Amazon Go Stores Are Coming to Chicago and San Francisco

Amazon Go - Amazon Go Stores Are Coming to Chicago and San Francisco

Source: Amazon

It’s been just under four months since, Inc. (NASDAQ:AMZN) opened the doors to Amazon Go, its futuristic brick-and-mortar store with no checkout lines and no cashiers.

That Seattle technology showcase has proven popular, and the company was expected to open six more locations in 2018. But analysts wondered about AMZN’s strategy. Would the company focus on its home town of Seattle, or attempt to make the concept more popular by going national? We appear to have the answer as two Amazon Go expansion locations have now been revealed: Chicago and San Francisco.

With Amazon Go moving out of the experimental stage into national expansion, there are implications for the retail industry — and for AMZN stock.

Amazon Go Expansion Pegged for Chicago and San Francisco

Engadget is reporting that two new locations for Amazon Go have been revealed. Although AMZN hasn’t confirmed the plans, there is a solid trail of clues pointing to Chicago and San Francisco.

The first giveaway? Amazon posted job listings for store managers in both cities. And in the second, local media outlets have discovered that Amazon has building permits for small retail locations in both cities. With ReCode’s report from February suggesting AMZN had plans to open an additional six Amazon Go locations in 2018, it looks as though the expansion has begun.

And rather than focus on making Amazon Go a showcase for technology in its home town of Seattle, it appears that AMZN is instead pushing for national exposure. That strategy is bound to cause some consternation in the convenience store industry. And the fact that the company’s futuristic store will be expanding beyond a single location has implications for competitors like Walmart Inc (NYSE:WMT), which takes on Amazon in retail as well as battling its Whole Foods division for grocery sales.

What More Amazon Go Locations Could Mean to AMZN Stock

Amazon has a long history of investing in infrastructure that eventually reaps significant rewards. A classic case in point is Amazon Web Services — or AWS. AWS was a sinkhole for investment for years, but has turned into a profit generating engine helping to drive AMZN stock.

Packed with the latest technology, including hundreds of cameras, an Amazon Go location is undoubtedly expensive to open. And AMZN will have invested significantly in developing the technology.

But there is a lot of money potentially on the table.

In the U.S., convenience stores did $233 billion worth of in-store sales in 2016. That’s money spent largely on food, and drinks — the kind of product mix Amazon Go focuses on. And it’s more than AMZN’s total revenue for 2017, which hit $177.9 billion. A successful Amazon Go expansion may require a significant investment up front, but the potential payoff for AMZN stock is there.

Implications for the Retail Industry completely disrupted the traditional retail industry, changing how consumers shop. Its rise is blamed for the demise of iconic retail chains like Borders and Circuit City. Amazon has forced retail giants like Walmart to scramble for an online shopping presence. Meanwhile, the AMZN purchase of Whole Foods has the grocery industry worried.

Amazon Go as a concept has implications for the retail industry as consumers look at the potential for time-saving and convenient shopping. An Amazon Go expansion has the potential to disrupt retail the way online shopping did. If AMZN gets its stores into major cities, it can begin to take business from traditional convenience stores. And as shoppers experience the technology involved, it could expand beyond convenience stores to larger locations like Whole Foods. That would put pressure on competing retailers — like Walmart — to adopt similar systems, adding costs and putting the jobs of 3.5 million cashiers at risk.

We’ll have to wait to see if AMZN expands Amazon Go further in 2018. Recode has been pegging Los Angeles as another likely location.

It’s possible that after the initial expansion, the company might stop and use the existing network of stores as a showcase of what it’s capable of. But there’s also a possibility that AMZN will aim higher, setting its sights on that lucrative convenience store market, in which case Amazon Go may develop into a division with a material impact on revenue and AMZN stock.

The one thing that seems certain at this point is that AMZN is not content to leave Amazon Go as a one-off proof of concept in Seattle.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

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