When Amazon opened a grocery store in Southern California, many grocers were forced into the cold realisation that Amazon was truly entering their space. Shortly afterward, news broke that Amazon was set to use its cashier-less solution, Amazon Go, in supermarkets and convenience stores, putting further fear into traditional grocery retailers.
That unease has further spread across the pond with recent news that Amazon is reportedly scouting the UK for new locations to launch its Amazon Go supermarkets…
So, why the fear? What difference does checkout tech mean to the consumer and in turn, the grocer? In actual fact, this fear translates as a valuable lesson in transformation for traditional grocery retailers.
Amazon has been looking to tap into the $900 billion US grocery industry (and then, the £190+ billion UK grocery industry) for some time, and perhaps even other areas of traditional brick and mortar retail; Amazon Go could be the trojan horse to do just that.
Amazon opened its first Amazon Go store in Seattle in 2017 and now operates 21 locations around the US. Amazon’s original plan reportedly centered on large format supermarkets, but that approach was abandoned in favor of smaller store footprints. In spite of their small size they pack a big price tag; observers familiar with the program estimate that Amazon spent millions of dollars on the technology for the first store, although as the program grows, scaling has likely reduced costs somewhat. It has also created a niche market of startups in Silicon Valley aiming to duplicate and ‘cash in’ on what’s become one of the hotter cutting-edge trends in retail.
Several of these startups like Zippin and Standard Cognition have created systems that work similarly to Amazon Go, using cameras and AI to track people as they move through the store. Others have taken a more low-tech approach and are attempting to automate shopping trolleys as a cost-saving measure for retailers.
So how frightened should retailers be of this new tech? The answer is two-fold.
Whilst there is currently no need for panic that cashier-less stores will become mainstream in the very near future, it is certainly something to keep an eye on. And with that being said, retailers of all sizes should be adopting a digital business transformation strategy now, and not later if they want a chance at survival in the future. This includes looking at how transformative new tech could help their businesses evolve in line with a changing market.
There are still roadblocks to overcome before this particular technology is ready for prime-time, and most of that sits squarely on the customer and their behaviour. Shopping, in the real world anyway, is still a very analogue process and has not changed much since the introduction of big box stores in the middle of the 20th Century. The idea of wandering through a store, browsing at your leisure, picking up then paying for your items before exiting heading is something that every consumer in the western world has done virtually every day of their lives. It’s a learned behaviour which all of us learned early and know well. It’s predictable, stable. It’s comfortable. At present, the reality of swooping in and out without making a physical payment just isn’t that simple for a few reasons:
First and foremost, the tech isn’t quite there yet. Cashierless retail sounds simple: walk into a store, take what you want, and leave. Seems straightforward, but there are several processes at work which require the end user to do things, and to tolerate other things, for it to play out smoothly. For starters, they have to have the app, either scan something when they walk into the store or allow background Bluetooth to track them, then walk around a brightly lit store with a ruthlessly curated selection and then leave with all their shopping to get a bill later. While it works in a convenience store, it remains to be seen if it will work the same way in a larger format grocery store.
Second, Amazon is not yet licensing the tech, though there are rumours they plan to do so in the future. Also, there are many other companies trying to cash in on the craze – there were several at NRF this year and I expect even more next yet – none of them are as seamless as Amazon’s and likely, don’t work as well. Therefore, the customer experience will be impacted, but we don’t know how yet and whether or not that will change the core functionality of the experience.
Lastly, retail tech changes lead to retail behavior changes, and these can be controversial. Several cities have enacted laws against cashierless stores because they negatively impact or discriminate against unbanked populations (San Francisco for example). That will impede large scale implementation of these programs as approaches that can be scaled only in certain locales and not others are expensive. As a result, the actual product may be much different than what we see today. As with many things, what we expect and what will actually may be are two entirely different things. Customer experience, and more importantly consumer perception, is a fickle animal.
It remains to be seen if consumers will fully embrace the cashierless technology once it moves into the mainstream which one day, it will. Whilst these stores may not be ready now, this shouldn’t preclude grocers from investing heavily in their digital transformation efforts to stay ahead when change inevitably, comes. It may well be sooner than you think.