Amazon’s retail store is not a reality yet but could end up being a big piece of its playbook

The topic of the increasing impact of e-commerce on logistics and supply chain operations never seems to let up these days, does it. Please note that is not a complaint at all; it is merely an observation.

That said, various reports published in recent months have focused on what e-commerce bellwether Amazon is up to these days in regards to its concept for a retail store.

This store is not a typical one in which you enter through the front door, pick out what you want, pay for them, and then leave. A terrific article in the online technology publication Re/code discusses the store, which is based on a patent Amazon filed.

According to the Re/code report, it works like this: “Based around the idea of complete convenience, such a store would work using a system of cameras, sensors or RFID readers that would be able to identify shoppers and the items they’ve chosen, according to the application, which was filed in September and published in January. The technology would also potentially give Amazon a more cost-effective way to compete with traditional retailers by operating a store that doesn’t require cashiers and could similarly serve as a place to pick up online orders.”

And there is also this: “[W]hen the customer passes through the exit (transition area) of the retail location, the items picked by the user may be automatically transitioned from the materials handling facility to the user and the user may be charged a fee for the items. … For example, if the user is purchasing items from a retail location, rather than the user having to stop and ‘check out’ with a cashier, teller or automated check station, because the picked items are already known and identified on an item identifier list associated with the user, the user may simply exit the retail location with the items. The exit of the user will be detected and, as the user passes through the exit (transition area), the user, without having to stop or otherwise be delayed, will automatically be charged a fee for the items (the items are transitioned to the user).”

The report also points out that just because a patent has been filed for this, it does not necessarily mean it will come to fruition. But at the same time, it gives other e-commerce players and bricks and mortar, or “big box” retailers one more thing to worry about when trying to keep up with the Joneses, er Amazon.

A recent conversation I had with Sean Adkins, managing partner at West Monroe Partners Supply Chain Practice points to the promise of this endeavor should it become a reality, and, as it turns out, the reason is that this model is already being deployed by other retailers to a certain extent.

“From my perspective it is certainly vary viable and very realistic,” explained Adkins. “I only say that because the model they are intending to follow is not dissimilar to what a lot of other large scale retailers are doing, which is essentially an extension of online and finding the abilities to give customers a convenient place to go and not only interact with the brand a bit but also pick up anything they order online. If you look at all the major retailers, you will find they all have some sort of strategy focused around this and are providing these capabilities so certainly providing customers an opportunity for this at their locations is viable and quite smart.”

From things like an inventory management, order fulfillment, and supply chain perspective, Adkins said there is much to consider with this type of endeavor, noting that the real upside is the ability to interact with the brand and do things in a physical location that cannot be done online.

On the supply chain and logistics side, he said that if done correctly by Amazon it will have good consolidation points for where the physical locations can be that come with vast benefits, like a completely different cross-model for getting product to consumers in a point-to-point or one-drop manner, with another option being a lockers or kiosks where orders can be picked up.

“If they pick up orders from a location like that, it creates a situation where costs that are associated with the click model can be reduced and are related to common carriers and door-to-door,” Adkins said. “It puts more of an onus on customers.”

But with Amazon Prime members getting free delivery as part of the $99 annual fee, does this retail store concept truly make sense?

Adkins sais it does but it comes with a caveat: having some period of inventory Amazon is maintaining that will allow customers an even faster pickup than what is available through an online order, which he described as a “speed play.”

“If it is all the same in terms of delivery time, a customer will likely wait for the order to come to their door instead of having to pick up somewhere, so that will present challenges, because they will have to be in a spot where quicker fulfillment runs can be made to physical locations, and it comes down to picking good physical locations for those retail outlets,” noted Adkins.

Another interesting part of this, observed Akins, is that it is not surprising that Amazon is possibly going this route in that it is so ubiquitous, coupled with how some retailers are heading in the other direction, to the original Amazon model, for online ordering and fulfillment.

“Amazon is the other side of the equation, and while it may seen counterintuitive to open physical locations, a physical location can be a very nice benefit,” said Adkins. “There are some other pure online-only retailers opening up flagship stores and RETAIL centers as a way to provide additional services to a customer they simply cannot provide in an online-only scenario in terms of speed and efficiency on the fulfillment end and a way to increase upselling and interact with the brand in a way they may not be able to otherwise.”

This possible plan by Amazon, Adkins, concluded, could very well lead to more online players opening up stores, with brick and mortar players working online to make it part of their playbook making the most impactful players the ones with an online presence and a physical presence, although the latter won’t be one in the traditional sense.