EXCLUSIVE: Amazon and Starbucks held talks about launching a cobranded lounge that combines cashierless Go stores with a café

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Amazon held talks with Starbucks to put its cashierless Go stores in a new cobranded coffee shop as part of an effort to expand the “Just Walk Out” technology found in those stores, Insider has learned.

The project, internally code-named “Verde,” was designed to build a lounge-style café that offers both Starbucks’ craft beverages and Amazon’s assortment of baked goods and hot foods, without the hassle of having to wait in line to check out, according to Amazon’s internal document obtained by Insider.

The initial layout of the store shows Amazon Go’s food section within a café, which has lounge seating. Customers would have to use separate apps for pay — Starbucks’ app for drinks and Amazon’s app for food — though the companies eventually want to build an integrated solution. The store was expected to have a newly created brand.

This project may no longer be in the works. Discussion was active until at least July 2020, the document said, but the companies failed to meet plans to open the first proof-of-concept store in the fourth quarter of 2020 and up to six stores through 2021. As of June 2020, Verde was a “top ten initiative for Starbucks,” as it aligned with the company’s drive to double down on pickup orders and eliminate lines, according to the document.

“Our plan is to launch a co-located store, where customers can enjoy handcrafted beverages at a Starbucks café, and/or pick up delicious grab & go food from Amazon Go, without waiting in line,” the document said. “We expect Verde to have its own branding, with elements from both Amazon and Starbucks.”

The plan further demonstrates Amazon’s ambition to expand the technology behind its cashierless Go stores into new areas. In such stores, customers can simply walk in by scanning their phones, pick up what they want, and automatically pay when they leave. Amazon started rolling out the technology to some of its Fresh grocery stores and Whole Foods locations this year, while other venues, including Hudson Nonstop and TD Garden, plan to use the service as well. Amazon also has a team of engineers working on a smart refrigerator that uses the computer-vision technology found in the Go stores, Insider previously reported.

The partnership could give Amazon new monetization channels for the technology, as its cashierless Go stores still largely remain unprofitable, according to two people familiar with the matter who spoke on the condition of anonymity to discuss sensitive topics. An Amazon-branded café would be the e-commerce giant’s latest foray into physical stores, which already includes grocery stores, bookstores, and a hair salon.

It’s unclear when the new store will launch, and it’s possible the two companies will ultimately decide not to move forward with the project, one of the people said. Representatives from Amazon and Starbucks declined to comment. 

Here’s a rendering of the store layout found in the document:

Store layout of new lounge by Amazon Go and Starbucks
Rendering of the proposed store layout. 

‘Amazon Go as a service’

This wouldn’t be the first partnership between Amazon Go and Starbucks. Amazon started offering self-serve Starbucks coffee in two of its Amazon Go stores in 2019.

But Verde would be entirely different since it builds a separate Amazon Go section within a Starbucks-type café. The target customers for Verde are “time-starved professionals” between the ages of 25 and 45 who live in “densely populated urban cities,” the document said. The three primary customer use cases are preorders through the Starbucks app, grab-and-go through the Amazon Go store, and “sit & stay” customers who want to enjoy the beverage and food options inside, according to the document.

For Starbucks, the new store would help improve its customer experience by eliminating lines, the document said. Starbucks also believes a third place away from home and work will still be important post-COVID-19 and wants the store to include lounge seating. The new store can also provide increased foot traffic and a more profitable way to add food to its cafés since Amazon will be taking care of the supply chain for food products, according to the document.

In Amazon’s case, the partnership is a “mechanism for Go to scale,” the document said. Starbucks stores would give Amazon access to a “much larger real estate pipeline” to launch the cashierless Go stores at a faster pace and a lower cost than a stand-alone Go store, the document said.

“Verde is Amazon Go as a service, meaning that retailers incorporate an Amazon Go (where Amazon owns customer identity/authentication, catalog, merchandising, supply chain, planogram, fixtures, and P&L) into their store premises to offer customers new selection and shopping experiences, complementary to their own,” the document said.

Amazon runs about two dozen Go stores and 18 Fresh stores, as well as about 500 Whole Foods stores. 

The two companies haven’t been able to agree on certain operational issues, which caused further delays, one of the people told Insider. Those topics include which company should oversee in-store labor and how to handle the distinct checkout experiences for Starbucks and Amazon products within the store, according to the document. 

Starbucks also wants to enable customers to earn loyalty points when shopping in the Amazon Go store section. Amazon, meanwhile, isn’t entirely sure about the lounge format, as most customers could just preorder pickups. The two companies are also considering closer integration in terms of loyalty programs and payment methods, with plans to eventually allow customers to pay for Starbucks drinks with Amazon’s app, or vice versa, the document said.

“In the long run, Verde is a concept that offers the best of both Amazon and Starbucks, in terms of accepting loyalty programs, Prime discounts, and other benefits,” the document said.

Source: https://www.businessinsider.com/

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