Amazon is ignoring a huge chunk of the population and a multimillion-dollar opportunity with its new grocery store of the future
- Amazon recently opened its first brick-and-mortar grocery store in Seattle, Washington.
- The store does not use cashiers. Shoppers instead scan their phones at turnstiles, and Amazon charges them automatically.
- Amazon said the new store will not accept food stamps for the foreseeable future. An expert says Amazon is ignoring a large population of potential shoppers.
Amazon pitches its new Go store in Seattle as the supermarket of the future.
The store does not feature cashiers or checkout lines. Instead, a sensor-and-camera system detects when shoppers pick items off the shelves, and Amazon charges them automatically via an app when they leave.
In January, Slate's April Glaser noted another glaring difference between Amazon Go and most traditional supermarkets. The former does not accept food stamps (also known as EBT cards) that are part of the federal Supplemental Nutrition Assistance Program (SNAP). An Amazon spokesperson confirmed to Business Insider that the company does not plan to accept EBT cards at the store, at least for the foreseeable future.
But that could be a bad business move for Amazon, according to Riana Lynn, a biologist and technologist who researches how cities can make fresh food more accessible.
"They could be raking in millions more dollars," she told Business Insider. "It's a no-brainer that accepting SNAP could be a lot of money for [Amazon], especially since it's getting into fresher groceries."
Just in the city of Seattle, 83,560 people use food stamps, which totals $98.8 million in annual expenditures, according to 2016 data from the Washington State Department of Social and Health Services. Since some of these SNAP recipients could theoretically be shopping at the Amazon Go store, Lynn considers that a missed market opportunity.
When asked about the decision to not accept food stamps, the Amazon spokesperson said federal law would not allow the company to do so in its Go store.
"The current law does not allow for SNAP benefits to be used on Amazon.com or at Amazon Go, but we're excited to be working on a pilot program with the USDA to accept SNAP benefits on Amazon.com," they said.
In 2018, Amazon will start participating in a two-year USDA pilot program that allows customers in three states to use food stamps on Amazon.com. Washington, where the Amazon Go store is located, is not included in the pilot.
The company has also offered discounted Prime memberships for food stamp recipients, but they still can't use SNAP to pay for Prime or grocery delivery charges.
At grocery stores that accept SNAP - including Amazon-owned Whole Foods - customers pay with EBT cards by entering a PIN at the register. The first Amazon Go store was not designed with this capability, but Lynn said it would not be hard to develop.
"We have people now that are building systems with two-factor authentication to be able to send millions of dollars of bitcoin. I think we can figure out how to authenticate SNAP cards," she said.
There are few online-only retailers that accept EBT cards. In addition to Amazon, FreshDirect and Thrive Market are also a part of the aforementioned USDA pilot. Online-only grocer Schwan's lets people pay online with EBT cards. Other chains with physical stores are part of the pilot program, including Safeway, ShopRite, and Hy-Vees. Nationwide, over 240,000 retailers accept food stamps at the register.
Approximately 42 million people receive SNAP benefits in the US. The program requires able-bodied adults without children to find a job within three months and to work at least 20 hours weekly. For people under the age of 65, food stamps lift more Americans out of poverty than any other government program besides the Earned Income Tax Credit, according to the Brookings Institution.
Amazon declined to say if it plans to launch more Go locations. If the company decided to expand outside Seattle, it opens the door to even more SNAP opportunity. Nationwide, the federal government spends about $73 billion on the program every year.
"If [Amazon Go] becomes a model across the grocery industry, and food stamps weren't accepted, that would indeed be alarming," said Mark Coleman of Food Lifeline, a nonprofit that works with SNAP recipients in Western Washington.
Lynn added that big food retailers will need to work together with policymakers, developers, supply chain experts, and local entrepreneurs to help make their stores more economically inclusive.
"We're going to have to continue to work together to bring fresh food to communities who need it most," she said. "It's not just going to be one company. We need to change the entire food ecosystem, because in the past two to three decades, it has become so industrialized and broken."