Comment by thisisit | Hacker News Reader

Comment by thisisit | Hacker News Reader

I like reading stratechery time to time for tech related strategy writeups. But this writeup somehow loses plot. The focus is too much on what are fixed and variable costs and the repeat of Amazon's buyout of Kiva.

What would have been an interesting discussion is to look at how the retail market is actually unfolding:

https://www.bloomberg.com/graphics/2017-retail-debt/

And whether cutting out the variable costs of a cashier etc is really worth the trouble in R&D and systems.

Edit: After reading some of the responses, I wanted to add something. If we look at the linked article above, retailers are taking in loans to open more and more stores. The idea being more stores = more customers = more profit. But that is not materializing at all. The question becomes - where does the issue lie really? Are variable costs the reason? What does Amazon Go solve really?

Sure, some might say better software is the whole point of Amazon Go. But,we are not talking about a SaaS where the cost of delivery is nearly negligible - it takes nearly the same amount of real estate and fixed costs to deliver 1 or 1000 of a SaaS product. That is not true for B&M. If they want to ramp up then they will need to open more stores - that requires real estate and other fixed costs.

There's not just the reduced cashier costs, but the vastly increased revenue per foot of store that will come about when customers know they don't have to wait in line.

The store will also be less empty per dollar of sales; or, said another way, shoppers will spend less time in store, creating the appearance of an emptier store for shoppers walking by, making it less time-consuming to enter.

Oh, and don't forget those prime signups just for people who want to try the store (though the number of non-prime subs when these stores rollout will be not huge).

Indeed.

The article didn't touch on how this approach reduces friction for buyers, which is hugely important. For the short-to-mid term, I suspect that frictionless shopping is a bigger deal than change in cost structure that comes from booting cashiers.

Exactly this!

Stratechery has a giant blind spot about Amazon's strategy, completely missing their #1 objective: customer obsession.

Bezos was clear about this from the beginning [0] and he repeats it every chance he gets [1]. He's not just bullshitting, this is actually the strategy, and it fucking works!

Stratechery opined that the Whole Foods deal was about putting Amazon products in physical stores. Of course not, it's the opposite -- it's about bringing awesome Whole Foods products to far more customers than Whole Foods reaches today.

Now Stratechery says Amazon Go is about eliminating cashier labor and leveraging fixed costs. Ridiculous!

If a well-paid cashier costs $15 per hour and can scan 12 items per minute, the cost is only 2 cents per item.

In fact, the cashier savings is probably more than offset by additional labor on the sales floor and to maintain all the sensors, cameras, turnstiles and software.

This is all about Bezos' customer obsession. If I don't have to wait in line, I'll happily shop Amazon Go every time I can, multiple trips per week. As a customer I'd be thrilled to eliminate the dead time of waiting in a line.

[0] 1997 Letter to Shareholders https://www.sec.gov/Archives/edgar/data/1018724/000119312513...

[1] 2016 Letter to Shareholders https://www.amazon.com/p/feature/z6o9g6sysxur57t

I must be weird. At no time has the idea of a line ever influenced my decision to go into a convenience store.

Or people like me who don't go shopping in convenience stores at Saturday are weird. I only do it under duress if I forgot something the other day, because I know the line will be so damn long.

Happens all the time to me, I'd rather give my money to someone with more appropriate staffing than wait in line to buy something.

So where do you go instead?

Sometimes nowhere, sometimes down the street. I do the same thing for restaurants, if there's a wait or my reservation isn't ready on time I'll go somewhere else. There's tons of competition out there, no need to waste my time for the benefit of a business owner.

I agree with you, and go one step further. I refuse to use self-checkout. For two reasons.

1. I don't like the thought of contributing to a system that costs people (cashiers) their jobs. 2. The whole reason I go to a store is for customer service. If I wanted self check-out, I'd order online from one of the same-day-delivery outfits.

I don't like the thought of contributing to a system that costs people (cashiers) their jobs.

People in boring, low paid jobs shouldn't be there. There are far better things people can be doing than working a till. The idea that we're doing people a favour by 'enabling' them to have a job when that job is tedious menial work a tiny compute can do is nonsense. We need to automate those jobs away to free people to do more interesting, fulfilling things.

