Are unmanned stores the next big thing for supermarkets?
Amazon Go went live in January 2018 in Seattle and was a complete hit worldwide. The idea of getting into a store, grabbing whatever you need and leave the outlet with no apparent checkout (at least as we were used to until then) was bringing convenience to the highest levels. Most customers felt like shoplifting as per this seamless transaction process.
Through the use of cameras, sensors, AI,… ultimately current digital capabilities, Amazon Go revolutionized grocery retail from different perspectives: it improved customer experience by eliminating the checkout hassle while saving overhead costs by cutting the effort of human cashiers.
But, once the wow effect is over, many questions around this new store concept arise. Are we, as customers, ready for it? Is there a robust business case for retail chains to adopt it? Which are the options and companies that are developing human-free stores? And, finally, is grocery shopping experience about seamless checkout?
Unmanned stores. Are customers ready for it?
There are many signs that show that show that cashierless stores have a lot potential from the customer experience perspective
6 out of 10 US customers find current grocery experience full of friction and over half of those surveyed said the main source of friction is checkout related
Lost sales due to long checkout lines are estimated to be approximately $37.7bn in the US (source: 451 Research data)
Nearly half (48%) of US customers agree that “Scan & Go” will make shopping easier
43% of US customers would rather use “Scan & Go” rather than wait in the checkout line
60% of internet users worldwide would prefer to shop at other retailers if they offered an Amazon Go-like experience
Nowadays, cashierless stores are not exclusive to grocers. As per the picture above, new retail verticals from convenience to home improvement, department and even apparel are testing self-checkout options: Urban Outfitters, Macy’s, Lowe’s or Home Depot are some of the big names that are investing in this new model.
And, as we will see later in this article, China is the country were most cashierless technologies are being tested.
The evolution of self-checkout
For many years, the checkout process has remained unchanged. Except for the vending machines, the process was somehow like this: you enter a store, fill the cart, wait in the checkout line until it’s your turn, pass the products to the cashier for her to scan and bag, show your loyalty card and then pay and leave.
The self-scan till was invented by David R Humble in 1984. He got the inspiration while standing in a long grocery checkout line and developed the "semi-attended customer-activated terminal" (SACAT). The self-scan stations began to be tested and used in the 1990s in parallel with the adoption of barcodes within the grocery retail industry. By 2013, there were over 200,000 in stores throughout the world and their numbers are expected to reach 325,000 by 2021.
Then it came Scan&Go, whose main difference is that customers do scan the products as they pick them from the shelves rather than doing it at the end of the store visit. From early days where customers had to carry a handheld scanner and the payment process was still “traditional” (at the end of the visit using a checkout terminal) to mobile phone apps, that scan products and make a seamless payment process, Scan&Go is the first technology that can replace human cashiers. However, the reality shows that this technology is struggling to gain traction as customers, for many reasons, don’t find there is an incremental value vs traditional checkout.
Finally, seamless reaches the peak with Grab&Go. No need of scanning at all, just checking in, picking the products and leaving. The “intelligent” store will charge, exclusively and accurately, you for the products you had in your bag when you left the store. Amazing (or scary…).
Is there a business case for retailers to adopt it?
Although self-checkout as an option to skip the “traditional” checkout line was born to improve customer experience, the truth is that massive adoption by retailers has had, at least until the recent years, a lot to do with its impact in labor cost reduction and therefore, increasing the historical narrow margins.
Apart from cost cutting, the rise of digital, automated, unmanned checkout technology has brought:
New 24x7 store models, such as interactive kiosks, which are a hot topic nowadays. In fact, Research and Markets thinks that the automated kiosk market will be worth $34 billion by 2023.
New customer interaction touchpoints (self-checkout apps) to provide personalized recommendations to increase ticket, basket size or advocacy
More valuable data to improve customer knowledge through advanced analytics, as they are able to track not only inventory levels but also customers’ behavior and provide insights across the whole value chain.
