What Does the Future Hold for Amazon Go?

On this episode of Industry Focus: Consumer Goods, Vincent Shen is joined by Fool.com contributor Danny Vena as they cover the latest headlines from Amazon (AMZN -1.29%), including updates on the location for its second headquarters and the grand opening of Amazon Go, an automated, cashier-less grocery store.

A full transcript follows the video.

This video was recorded on Jan. 23, 2018.

Vincent Shen: I wanted to pick your brain really quick on Amazon. The company has been making a ton of headlines this past week. First, they announced that the location of their future HQ2, their headquarters, has been narrowed down to 20 locations, three of which are close to Fool HQ here in Old Town, Alexandria. Those are Washington D.C., Montgomery county Maryland, and Northern Virginia. And when Asit Sharma and I first covered this news last year, we mentioned Denver and Raleigh, North Carolina as other likely candidates for the new headquarters, and those also did end up making the list as well, not to mention bigger cities like Chicago, Boston, New York, and Los Angeles.

The actual news I wanted to hear more about from you, Danny, has to do with Amazon's latest experiment in brick-and-mortar retail. Their Amazon Go store has finally opened to the public as of yesterday at the company's Seattle headquarters. Can you tell us a little bit about this "store of the future" concept and what they're trying to do here?

Danny Vena: Absolutely, Vince. Last year, Amazon announced they were going to open something of an automated store. What they were looking at doing was, they were going to use a combination of artificial intelligence, a combination of sensors, and they were going to use these to blanket a store so that that store could be completely cashier-less. They had some troubles with it initially after they first rolled it out. They were planning on opening it to the public in the spring of last year. They ran into problems when they had more than 20 customers in the store. The system would malfunction or crash. Which is probably not what they were looking to do. So then, they put off the big grand opening. They finally announced over the weekend that they were opening the store in Seattle to the general public after testing it for the last year on employees. So that store is open as of yesterday.

Shen: About a one-year delay. I don't think the people who had an opportunity to actually shop at the store are too disappointed. It's pretty small. It's only about 1,800 square feet. It's stocked with things that you would expect: snacks, some prepared food, beer and wine -- typical inventory for a convenience store like this. Keep in mind, there's no cashiers, no registers, no shopping baskets, no shopping carts. What you have is a whole host of cameras and sensors positioned throughout the store to track shopping activity, in addition to the check-in kiosks at the front of the store. When you come in, you log in with your Amazon account. Then, as you place items into your own bag or backpack, however it is, you're going to carry your stuff out of the store, they will be tracking that with your Amazon account. There are still employees at the store, but their roles have changed. They're restocking shelves, they're helping customers, checking IDs for alcohol purchases, for example, and also preparing food for sale in the kitchen next door.

The early reviews and response that I've seen to this Amazon Go shopping experience are pretty positive. Customers seem to be talking about how strange it feels to just walk out of the store without having to wait in line or take out their wallet. I think that could definitely be considered a step-change in convenience -- that if you have the right product selection, you have competitive pricing, I definitely think that a store like this can build a loyal customer base for the company.

Last point for you, Danny, how does Amazon Go fit into the company's strategy going forward? Management has definitely never been shy about experimenting, testing new ideas. Is this about the sensors and cameras, the technology behind that? Or is this about establishing a larger physical retail presence? They have some of their bookstores, they're pushing out to almost 20 stores in 2018. Or do you think this is something else entirely?

Vena: Vince, Amazon has been delving further into the world of artificial intelligence. It's well known that they're among some of the initial first movers in the AI space. They were the first to release their Echo family of smart speakers. They've been using it to track inventory, forecasting those types of things, for some time now. I think essentially, where you're going to see -- this is a big experiment for them. They have not announced any plans at this point to expand beyond that initial test store. That said, with the bookstores that they've opened up, with the acquisition of Whole Foods last year, you add this into the mix, and I think eventually, what we're going to see is, they may roll that test out into some of their Whole Food stores, and I think that could be a game-changer for them.

Shen: Yeah. Though management has been pretty mum about the next steps for this -- they refuse to comment on expansion and things like that -- you do see a lot of opportunities, like you mentioned, with Whole Foods and some of the other business segments that they jumped into, other projects and experiments they've jumped into, to roll out this technology and just learn more and more about the consumer habits in store and how that can apply to the various parts of the business.