After spending 20 years building an unparalleled e-commerce empire, Amazon.com (NASDAQ:AMZN) is making a surprising move.
The company is turning to bricks and mortar as its next frontier. Amazon is experimenting with three different real-world formats, including a convenience store, grocery pickup stations, and a bookstore chain, and they all have one thing in common.
Unlike pretty much every storefront on the planet, Amazon's businesses do not accept cash. The boldest iteration of this tactic is the Amazon Go convenience store, a 2,000 square-foot Seattle store that is currently open only to Amazon employees and relies on a network of cameras and technologies similar to autonomous vehicles to automatically charge customers based on what they take out of the store. It has no cashiers or checkout lines; customers simply swipe an app at a turnstile upon entry in order to be charged. Amazon is experiencing some technical hiccups with the new system, but the technology has the potential to change the entire retail industry if it is effective.
AmazonBooks, which now has seven locations, also does not accept cash, taking only credit/debit cards or payments through the Amazon app.
As a technology company in addition to a retailer, perhaps it's no surprise that the company's brick-and-mortar iterations have gone cashless. Amazon is supposed to be a forward-thinking company, and its retail experiments ought to reflect that. Other tech giants have taken a similar stance against cash.
Apple (NASDAQ:AAPL) CEO Tim Cook has said, "We would like to be a catalyst for taking cash out of the system. We don't think the consumer particularly likes cash."
The iPhone-maker introduced Apple Pay in 2014, and, while it's failed to become a substantial revenue stream for the tech giant, Apple still has high hopes for its ability to transform payments.
Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) has made a similar move with Google Wallet and Android Pay. Likewise, Amazon has Amazon Pay, an online payment processing service launched in 2007 that allows shoppers to purchase on other websites using information stored by Amazon.com.
Paper or plastic
For a store like AmazonBooks as well as most retailers, there are a number of costs associated with accepting cash. Cash needs to be counted, tracked, safeguarded, and delivered to the bank, all of which take time. It can also be easily stolen. Eliminating it from your business and just accepting plastic also eliminates all of those issues.
But there are problems with credit cards. Wal-Mart Stores, Inc. (NYSE:WMT), the world's largest retailer, has railed relentlessly against credit card fees, and has sought a number of ways to undermine the big credit card companies' control over payments, including filing a $5 billion antitrust lawsuit against Visa and forming a consortium of retailers to launch their own smartphone-based payment network, CurrentC. However, CurrentC was widely considered a failure when it launched last year, and was sold to JPMorgan Chase, which will roll the technology into its own Chase Pay system.
Amazon has been mum about its cashless strategy, but a retailer that has reached more than $100 billion in sales through only digital payments likely sees little use for cash. The real test for those ambitions may be Amazon Go. If the company can make that technology work, it could lead to its opening larger grocery stores, giving Amazon an advantage it's long been craving in the grocery segment. AmazonBooks, on the other hand, seems to have demonstrated to the company that its customers are perfectly fine shopping without cash.
With its leading cloud computing division and cutting-edge technologies like the Alexa, Amazon is no slouch among tech heavyweights, though it may be best-known for e-commerce. If the company can extend its cashless empire to the brick-and-mortar realm, it may unlock its biggest growth stream yet.