Want to see what’s up Amazon’s sleeve? Take a tour of Seattle

Business


SEATTLE — Tourists in Seattle have a new must-see destination: Amazon Go, the cashierless store the company opened near downtown in January.

People who are interested in what is coming next from Amazon, which makes about half of all online retail sales, just need to roam the city. Amazon uses Seattle as a living laboratory, trying out new retail and logistics models.

Some trials never leave the city. But others, like the use of independent contractors to deliver packages, have found their ways to the rest of the country and abroad. The pilots point to a company, with ambitions that at times can seem boundless, investing deeply in figuring out its physical footprint and how to provide convenience at a lower cost.

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“Seattle is great for rolling out tests that haven’t been completely debugged,” said Jeff Shulman, a business professor at the University of Washington who hosts a podcast on the city’s culture. In 2015 when Amazon first tested the Treasure Truck, a decorated vehicle that drives around and sells a daily deal like smart watches or plant-based burger patties, it delayed the public debut at least twice before finally going live. The service has since expanded to more than two dozen cities.

As the grunge era in music showed more than two decades ago, “experimentation is embedded in Seattle’s DNA,” Professor Shulman said, so “you can get early feedback on how people use your product, and they will also be fairly forgiving on the hiccups.”

Amazon said it employed more than 45,000 people in the city, and its teams turn to them to test new products and services.

Here’s a tour of a few places where Amazon toys with new ideas in its backyard. Even after projects have expanded outside the city, the flagship locations remain a home for tweaks.

A second Amazon Go store opened in August, just a mile south of the original, this time in the heart of downtown. Like the original, it uses sensors and cameras to track what customers take off a shelf, so they don’t need to check out. But the store shows how Amazon may adapt the concept to different locations.

At 1,450 square feet, it’s smaller than the original, and has a more limited selection, making it feel like a walk-in vending machine selling grab-and-go lunch food and drinks. Unlike the original, it doesn’t sell alcohol, which requires employees to manually check IDs.

Starting a technology-heavy experiment like Amazon Go in Seattle makes sense because the culture prizes the avant-garde, Professor Shulman said. But success here can give a false sense of optimism that a product might take off, so Amazon pilots some experiments elsewhere.

Prime Now, the company’s one-hour delivery service, for example, started in New York. “You will see them go to other cities when looking to test if the market will like it,” and whether it’s worth expanding around the globe, Professor Shulman said.

Amazon has big plans for building more Go stores. It opened a third in Seattle, as well as its first in Chicago this month, and has acknowledged plans to expand in New York and San Francisco.

On the northern edge of the city, in the Bitter Lake neighborhood, an Amazon storefront stands in a strip mall on a street lined with car-parts stores and known for prostitution. This is where Amazon opened what amounts to a post office.

In the front of the store, Amazon customers can pick up and return packages. In the back, workers sort boxes for delivery drivers.

Amazon has other pickup locations around the country, usually near college campuses, but most don’t have the integration with a sorting depot.

Customers go in, scan a code and then wait for the door on an Amazon locker to quietly pop open and reveal their package, like an automated post office box. The back of the locker is open, providing a glimpse into a small sorting facility used by Amazon Flex, the program piloted in Seattle that pays independent contractors to make deliveries in their own cars.

The storefront offers an alternative to customers who don’t want boxes dropped on their doorstep, be it for fear of porch thieves or rain. But it also tests what makes people choose an option that costs Amazon less than having drivers handle the last mile of delivery. Offering reliable, fast delivery has been essential for Amazon’s growth, but that door-to-door delivery is also expensive. Shipping costs ate up 22 percent of Amazon’s online sales in the second quarter, up from 16.5 percent two years earlier.

The pickup storefront also provides one more place for Amazon to put ads in front of consumers, a growing business for the company. Last week,signs for Red Bull were displayed on a TV screen and a poster by the front desk.

For more than a decade, Amazon tried to break into the grocery business, a mecca for recurring consumer spending also known for brutal profit margins. It started AmazonFresh grocery delivery in Seattle in 2007 and worked out kinks for five years before expanding to other markets. But home delivery of perishable goods is tricky and expensive.

In Ballard, a neighborhood on the north side, is another experiment: one of two Seattle locations that Amazon opened for customers to pick up groceries ordered online. It feels like pulling into a Sonic Drive-In. After a customer parks under an awning, cameras read the license plate, and an Amazon employee brings out the groceries and puts them in the customer’s trunk.

Getting customers to pick up their groceries at a central location can be cheaper than home delivery, and pickup is available to all Prime members, not just those who pay $15 a month for AmazonFresh on top of their $119 annual Prime membership.

The pickup locations opened in March 2017, just months before Amazon bought Whole Foods, and are the only stand-alone pickup locations for fresh food straight from Amazon. In August, Whole Foods began rolling out free pickup for Prime members at its locations. Whether the drive-in model takes off remains to be seen. The Ballard location isn’t often packed.

Amazon opened its first physical bookstore in 2015, in an upscale shopping mall near the University of Washington, not far from where a Barnes & Noble used to be.

While Amazon has since opened bookstores in at least a dozen other states, the original remains a test site.

The Seattle location was one of two sites where Amazon first tried letting customers return items. On a recent afternoon, more people appeared to be returning items than buying books or devices. Now, all Amazon bookstores accept some returns.

It’s part of the company’s growing network of return options that don’t depend on the mail. For some customers, going to a store is easier than finding a box and packing tape to ship something back, and for Amazon, it’s most likely far cheaper.

Drop-off returns cost retailers about 20 to 30 percent less than returns by mail, said Mark Geller, the chief executive of Happy Returns, which runs drop-off locations for other online retailers.

“A big part of the costs is first-mile, last-mile stuff,” Mr. Geller said. “It’s the law of nature that over time people will take the path of least resistance. If they reduce the friction by making more drop-off locations, and in more kinds of places, that is going to become compelling.”



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