We also need to do things to work out how to enable those people to do more interesting work, like figuring out how to pay people if the free market fails, but that's a separate issue.

Not a separate issue to the person losing their job!

These have to be solved together, or big trouble will be coming.

> or big trouble will be coming

The implication here is that the trouble isn't already on it's way. Those jobs are operating on borrowed time at this point and I think they'll be gone sooner than most people think. This is a problem that we should have started addressing several years ago at least.

>We also need to do things to work out how to enable those people to do more interesting work, like figuring out how to pay people if the free market fails, but that's a separate issue.

Seeing as the free market has deeply failed many, MANY people (and stands to fail even more in the near future), I would hesitate to put more people out of work before addressing this "separate issue." Lots of people can have their lives ruined before those in power decide it's time to think about how to ameliorate the damage done.

In the history of economics and politics, that has never happened. Tumult creates unacceptable carnage, and the solutions fall out of the carnage. Furthermore, we don't always correctly predict the form that carnage will take, so it's not even as if we know what acceptable solutions might be until things are already in freefall.

So although it's a nice sentiment, I'm not so sure it's realistic.

When textiles automated in England, the carnage included a generation of weavers starving to death.

Consumerism and technology have coincidentally grown to provide a few more generations of employment. But now that's ending.

And sure its not happened in history, because we've never been exactly here before. But we're here now! And there's no sign that solutions will fall out of the sky to fix things. I for one don't want to wait for starvation or revolution.

then don't wait for it - ontario NDP adopted basic income as a platform point, basic income tests are happening in a number of countries. Advocate for it or something else that is attempting to solve that problem.

At the very least, we can push back against the notion that this upheaval is "for the best" simply because it's the outcome of the market. It's Panglossianism at its worst. Sometimes things that benefit capital are bad for the world and for the rest of society. Wealth doesn't trickle down except by political will. That political will can only organize when we, the very fortunate few who have better resources and education than most working class people, begin to give a shit about something other than what is technologically possible or efficient.

That's correct. But this is why you should shape your purchase habits in different ways than choosing lack of automation.

For instance, choose to shop at a coop grocer, where the workers are paid a livable wage and usually also become member-owners with voting rights and a share in the profits. (There are also consumer advantages to consumer coops, obviously.) In this case, it'd be to the workers' advantage to automate things which make sense to automate as they share in the higher profits and possibly a higher wage as well.

Personally, I don't use self-checkout usually because cashiers are almost always much faster when you have a lot of stuff. But generally, I'm much in favor of automation.

Just think of all the people that were displaced when the horseless carriage came about. Society will adapt. It may be painful for those directly affected, especially in the short term, but that won’t stop progress.

There are some people who are really only capable of doing these "boring, low paid jobs". Not everyone is capable of being an information worker or a hard physical laborer.

Once a basic income or solid safety net has been established, we can consider whether it makes sense to take actions in order to not obsolete low paid jobs.

Heck its not all about low paid jobs. That's just another domino. Folks who used to be office managers, technical writers, factory line managers find themselves automated out of a job. They turn to lower-paid jobs.

To compound it all, now the lower-paid jobs are going too. Leaving a 'bow wave' of steadily-lower-wage folks completely out of options.

Your second point doesn't apply here. No matter what you have to walk around and pick up the items you want (at least for now, if you're going to a B&M). The difference here is waiting in line vs. just walking out of the store when you're done.

And yet self-checkouts have not replaced cashiers. I often see more people waiting for cashiers than in the self-checkout line at the stores I visit. When I use the self-checkout I'm giving the cashiers an opportunity to have more time to serve those who choose them instead.

Lastly, every time I walk somewhere I don't fret about costing a taxi driver their job.

I'd rather just give someone money to live and let them find something productive they'd like to do with their time than shoehorn them into menial jobs that don't need to be done for the sake of having a job.

1. I don't like the thought of contributing to a system that costs people (cashiers) their jobs.

So only when you need customer service you care about their jobs?

Come on think about your statement for a moment and realize what the internet has done. You are part of that.

NYC Trader Joe's aren't convenience stores but my shopping times are informed almost entirely by the expected line length.

