And the perils of regulating against bigness
I hear they are already doing this at Bay Area CVS stores. People walk in, take what they want, and leave.
You are completely wrong about Hampton Inns. I spend 220 nights a year in Hotels. I’m Hilton Diamond. Mostly Hampton Inns. But also HI Express and Resident Inns and the like.
What people don’t realize there’s all these hotels basically handle your infrastructure workers of America. They aren’t filled up with businessman, will they have them, but largely they have technicians, road workers, railway workers, people who work on water plants, engineers, all the sort of specialties that are required to keep stuff working in America, but is so specialized of people have to travel. Usually, many of these people will clear out on Friday to go back home for the weekend, and that’s when the families come in. But Monday through Friday in any average Holiday Inn or Hampton Inn… This is where you truly essential workers are.
Trust me when I say, people absolutely do care about clean rooms. Now a lot of these hotels have gone to a service on demand model. Where are the only key in your hotel room in there for two days or three days, or upon request. This is reduce the labor requirements a little bit, but they are still having issues.
Amazon’s system has a number of limitations you didn’t mention. You can only put items in the 2 bags in your shopping cart. You can’t just load up your cart, because the cameras can’t recognize that. So if you need more than 2 bags of food, you’re stuck.
Also, critically, because the cart has some expensive technology, you *can’t remove the cart from the store* so you either transfer to a dumb cart or have to carry it to your car.
Overall, I don’t think these trade offs are worth it vs a regular checkout. I think this system more works for a convenience store, like an Amazon Go. Although based on the ones I’ve been to, I don’t see much foot traffic there either.
Great thing that I live in Philadelphia where this is impossible to do as in 2019 local city council lawmakers and the mayor signed a bill that bans cashless stores. They say it will help ease the day-to-day lives of many lower-income residents. I think it is bullshit for reasons I won't get into with this post.
Which is sad, as Philly was one of the few cities that were getting a flagship Amazon fresh store. And we need this type of innovation... especially grocery store innovation. There are plenty of food desert or desert-lite jawns where some innovative small grocery-store or co-op could do a lot of good. Sad that this city is rejecting this type of 21st century innovation.
I wonder if people would rather go back to gas attendants. Was that better? I hate driving through Jersey for this very reason.
Another angle here is that Amazon has seen a huge explosion in their grocery deliveries. These stores can double as last mile distribution centers and cut down delivery times. They’re working hard to get sub one hour delivery on groceries into large urban markets.
A lot of back and forth on the utility of self-checkout at the grocery store and I think it’s a reasonable point that the utility of it depends a lot on how many items you’re buying and how many of them need to be weighed rather than just scanned— for the moment both self-checkout and auto-checkout are really most effective in urban areas where you’re likely to be making more and smaller shopping trips.
But I think this points out where the puck is going: grocery stores are a dress rehearsal. Whoever can first make a serious dent in the checkout expertise at a big box store is going to make an unholy amount of money. Imagine a Saturday trip to Costco where you don’t spend 20 minutes in line to check out. Whoever builds that better mousetrap first will win big.
Another area where bigness can be good is health insurance. Only when an insurer reaches a certain behemoth size does it have the leverage to hold the line on rent-seeking price increases by providers. Insurers that become vertically integrated and directly acquire providers have more control to reduce inefficiency out of the provider system, as well as the incentive to do so. That's why a theme of health care reform efforts since the HMO fad of the Clinton years, through ACOs under Obamacare, up to today, has been to try to encourage providers to become risk bearing, i.e., to become whole or partial insurers. But small mom and pop physician practices and local hospitals can't easily manage risk like that - it takes size, to spread risk, to support a good data management infrastructure, etc.
Hampton Inn slam out of nowhere. Like, they aren’t the most up-market brand, but they’re not a Travelodge or Motel 6. People going there are going to expect clean sheets on the bed and fresh toiletries in the bathroom at least.
Really, if we are getting into a place where the labor market it too tight for Hampton Inn-level places to hire enough cleaning crews, I’d expect them to raise prices enough to cover the difference, and for a larger gap to open up between the low-mid market they occupy and the truly down-market places (who might actually eschew cleaning crews, and quickly become even dirtier and less attractive to all but the most desperate customers).
In reading this, I think Matt is ignoring a very important feature of Amazon‘s business model. Amazon essentially operates four separate but vertically integrated businesses: a platform serving other retailers, a retail business, a logistics apparatus that serves both, and an IT shop that is now primarily engaged in outsource cloud computing.
