You would think they would have learned their lesson. After giving Amazon a 10-year (really closer to 15 when you come right down to it) head start in the ecommerce business and then failing to understand how important both the Prime program and free shipping were to the success of buying online, traditional retailers are once again losing out to Amazon’s enormous advantage when it comes to automatic checkout stores that use AI technology.
Cashier-free stores have the potential to eliminate thousands – and eventually tens of thousands as they proliferate – of jobs. Estimates are that supermarkets and grocery stores employ as many as three million workers nationally.
Closing in on three decades since Jeff Bezos sold his first book out of a local warehouse, the rest of the retail world is being caught asleep at the switch, clueless and woefully behind. In the meantime, Amazon is sleepless in Seattle, working nonstop to continue to disrupt retail.
Pass Go, Collect Your Purchases
Amazon opened its first “cashierless, Just Walk Out” location near its Washington State headquarters in 2016, which if you don’t happen to have a calendar handy is almost six years ago. At first it was only for company employees but by 2018 it was open to the general shopping population. A glorified convenience store, it was heavy on prepared and packaged foods rather than general merchandise or groceries. It used artificial intelligence, sensors, more cameras than you’d find at a fashion runway show, and all kinds of double-secret technology that no doubt NASA doesn’t even possess to allow shoppers to just pick up items and walk out of the store. No imputing a credit card, no stopping at a self-checkout register – much less a traditional staffed counter –and no high tech, TSA-type tunnel to walk through to scan your purchases.
If you get a vicarious thrill out of being a legal shoplifter or had latent kleptomaniacal tendencies this was your dream, come true. Amazon continued to fiddle with the technology while expanding the format to more locations around the country. In February 2020 it put the concept on steroids and opened its first larger format grocery store, with about 7,700 square feet of selling space, again in its Seattle hometown. With an expanded product assortment, it still wasn’t a full-fledged supermarket but it was no longer just a novelty where you picked up lunch and something to drink, friction free.
As of last count there are 26 Amazon Go stores, in Seattle, San Francisco, Chicago and New York and two larger grocery stores, now under the Amazon Fresh name, both in the Seattle market. There is also one in West London in the U.K.
According to Bloomberg, Amazon is testing the cashierless format in an existing Fresh store in Illinois and has as many as 28 additional Fresh locations in the works, although it’s unclear how many will get the AI technology. These newer stores have scaled up considerably and range from 25,000 to 45,000-square-feet. As such, the smaller ones are the size of Aldi or Lidl locations while the larger ones are as big as conventional supermarkets from national chains like Kroger, Albertsons and Publix. In other words, they are true supermarkets. And now there are reports that at least two Whole Food stores (owned by Amazon in case you aren’t keeping up) will also test this cashier-free format soon.
The Rest…Such as It Is
Who else is currently operating cashierless locations? The fact of the matter is that you can count them on your fingers…and still have a few left over to press some screen buttons.
- Circle K, the convenience chain, is testing a cashier-free store in Tempe, AZ.
- Freemont, CA-based Loop Neighborhood has also rolled out the technology in two existing locations in the Bay area where shoppers use a QR code system when they enter the store to walk out without a formal checkout.
- Elsewhere, both Albertsons and Sam’s Club are reported to be testing checkout-free technology but it’s unclear how many stores are actually up and running and how developed the AI capabilities are. Sam’s Club has a test store in the Dallas market that allows for self-checkout using advanced technology that automatically charges it to your credit card on file but you still need to scan your purchases on your smartphone.
- At Newark Airport’s Terminal C, at least one small snack and convenience store operated by Hudson News and using the Cibo Express name has cashierless checkout, but you need to input your credit card as you enter the store to make a purchase. In the small print outside the store, there’s a sign indicating it uses Amazon’s Just Walk Out” technology. While some published reports suggest Amazon intends to license out the technology at other airports it’s unknown if any others beside the Newark location are currently open. It’s another example of how Amazon really makes most of its money as a third party tech supplier and operator rather than just selling stuff itself.