Although there is no doubt about the benefits of frictionless experience from customer and retailer sides, there is still a long way to go until unmanned stores gain traction as there are many challenges, such as the following:
Loss, theft. This is the probably the major roadblock for the massive adoption of scan&go technologies if it means there is no one watching out in the stores. Computer vision (as Amazon Go) may help reducing this issue but it has not seen effective for large store formats or when exceeding a given number of concurrent customers.
Managing fresh goods. Current frictionless technology is far from charging customers for non-packaged fresh goods without the support of the scale.
Number of concurrent customers. Apart from the challenges due to theft, an excessive number of customers within the stores may provoke that cameras wouldn’t have enough tracking data to charge accurately. Amazon Go stores capacity is around 20 customers.
Deployment costs. Investments required to build and run effectively an Amazon Go type of store are significant and the pace of technology evolution may provoke very short obsolescence cycles.
Accepting cash. Amazon brick and mortar stores have recently been forced to accept cash as a form of payment (Amazon Go store in NY recently opened in May 2019), which may complicate the checkout process and require somehow human interaction.
Then, from the customer satisfaction perspective, there are two critical challenges:
Ensuring it works. It is imperative that the technology works and works well without the customer having issues and getting frustrated as, in an unmanned store, the impact of any flaw may be higher than in traditional stores.
Bringing value to the customer. As said early in this article, self-checkout, in any of its variants, it’s not just passing the checkout ball to the customer to save costs. If queues are still there or the process is too complicated, it may result in a loss of attractiveness and therefore, satisfaction and sales.
From scan&go to grab&go. Retail chains and tech companies in the industry
As said at the beginning of the article, it seems Amazon is leading the cashierless revolution but there are many retailers testing different approaches to “self-checkout 2.0” around the globe. There are also tech companies focused on developing the supporting technologies.
Main tech companies
There are basically two different approaches to self-checkout: scan-based (either directly by the customer or not) and computer vision-based. Here it is the list of the key players nowadays:
Amazon. It is probably the most well-known company in all related to phygital retail. It is both technology developer and retailer. It uses a combination of shelf sensors and cameras (machine vision) to track people, products and the interactions. Compared to competitors, its technology may be the most complex to implement. Amazon plans to open +3,000 Amazon Go stores by 2021.
Alibaba. The Asian giant is not as famous as Amazon but it is definitely the company to follow in terms of retail digitization. Through its Hema banner, customers can scan products using an app and then pay using their Taobao or Alipay (both from Alibaba) accounts. There are already 65 Hema stores running in China.
Microsoft. It is the other big technology name. It is currently partnering with Amazon retail competitors such as Walmart, for cashierless checkout, and Kroger, for speeding-up the in-store visit.
Standard Cognition. It is based exclusively on cameras (machine vision) to track the interactions between products and customers in-store. Compared to Amazon Go, it requires a smaller number of cameras to track interactions so the initial investment is significantly lower. It does not use face recognition (neither Amazon by the way). You can visit a real, open to sales Standard Cognition store in San Francisco to check its technology.
Trigo Vision. Israel-based company that uses computer vision and artificial intelligence to track product and interactions. Trigo Vision claims that there are benefits not only for customers but also for retailers and CPG companies as they can track stocks and product performance-to-space. In 2018, it announced a partnership with Shufersal, Israel largest supermarket chain, to deploy its technology in 272 stores.
Caper Labs. Instead of ceiling cameras, Caper has developed smart shopping carts, which have evolved to include cameras for automatic scanning. The claim is that retailers don’t need to refurbish stores to adopt seamless check-out as it is only needed to replace carts. Caper technology is already being tested in two unnamed supermarket chains.
Zippin. Also based on ceiling cameras and sensors, it works by first downloading an app that gives the customer a QR code that must be scanned before entering the store. It was the first company to open a store in San Francisco to showcase its technology some months before the opening of Amazon Go. Its CEO is an ex-Amazon.
V7 labs. It combines images captured by in-store security cameras with advanced analytics to enable a seamless checkout experience.
Grabango. It uses ceiling small cameras (the size of smartphone ones) to track interactions and it is connected with the store checkout system so it gives the options of either performing a traditional (cash or using credit cart) payment without the final product scanning hassle or setting the basis for seamless checkout.