There is no way that the antitrust authorities of a prior era would look at this and think it’s a good thing. It allows for all sorts of competition-limiting behavior on Amazon’s part. You can hobble competitors by denying them access to services, steal crucial business information off AWS, subtly overcharge for logistic services to drive competition out of select markets… The list is endless.
And the reality is, Amazon’s ability to innovate is not contingent on all four of these business models being linked, at all. Amazon, the retailer could still quite effectively pursue the fresh model without having preferential access to AWS or Amazon, the retail platform
I don’t know if this is because I got lucky in the grocery stores I’ve frequented since self-checkout became a thing, but in my opinion self-checkout is much, MUCH preferable to full-service checkout. Partly because I don’t need a human being standing there judging the vegetable:dessert ratio of my grocery purchases, but back in LA Ralphs used to send me coupons regularly and to use those I’d need to flag down an attendant anyway. The real reason self-checkout is better is because I know how to pack groceries into my backpack and grocery bag much, much more efficiently than any stranger, no matter how skilled. Also, no risk of the next person’s groceries rolling down the conveyor belt into mine while I’m still packing up.
In Sweden, if you have a loyalty card, you can get a scanner at the supermarket, self-scan everything you buy and self-checkout. No cameras needed. There is a gate you have to scan your receipt to get out and there are random checks. All very convenient. Around 80% of shoppers use this system where I shop. I think this system exist in most of Europe too. The Amazon Fresh solution seems convoluted and kludgy to me, and creepy too.
The Big thing is interesting, since you can make a case that Amazon is getting to a level where you know so much about the consumer that price movements is no longer the most efficient indicator for allocating resources, hence planning potentially superseding market allocation.
This whole piece boils down to "big companies have economies of scale and that's efficient, and sometimes consumers benefit from this!"
Everyone knows this already, including the economists that want to fight Amazon with anti-trust efforts. The problem is Matt misses half the picture, which is that there are trade-offs: fundamentally, between efficiency and resiliency, and more specifically, trusting Amazon to keep the consumer happy once they have achieved complete dominance in market. I don't see any engagement with this, just "big efficient, efficient good!"
*painfully Yuppie brain* can we get this instant checkout technology at Trader Joe’s?
A couple of random thoughts -
1. Matt Stoller is one of the absolutely dumbest people on the twitter.com. When he's not fellating Josh Hawley because he says "Amazon bad", he spends the rest of his time being extremely wrong about everything and it's mystifying why anyone pays any attention to him.
2. Years ago, Food Lion, a large chain of middle of the market grocery stores, decided to re-brand their stores based on the income levels of the communities in which they were located. higher income area stores became Bloom, middle income stores staid Food Lion, and lower income communities got Bottom Dollar Food.
The concepts failed after a few years, but Bloom tried to do what Amazon is doing now nearly 15 years ago. You could grab a self-scanner when you entered the store, then walk around and scan and bag your own stuff as you shopped, and at the end you simply walked up to a self-serve kiosk to return your scanner and pay. It was a great concept and I was disappointed when it disappeared along with the Bloom branding. That amazon has taken this a step further and can autobill you as you walk of the store is a no-brainer of a concept.
3. I find self-checkout awful. Unless I've got less than 5 items, I avoid self-checkout at all costs. Its slow, the area is too small to effectively organize your groceries, and it inevitably yells at you for not putting the items down quickly enough or too quickly into your bag and needs a manager to unlock the terminal.
4. I try to support unionized labor anytime I can, but here in DC I find the unionized grocery stores to be generally terrible, with surly, unhelpful employees and far more spoiled produce. I'm glad there are unionized stores in town because it likely inflates the wages at the non-unionized Harris Teeter I shop at, but every Safeway in DC is a disaster, and Giant is only marginally better.
The history of grocery shopping is one of pushing more and more labor onto the customer. 19th century dry goods stores essentially had everything behind the counter. A&P's innovation was to allow customers to select their items from shelves themselves. Self-checkout enlists the customers to do their own scanning and bagging. This has always struck me as a poor form of specialization as the general public will never be as fast or efficient as checkout clerks who do it all day long. Some stores still have bag boys (who in many areas historically worked just for tips) but even this form of labor division is vanishing. Since the store pockets the saved labor from self-checkout, the inefficiency is a time tax on the customer.
I'm not sure how Fresh works in this paradigm as it is replacing check-out machines and scanners with just a different technology.