I avoid Safeway and Trader Joe's because the lines are so damn long...

You must be lucky to live where you do. I’ve definitely timed visits to Costco, Trader Joe’s, and Wal-Mart to avoid long lines at checkout.

The self checkout doesn’t help, it actually takes longer than a good cashier.

Agree; Costco is far more palatable on a Tuesday at 7 PM than on a weekend.

I think of Go as a better self-checkout. Those machines are awful, and Go’s tech basically does the same thing but in a smoother, more scalable way.

>I think of Go as a better self-checkout.

Yeah, I don't think this type of thing is actually that big a deal for a supermarket where stuff needs to be bagged etc.

But it seems like a qualitatively different experience than self-checkout at a convenience store/small grocery store.

I also expect a lot of US readers tend to think in terms of either supermarkets or fairly junky 7-Eleven style convenience stores. But there are a lot of places in Europe where there are more intermediate options like the Marks and Spencer markets.

Amazon Go is much more akin to a 7-11 than to a Trader Joes or Costco. They have yet to show that this model even works on this tiny scale. The capability of this tech to scale up effectively to an actual grocery store much less to a warehouse type store is completely unknown. (I personally wouldn't count on it.)

> The self checkout doesn’t help, it actually takes longer than a good cashier.

Yep. Someone who scans and packs thousands of items a day is going to be much better at it than I am, given that I'd only scan a few dozen items a week.

Unless the lines are really too long, I'll always take a cashier over using the self-checkouts.

Or maybe you've never experienced a convenience store with a significant line.

If there are 2 or 3 people in line that doesn't dissuade me from shopping there, but if I see a long line of a dozen people winding through the store, I almost always go somewhere else.

I've run into that at gas station convenience stores a lot -- I go in for a drink or snack while pumping gas and if there's a long line, then I just go back to my car and leave.

>I must be weird. At no time has the idea of a line ever influenced my decision to go into a convenience store.

I've walked into a store to buy something in the half hour before some large lottery is about to close (and everyone seems to be buying tickets), and walked right back out again.

Lines are also the primary reason I don't shop at certain stores (e.g. walmart).

In a way, what Amazon is really testing here is how to make brick and mortar shopping competitive with online shopping. But rather than undercutting their online business what they're really doing is finding ways to compete with other retailers in spaces that are hard online, such as groceries and immediate items.

A Prime subscription isn't required to use the store.

https://arstechnica.com/information-technology/2018/01/we-te...

"And whether cutting out the variable costs of a cashier etc is really worth the trouble in R&D and systems."

No, it is not worth it... for a retailer. This is what makes it an effective moat. Fast forward 10 years and Amazon will have a cost advantage over all the other retailers. Amazon store's can be open 24 hours without any extra costs. They can be much smaller or hold items that are less profitable.This will eventually pay for the moat but it will take a very long time. Longer than most companies are willing to wait for it to pay off. Amazon will also you the tech in more ways than just these stores.

"Fast forward 10 years and Amazon will have a cost advantage over all the other retailers."

Once this happens, then Amazon can sell every retailer Amazon Retail Services the same way that it sells AWS. Maybe they can even be deployed via shipping containers on demand. State fairs, festivals, summertime around lakes, disaster recovery areas all have a spike of consumers that is limited by where retail storefronts are already in place and mobile facilities like food trucks.

I don't think so. They want to be the only middleman. Suppliers can buy shelf space in Amazon stores but I don't think they will help retailers. They want to make a small percentage of every sale.

It's a long term play, I think. All of the tech becomes a sunk cost, and over time the removal of variable costs creates the ability to scale with costs still trending to 0, or, less upwardly.

It's per usual. Looks like Ben's strategy is to publish empty bait articles in his free blog, agitate the net, and than collect all that knowledge and give it to his subscribers. Smart strategy, but ,meh.

Are you a subscriber? The weekly articles are not bait. They are longer about bigger theories and trends. The emails are shorter and more focused on news. He just applies and develops the same theories to the daily news. Both are very good IMO. Who is better in this space?

I don’t agree this article is bait, but I listen to the podcast and I do like that it’s recorded long enough after the article to factor in some of the responses. It’s a valid strategy (and a good micro-example of his aggregation theory.)

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