforms is already changing retail, with companies able to collect more data and shoppers able to enjoy a more personalized shopping experience as a result. 3-D printing is expected to be a game changer. Already, Nimbly, an on-demand 3D-knitting platform, can sew garments for a customer while they wait. Perhaps, said Kevin Sladek, Nimbly’s co-founder, standard sizes will go the way of the dodo and disappear entirely. For retailers, the risk of having pricey items, like cashmere sweaters, on hand that may not sell at full price goes away. “With the retail experience of the future, there’s a customization angle that we’re just on the cusp of,” he said. Sometimes the use of AI will be consumer-facing and other times, it will do its part on the back end. Read: Retailers are getting help from technology including AI in a busy returns season “Today’s competitive landscape forces companies not only to be customer-obsessed but data led,” said Forrester’s Witcher. “Retailers need to stop looking at gut instinct and start looking at data to drive their business.” It’s important that digital functionality is coupled with people power. “Brands that understand how to take the customer from AI to the physical space will be successful,” said Michael Klein, Adobe’s director of industry strategy for retail and travel and hospitality. See: Which technology in Netflix’s ‘Black Mirror’ will change our lives first? Also: Here’s how workers can keep their jobs, despite the inexorable rise of automation An important question that retailers should ask is: “How do I make sure I get to a human as quickly as possible if the bot or machine can’t satisfy my request?” said Klein.