Amazon Advances its RaaS Play with Starbucks

One of Amazon’s many orbiting initiatives that we continue to track is retail-as-a-service (Raas). Partly to expand its business and diversify revenue, the idea is that Amazon can bring its signature logistics and streamlining tech to retailers. It’s hoping this grows its business in similar ways that AWS did.

This includes its “Just Walk Out” cashierless technology that was incubated in Amazon Go stores before spinning out as the centerpiece of its RaaS play. For those unfamiliar, it uses computer vision and other tech to track items as you shop and charge you automatically, thus avoiding checkout bottlenecks.

Benefits include better customer flows throughout a given store; convenience (thus loyalty); and cost-efficiency. In true Amazon fashion, the latter likely leads to lowered costs for competitive edge. As Jeff Bezos likes to say, “your margin is my opportunity.” And retail is next in his crosshairs for disruption.

Amazon Goes Full “Retail as a Service”

Big Guns

Now, after piloting Just Walk Out at Amazon Go and a handful of airport-based convenience chains, Amazon is breaking out the big guns: Starbucks. Its NYC location at 59th & Park will pilot Just-Walk-Out as well as a new format that’s a cross between a traditional Starbucks and an Amazon Go store.

This will include a lounge area where customers enter and register for the program. There, they can enter a posted in-store code in their Amazon Shopping app, or scan their credit card. They can also scan their palm using the Amazon One system that’s yet another orbiting part Amazon’s its RaaS play..

Once users are in (or if they registered in a previous visit), they can proceed to the store. That includes a selection of grocery and convenience items, as well as a Starbucks counter. As with Amazon Go, anything shoppers pull from a shelf is added to their virtual carts to be charged after they leave.

Interestingly, this brings together the two biggest quick-service innovations of the past few years. One is Just-Walk-Out, and the other is Starbucks’ order-ahead technology. So savvy shoppers can presumably order their coffee ahead and shop, while never having to wait in a line nor reach for their wallets.

Amazon’s Next Trojan Horse, Part II: Touchless Payments

Competitive Pressure

Panning back, where this gets interesting is the ripple effect across the retail sector, including SMBs. Others will be compelled to adopt similar in-store streamlining technology out of competitive pressure. That could be from Amazon, or other RaaS startups that are stimulated to fill a demand gap.

And that’s already happening, considering well-funded companies like Standard, Leap and Mercaux. As competition and margin compression ratchet up, it will only invite new players and alternate approaches. We could also see RaaS specialization beyond coffee in different sub-verticals like luxury, big box, etc.

Back to Amazon’s latest NYC moves, they’re largely experimental. So it may go nowhere or it may be a sign of things to come on a broader scale. That could mean more hybrid stores that blend coffee and convenience (watch out 7-Eleven ); or simply Just Walk Out’s first move into the coffee vertical.

As we’ve predicted, Amazon will continue to expand into more retail categories, and evolve Just Walk Out’s capabilities. Meanwhile, its coffee experiment will continue in the coming months with two more NYC locations including one inside the New York Times building at 40th & 8th Ave.

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