Sensei. A Portuguese tech startup which is based on ceiling cameras and advanced analytics to track interactions and automatic debit of grabbed products. It has been reported that it is testing its technology with German Metro AG, Sonae and a British chain.
Skip. Probably the less tech intensive approach, it is based on a customer app, a shop assistant app and a cloud camera. The customer picks and scans the products, the assistant has a record of number of scanned items so he can do a visual consistency check and the camera just double checks that there are no discrepancies between grabbed and paid.
Albert Heijn “Tap to Go”. The supermarket banner of Ahold Delhaize group has developed an NFC-based technology that works by tapping a product shelf tag with an app or a card and the customer is charged ten minutes later for that product. Plans are to expand this technology to its 80 stores in the Netherlands.
These are only some of the long list (and growing) tech companies, but there are many others such as Aifi, Focal Systems, Maxerience, Deep Magic,… also pushing hard in this area.
Unmanned or cashierless stores are certainly a recent phenomenon. The pioneers in this arena would probably be the Swedish store Naraffar that, back in 2016, opened an unstaffed 24x7 convenience store which was based in an app to scan products and drive automatic payment and the US-based Farmhouse Foods, that also in 2016, opened an unmanned 24x7 store in a small town in Minnesota that used cameras to keep track of customer (who had to pay a $100 register fee) purchases.
After that, most of big guns in the retail industry, either in the US (although Walmart seems a bit reluctant and its recently launched IRL store does not focus on it) or in Europe have been testing this technology. But China is the most prolific country in terms of its deployment, probably due to people acceptance of the privacy implications of using cameras and, above all, face recognition.
Apart from Hema, which has been commented before, there are other relevant banners deploying self-checkout technology:
BingoBox. It’s the case of a tech startup (owned by WeChat) to provide the technology to retailers to open unmanned stores that has decided to deploy its own banner and franchise model. Stores are stocked by Auchan. It has already +300 stores in China and plans to expand to South Korea, Hong Kong and Malaysia. It is based on an app to generate a QR code to open the store as well as scanning products. Customer is automatically charged via WeChat or Alipay. There are in-store cameras to prevent shoplifting. Bingobox is currently developing an image recognition platform, called Fan AI, to identify both products and customer faces.
Tao Café. Part of Alibaba Group (as Hema) it is not a supermarket but a sort of extended coffee shop. Customer has access through a custom QR, then she grabs the merchandise (which is still prepared by humans) and, once she leaves the store, she is charged through Alipay. Customers can also order and pay using facial recognition.
7-eleven Signature. 7-eleven opened an unmanned store in Korea in 2017 that allows customers to pay using the palm of their hands (HandPay system). Customers place the products on a conveyor belt that scans them and show the list and total amount on a screen before the hand-based payment.
JD.com. JD is the second largest e-commerce platform in China, just after Alibaba. It opened its first unmanned store in January 2018, that is even before Amazon Go first opening. Using computer vision, facial recognition and sensors, customers use their phones to check in, grab their products and are debited once they leave the store.
Moby Mart. The supermarket on wheels. Its parent company, the Wheelys Company, bought Naraffar so Moby Mart uses the same approach to self-checkout. The main difference is that Moby Mart is a mobile supermarket so customers can use the app to find where is the nearest station or even ask the store to come to a given parking lot. Another feature is that, when the store needs to be replenished it autonomously drives itself to the warehouse.
Frictionless, seamless, automated, self-service retailing are some of the terms to describe a new approach to shopping experience in physical spaces. Its disruptive technology, which is gaining traction at fast pace, will force to rethink legacy in-store practices.
What does this approach need to become definitely widespread? Apart from a supporting technology that has zero execution errors in high traffic environments, there are many challenges regarding customer adoption, such as:
The trade-offs in privacy,
getting used from human to human to human to digital interactions, and last but not least,
making customers feel there is a significant shopping experience improvement and not just a cost saving from retailer’s side
Does this mean that the future is unmanned stores? In my opinion, definitely not, as shopping is not the same as buying. The truth is that the store associate role will change towards delivering more personalized, value-added service.