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As Business Leaks Away, And Amazon Go Threatens, Retailers Eager To Automate Stores

Alarm in the retail industry spurred by high vacancies and by Amazon's automated foray into physical retailing is pushing brands to automate faster than ever before. 

The race is on to install cost-cutting tech, such as cashierless checkout and automated inventories, to buttress retailers' bleeding bottom lines.

Self-Checkout

Retail vacancies are high, reports the Wall Street Journal, citing Reis data on 77 metro markets, with big mall vacancy standing at 8.4% in Q1, up from 8.3% in Q4 and the highest rate since the end of 2012. 

Retail absorption was actually positive for the first quarter, up 453K SF, but that is the lowest national quarterly absorption in five years. Moreover, only 712K SF of new retail space was completed in Q1 — a well-below average figure, according to Reis.

Disappointing quarters come and go in retail, but what is really driving retailers to action is the likes of Amazon Go in Seattle, a store in which sensors and artificial intelligence have largely replaced cashiers, the New York Times reports.

The longer-term worry among existing retailers is that by leveraging its vast distribution system and offering a smooth shopping experience in a physical store (no waiting in line, for instance), Amazon will be able to muscle its way into physical retail.

Though mum on its expansion plans, the online retail giant is looking into other markets in which to open Amazon Go locations.

Retail automation is not new, with self-checkout standard across the industry, but Amazon Go takes the process to new heights. Cameras and sensors watch everything a customer does in great detail and automatically tallies items they put in their bags. As customers leave, they are charged automatically.

Such automation will also generate vast amounts of data on shoppers, both collectively and potentially as individuals, giving a retailer like Amazon new ways to market goods to shoppers and to calibrate inventories more precisely.

Existing retailers are thus rushing to deploy their own systems to bring more automation to the retail experience. At 120 U.S. Walmarts, for instance, shoppers can scan and pay for items using their smartphones. Kroger has begun testing mobile scanning in its stores. As the Amazon Go experiment unfolds, this automation is likely only the beginning for major retailers.

Such technology will not be the sole property of large chains in the near future, either. Startups are looking to give smaller chains and independents the benefit of cashierless checkout and other retail technologies in the near future, with venture capitalists putting $100M into retail automation startups in the past two years alone, according to the NYT, citing Pitchbook data.

It is not entirely clear whether the tech used in Amazon Go will be scalable to big-boxes and other large store formats, at least not in the immediate future.

Also less certain is the impact on retail jobs any wide adoption of cashierless and new retail tech will have. For its part, Walmart, the largest employer in the country, asserts that new tech will redirect employees rather than replace them.