The Cashierless Concept Has Arrived, But Is It Here To Stay?
A new wave of technology is disrupting traditional retail, and it has nothing to do with online shopping (well, not much).
Cashierless brick-and-mortar stores, a concept introduced by e-commerce titan Amazon, could completely upend the way shoppers engage with products and each other while shopping. Amazon Go in Seattle uses revolutionary technology that allows customers to walk into the store, sign into the store’s app, grab their groceries and simply walk out. No checkout, no checkout lines.
The app records shoppers' purchases and charges their accounts accordingly after they leave.
Though a faster and painstakingly convenient way to shop, experts question whether the cashierless trend will grow in popularity, or fizzle out before being adopted en masse.
“We know [customers] are interested in convenience, making things happen more quickly and efficiently, but are these stores going to grow in popularity? That’s going to come down to whether or not they cater to the needs of the consumer,” National Retail Federation Vice President of Research and Industry Analysis Mark Mathews said.
In January, Amazon introduced its beta Amazon Go to consumers with much fanfare, leading the e-commerce behemoth to announce the expansion of the concept with the addition of another six stores in Seattle and Los Angeles. The technology uses computer vision and machine learning algorithms to track shoppers as they move through the store, allowing them to simply grab items before exiting the premises.
Starbucks is testing a similar concept nationwide that allows customers to place orders and pay on their mobile apps before arriving at the coffee shop, making the wait to retrieve food and drink orders faster than ever before.
According to AiFi, a startup that uses artificial intelligence and computer vision to offer scalable checkout-free solutions to retailers across the country, this kind of quick and efficient service is essential in today's marketplace.
“Here’s what we know. More than 90% of last year’s retail sales came from physical stores, yet Americans spent at least 37 billion hours waiting in line, which is considered the top frustration among shoppers. Convenience is key if stores want to grow and drive business," AiFi CEO Steve Gu said in a statement.
Working Out The Kinks
Before the technology can advance, Mathews said retailers need to focus on getting it right — something they are likely to let Amazon test first. The e-commerce giant's initial attempt to roll out the cashierless store was delayed nearly a year after technical difficulties prevented the app from properly tracking items. Months later, there were still issues tracking groups of people.
“If you get the technology right and you make it easy for people there’s definitely room for growth. People are going to let Amazon go out there and see whether or not it’s successful and how it works. If it is successful, maybe it does catch on,” Mathews said.
In the case of similar convenience-enhancing technology like self-checkouts — which have been around for nearly two decades — retailers are, to this day, still working out the kinks. Self-checkout adoption has been sluggish as a result. Despite offering the allure of a faster checkout, many consumers still choose a human cashier over a self-checkout line unless the cashier line appears to be too time-consuming, the Harvard Business Review reports.
“Self-checkout hasn’t solved the problem for a lot of consumers because it’s still not seamless. If you’re buying a bottle of wine you still need someone to come over to you, and I still struggle with the [sensitivity of the] weight sensor,” Mathews said.
Part of getting it right will also involve dealing with perceived privacy issues. In a survey of 1,500 customers, nearly 20% felt that an app that tracked their movements while visiting a store would count as an invasion of privacy, according to the Harvard Business Review.
"Customers need to have [confidence] that privacy will not be invaded. [It] will take some consumer confidence to break through that psyche," Berkeley Research Group Retail and Consumer Practice Managing Director Keith Jelinek said.
A Healthy Return On Investment?
While the technology may make shopping easier for customers, one major issue that could plague retailers in the near term is the return on investment, or lack thereof.
The technology powering Amazon Go employs radio frequency identification — also known as RFID. This is an expensive electronic device that allows for the tracking of items, according to Jelinek.
"Although the technology has become less expensive to tag products, it still requires a sizable investment in infrastructure at the retail location," Jelinek said.
While studies have shown that convenience does correlate to increased customer satisfaction, it does not necessarily translate to increased loyalty, according to Ipsos' magazine, GenPop.
“The challenge for retailers in a capital-constrained world with all this tech available [is that] it’s difficult to figure out where to place your bets because you can’t afford to invest in something that doesn’t resonate with the consumers,” Mathews said.
Even so, Jelinek remains confident that cashierless technology will help retailers stand out as long as stores have an effective strategy in place.
"It definitely will be a differentiator, but one that needs to be selectively deployed in store types and locations where the customer is going to be more accepting — likely targeting demographics such as millennials," Jelinek said.
While Mathews was hesitant to predict whether or not cashierless stores will be adopted by retailers across the globe, he did say it is unlikely to have as much of an effect on employment as one might expect.
Between the year 2000 and 2014, the number of self-checkouts in large grocery stores increased tenfold, and yet employment remained largely flat.
A similar phenomenon happened with the introduction of ATMs, which were expected to replace bank tellers and subsequently have a massive impact on employment in bank branches.
“Instead, the overall employment in the banking industry grew over time. The nature of the bank branch changed. It went from being transactional to selling financial products. Banks took that money and invested in more branches with a slightly different function, and therefore the number of employees actually grew,” Mathews said. “There’s a long history of innovation and scares ... [but] for the most part it tends to not come true.”