Amazon (NASDAQ: AMZN) has already done an amazingly good job of building and maintaining a solid online client base. But the retail giant won't stop there.
Amazon has been increasing its physical footprint for years, whether by buying and opening grocery stores or experimenting with offerings like apparel. And it's also made a point of incorporating technology to make the shopping experience more pleasant and convenient for consumers.
The great thing about Amazon Go stores is that they're cashier-less. Consumers simply fill their carts with the items they want and use an app to check out. Amazon Go features a range of food items and everyday essentials. Think of it as a convenience store, only with higher-end offerings.
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Until recently, Amazon Go stores have been limited to larger, bustling cities like New York, Seattle, and Chicago. Now, the online giant is looking to expand its network of Amazon Go locations -- but its targeting a surprising string of neighborhoods.
Rocking the suburbs
Amazon has announced plans to introduce Amazon Go stores in suburban markets. The stores will function the same way -- checkout will be via an app so customers can get in, get out, and go along on their merry way.
The key difference, however, is that the suburban version of Amazon Go will be bigger than its city-based counterparts. Given the cost of real estate out in the suburbs, that adjustment makes sense.
Now some investors might question why Amazon would choose to take a store model that's clearly designed for cities and try it out in the 'burbs. But the logic is actually quite simple.
With so many people working remotely, Amazon is hoping that its suburban expansion will help it grow its customer base. And those who get used to shopping at suburban Amazon Go stores might continue that practice once they're called back to their city offices if there's an Amazon Go store in close proximity.
The real estate impact
Many stores have closed their doors on a permanent basis in the wake of the pandemic. If Amazon's expansion proves successful, commercial landlords may have more opportunities to lease out vacant space.
The good news about Amazon's latest play is that it shouldn't take business away from supermarkets, which commonly serve as suburban shopping center anchor tenants. Amazon Go offers a much narrower selection of products than big-name grocers. And while some customers might appreciate the convenience of cashier-less shopping, it may not matter so much to others given that self-checkout is a mainstay at most large supermarkets now.
Plus, the Amazon name might draw customers to adjacent businesses around the 'burbs, helping to ensure their staying power. So all told, real estate investors may come out ahead as a result of Amazon's expansion -- that is, if it proves profitable.
Though Amazon clearly has a solid history of success across its various ventures, opening a series of glorified convenience stores in the suburbs is a somewhat risky move. Suburban consumers may not appreciate the opportunity to sacrifice selection for faster checkout, so it'll be interesting to see how well Amazon Go does in its new locations.
