Amazon (AMZN -1.65%) is reportedly in talks with OTG's CIBO Express stores (found in airports) and Cineworld's Regal theaters to bring the cashier-less technology that powers its Amazon Go stores to hundreds of locations. It's also looking to install Amazon Go equipment at concession stands at sports stadiums, according to CNBC. It plans to start installing equipment in third-party stores at the start of next year.
Offering Amazon Go as a service is a $50 billion opportunity for the online retail giant, Loup Venture's Andrew Murphy said last year. How Amazon plans to monetize the service is still to be determined, according to CNBC, but there are a lot of different paths. Because Amazon has such an ecosystem of services, the company could offer several different ways for its retail partners to provide compensation.
Image source: Amazon.
How would you like to pay for that?
Amazon may give companies licensing its Go technology a few different options to pay for the service.
One option is to take a percentage of sales from each store. There are two reasons this might appeal to retail partners. First of all, the technology removes the need for cashiers, freeing up personnel and resources to increase product display space and protect against theft and other breakage. That reduces the overall cost of running the business. Second, the Amazon Go format has proven incredibly efficient in terms of sales per square foot of retail space. That could mean third-party merchants would see a boost in total sales, so giving up a percentage of those increased sales wouldn't hurt as much.
The second option Amazon is exploring is charging merchants up front and then taking a monthly fee after that. This option may appeal to merchants that want to have more certainty in their expenses, effectively replacing their cashier expense with a (theoretically) less expensive service expense paid to Amazon.
There are a lot of different models Amazon can explore, but as long as it's saving merchants money and expanding their profit margins, it should be an appealing option to a lot of retailers.
Taking back the retail cloud
One interesting note in CNBC's report is that Amazon won't require retailers using the Amazon Go technology to use Amazon Web Services (AWS) as the back end. That's especially notable as competing retailers have taken steps to move their business away from Amazon to competitors like Microsoft.
Microsoft has developed several innovations for retailers in an effort to woo more companies to its Azure cloud. Most are more than happy to stop lining the pockets of one of their biggest competitors.
Amazon could use its Amazon Go technology as a way to fight back against Microsoft. If retailers are paying Amazon a monthly fee for the service, for example, it could offer a credit or discounted rate for using AWS with it. Or retailers may opt to use Amazon's cloud for simplicity's sake.
Building out other services
Putting Amazon Go technology in more locations opens the door to a lot more services from Amazon.
Amazon may have an opportunity to process payments for stores using its technology. Since users have to scan an app to check into Amazon Go stores, Amazon may develop those apps for merchants and integrate its payments service into it. That would provide a secondary revenue stream for licensing Amazon Go technology.
Additionally, the company may be able to collect shopper data from stores using its Amazon Go technology. That could feed into its own marketplace platform, as well as its growing advertising business.
With a growing slate of services, including AWS, payment processing, and advertising, Amazon has a lot of ways to monetize licensing its Go technology beyond directly asking for payment or a percentage of sales. And that could lead to a lot of revenue for the company if it can sign on some meaningful partners.
