Amazon Go is not only trying to out-convenience convenience stores, it could out-earn them, too. And that could mean a new, giant multi-billion dollar business for Amazon within just a few years.
Amazon’s cashierless Go stores could be a $4 billion business by 2021, new research suggests
The futuristic shops bring in more revenue than regular convenience stores.
Jason Del Rey / Recode
Rani Molla was a senior correspondent at Vox and has been focusing her reporting on the future of work. She has covered business and technology for more than a decade — often in charts — including at Bloomberg and the Wall Street Journal.
Amazon’s new cashless, cashierless stores — which allow customers to just grab items off shelves and automatically get charged upon exiting, thanks to a bevy of sensors and cameras — bring in about 50 percent more revenue on average than typical convenience stores, according to new estimates from RBC Capital Markets analysts.
Using their own purchases at Go stores as data points, RBC analysts estimated that the typical order size at the new futuristic shops is around $10. The analysts also counted the number of visitors to an Amazon Go — an average of 550 a day — which would mean the average Go store generates an estimated $1.5 million in revenue a year excluding days when current Amazon Go stores are closed.
Amazon has considered a plan to open as many as 3,000 Amazon Go stores by 2021, according to a Bloomberg report, meaning the futuristic shops could generate in the ballpark of $4.5 billion in sales a year if the company follows that aggressive store rollout plan and if new-store sales are similar to current RBC estimates.
Amazon declined to comment on RBC’s findings.
Using National Association of Convenience Stores data, RBC estimates a regular convenience store of the same size would bring in just over $1 million a year in sales.
Here’s what that disparity looks like on a square-foot basis:
Amazon opened its first Amazon Go store in Seattle early last year, and has added eight more locations since then, all in either Seattle, San Francisco, or Chicago. Recode reported in October that the company is also building out its first New York City outpost.
Amazon has not yet settled on a uniform format for these stores of the future. Some only feature prepared foods like sandwiches and salads that make them more competitive with eateries like Pret a Manger. In 2016, Pret A Manger saw £ 776.2 million ($1.1 billion then) in revenue from 444 stores, which works out to about $2.5 million in sales per store — or $1 million more per store on average than the Amazon Go estimated sales numbers. Pret’s sales per store are more in line with top quick-service restaurants like McDonald’s, Panera Bread, and Chipotle.
Other Go locations, including the original Amazon Go store beneath Amazon’s Seattle headquarters, also feature a selection of packaged grocery items and beer that make them more akin to an upscale version of a corner store or high-tech 7-Eleven.
While Amazon Go has the potential to become a multi-billion-dollar business, it will be expensive to get there. Amazon Go stores need more initial investment than normal convenience stores, with the first Go location requiring more than $1 million in hardware alone. Amazon would need to spend as much as $3 billion to roll out 3,000 stores, Morgan Stanley has estimated.
How Amazon Go labor costs stack up over time against traditional convenience stores and sandwich shops remains to be seen. While there are no cashiers in the tech-laden storefronts, Amazon currently employs workers to prepare sandwiches, stock shelves, and greet customers.
This article originally appeared on Recode.net.
See More:
