First, and most important, let’s talk about how ‘Amazon Go’ would make sense.

To understand strategies that make sense for companies like Amazon, you first have to understand what it is that is at the core of those companies (it’s (only slightly) harder to get that than to get the same fundamental understanding for, say, Walmart in the 1980s), as I wrote in October of this year:

[…]think about those physical locations as an extension of the digital business. (Which they obviously are going to be.)

If you are a small business that has a traditional point-of-sale system, we predict you’re more likely to see Amazon Go as a POS product Amazon wants to sell you rather than as an 1,800-square-foot market down the street.

​Thinking about ‘Amazon Go’ as the POS product in Amazon’s payment portfolio makes more sense than ‘Amazon Go’ as the starting point for Amazon stores does.

But that is only one half of the story, if it all.

Before we get to the more interesting, second part of the story, first, some context on Amazon Payments. Business Insider:

As seen in the chart below, 15% of the market cited Amazon Payments as the most preferred payments method after credit card, only trailing PayPal, and coming in way ahead of Apple and Google’s competing products.

[…]

Since its launch, the product has gotten thousands of sites on board, but with only a few big names — like the inflight Internet service Gogo — making the list.

In April, Amazon Payments launched a new Global Partner Program which allows e-commerce platform providers to easily integrate its service. TechCrunch reported at the time that Amazon has 285 million account holders, with over 23 million of them having paid through their accounts on other sites.

Amazon Payments is already a growing success story, giving Amazon an entry point into other merchants’ businesses. ‘Amazon Go’ is a continuation of this.

‘Amazon Go’ looks to be poised to become a strong platform/marketplace play. Paying through a smartphone app, that already, in a lot of cases, has a rich shopping history attached to customers, can bring in new ways of shopping.

See that? “No-Line Lunch”, “No-Line Breakfast”, “No-Line Dinner”. Those are not slogans for grocery stores but for fast-food(ish) restaurant-type locations.

Amazon of course will not operate thousands of those locations in the US; let alone hundreds of thousands around the world.

What makes more sense is a franchise hybrid model. Like Amazon Marketplace, locations in this model would be (co-)branded with ‘Amazon Go’ (or something similar). But they would also be run locally by (more or less) independent actors (like a McDonalds restaurant) and could take up very different shapes and forms (unlike a McDonalds restaurant).

It is unlikely that many existing stores would be (or could be) retro-fitted into “Amazon Go” locations. The incentives for this remodelling will not be particularly high at first. (The up-front costs will be too high.) More likely, new small businesses or local chains will form around this system, piggybacking on Amazon’s platform to success. (With the same dependent and distribution-driven model like Amazon Marketplace merchants, eBay powersellers or, say, YouTube stars.)

In a market like the US, Amazon can use Amazon Prime members to lure new businesses into this model.

There is a reason we say ‘locations’, not ‘stores’. Amazon could use locations with ‘Amazon Go’ for a lot of different things: for example as pick-up locations of orders by customers or ‘Amazon Flex’ workers, or for local events etc. for Prime members. Once local locations are outfitted with Amazon technology, all kinds of transactions can be fulfilled there.

And this only makes sense as a Franchise/Marketplace hybrid model, as this is the only way to get it to scale fast.

The “you” that Amazon the online retailer sees right now is the you that buys a 30-pack of something stupid at four in the morning, the you that mindlessly puts expensive things that you never plan on buying in your cart, and the you that inexplicably buys a large quantity of cardboard boxes one day (it’s because you’re moving apartments, but Amazon doesn’t know this).

But the “you” that Amazon doesn’t see, and so clearly desperately wants to, is the you that buys a cheap hamburger for lunch every Wednesday like clockwork, the you that picks up a bag of kale chips at midnight, the you that buys contraceptives on Friday, and so on—all of the tiny, insignificant, stupid things that altogether make up the reality of our daily lives. […]

Anybody can get rid of a cashier with a robot. That’s easy, and in fact, a lot of places have already done it with self-service checkout machines. But what only Amazon can do, and what it is seeking to do with Amazon Go stores, is design a hyper-efficient and data-driven information loop built around physical and online shopping. This will likely benefit Amazon’s business for all of the reasons that customer data does now: improving its marketing, recommendations and promotions, and keeping its supply chain in line. All of this comes down to knowing you.

​Of course, Amazon will operate some “flagship” locations itself. Every ‘Prime Now’ fulfillment center, located in the middle of a metropolitan area, will most likely get an ‘Amazon Go’ space. As with Amazon itself being the first and best customer of AWS or Echo being the first and best customer of the voice platform Alexa, those Amazon locations will be the first and best customers of the ‘Amazon Go’ system. But they are not the goal; they are the launching point. (Similarly, expect something similar to the Alexa fund coming to Amazon Go as well.)

Last not least, now about those “2,000 stores” rumors. Reporters, getting scoops on single data points, sometimes miss the context of those data points. Reporters are neither employees working on those plans nor are they, in most cases, analysts looking constantly at the bigger picture of the company’s direction. In this case, it is most likely that Amazon is planning to get at least 2,000 partners in the US on board over the next couple of years.