- Overseas, besides the one location Amazon has in the London area, the playing field is just as limited. Grocery Gazette, a British business publication, recently reported that Aldi is testing a cashier-free store in the Greenwich neighborhood of London in that country but could not confirm an opening date. It said it understood it would be a smaller location with about 1500 items for sale, significantly less than a typical Aldi but closer in line with the Amazon Go assortments
- The story cites another report in The Mirror newspaper that Aldi would be “rolling out the new format across the UK after it perfects its system,” but had no firm dates. Another report from Europe said Aldi would be opening a “frictionless” location in the Netherlands.
- Back in the UK, grocery chain Tesco just opened its first cashier-free store in central London under the GetGo banner, allowing shoppers who are signed up on its app to walk out of the store with their purchases without any formal checkout process. Tesco isn’t saying if more such stores are on the way.
Third-Party Tech Solutions
While Amazon is starting to license out its technology, other companies are racing to introduce similar AI systems, including Trigo Vision (used in the Aldi and Tesco stores), AiFi and Grabango. And just in the past few weeks online ordering giant Instacart said it was buying another player in the space, Caper AI, for $350 million, which while sizeable is still relatively chump change in the tech business.
Obviously, these companies are all high on this concept. Speaking recently on CNBC, Grabango chief business officer Andrew Radlow said, “I think there is a universal agreement that this is the new 21st-century shopping experience.” Just as obviously, there has been pushback on the idea of these stores which have the potential to eliminate thousands – and eventually tens of thousands as they proliferate – of jobs. Estimates are that supermarkets and grocery stores employ as many as three million workers nationally. The State of New Jersey and the City of Philadelphia have enacted legislation banning such cashier-free stores and New York is considering similar actions. In one published report The Office for National Statistics (ONS) estimates that around two-thirds of cashier jobs are at high risk of being replaced by technology.
Head Counts & Headstarts
Naturally these labor savings are a key factor in all these stores and even with the heavy upfront investment in technology they could start to be quite profitable once these operations are scaled up. Insider, the online news site, said it had obtained a confidential Amazon report that forecast costs for operating these stores would be reduced by 75 percent by 2023. One published estimate forecast the automated checkout market size approaching $23.6 billion within five years.
The Supermarket News report cites an RBC Capital Markets analysis released in January 2019 that estimated average annual sales of $1.5 million apiece for the then nine Amazon Go stores. “Based on a September 2018 Bloomberg report saying Amazon may open up to 3,000 Go stores in the next several years, RBC’s estimate would translate into a $4.5 billion business for the Go banner.” That’s a huge business onto itself and it once again underscores the obvious: In a still nascent business that has the potential to be huge within just a few short years Amazon is so far ahead of everybody else…just as it was in the original ecommerce sector.
Amazon has somewhere around 30 stores in the U.S. and the U.K. that are cashier-free and everybody else – combined – seems to have less than half a dozen. Giant grocery chains like Walmart, Kroger, Albertsons and their counterparts in Europe are barely on the radar when it comes to this technology…just as Walmart, Target and almost every general merchandising national chain was in 2000 when Amazon first began to move beyond books and CDs.
Right now, this cashierless tech is just in the grocery chain but like those first books and music, this could be the Trojan Horse into the entire retail spectrum. And this is not some science fiction of the future. TechHQ, a website that tracks all things technology, said it best in a recent headline: “Cashierless stores are now the present (not the future) of retail.” And it’s Amazon…once again…that is leading the way. Some people just never learn.
Author’s Note: After this story was originally posted, Grabango, one of the third party suppliers of checkout-free technology, told The Robin Report that its system is now in place in six Circle K stores and it would also be supplying cashierless systems to four Giant Eagle GetGo stores in the Pittsburgh area before the end of the year.