Source: H-E-B Go/Google Play
Grocers develop their own tech responses to Amazon Go
When Amazon.com announced a c-store that would let people shop and walk out without physically conducting a transaction at a checkout, it seemed like a feat only one of the biggest global tech companies could pull off. Now, even regional grocers are attempting the same.
Giant Eagle is launching a pilot in one location in partnership with a vendor called Grabango, according to The Motley Fool. The technology, like that used in Amazon’s Go stores, uses computer vision and artificial intelligence (AI) to identify what customers take from the shelves.
A growing list of other retailers and tech start-ups are working on solutions meant to keep up with the Amazon Go curve. U.K. grocer Tesco is rumored to be working with a startup to launch a similar solution in its stores. Startups, including Zippin and Standard Cognition, have opted to launch brick-and-mortar outlets, which use the companies’ respective solutions.
Long checkout lines have long been a major pain point for shoppers. Retailers began introducing solutions like self-checkout decades ago. Amazon’s “Just Walk Out” tech is a particularly radical approach. Retailers that aren’t going that far, however, are nevertheless piloting and rolling out tech-enhanced checkout options.
Another regional grocer, H-E-B, has begun piloting a scan and go solution, which lets customers scan products with their smartphones during their shopping trip, bag them and pay via generated QR code before leaving. Sam’s Club has demonstrated success with its scan and go technology and has been attempting to make it work even faster through the use of computer vision.
In the case of the technology used by Amazon, however, questions of cost, practicality and consumer interest remain. While there were reports of Amazon opening as many as 3,000 Go stores nationwide by 2021, so far it has only opened around 15.
Discussion Questions
DISCUSSION QUESTIONS: What does the use of checkout-free technology by regional grocers mean for Amazon and its retail rivals? Do you see such pilots as being sensible and necessary for regional grocers, or are they getting ahead of themselves?
Poll
BrainTrust
Rob Gallo
Chief Marketing Officer, Impact 21
Kenneth Leung
Retail and Customer Experience Expert
There is no choice. Customers are driving the demand for a better end-to-end experience. All retailers need to come up with their solutions to improve their experience in-store. There is no one best solution. The operative word at this stage is “pilot.” All of these different options can be tested and measured. When in doubt, simply ask the customer about whether it improved their experience.
After a career of 25 years of “asking” shoppers, I learned that “observing” them gave more direct access to reality. As an illustration of this concept: we used to ask shoppers (in the store) if they used a shopping list. Often they said yes, always. And if we asked if we might look at their list, they might fumble around and say, “Oh, I must have forgot it today!”
The disjoint between what shoppers say, and even think, is vast. The gulf between words and reality! (How To Observe, Measure And Think About Shoppers.)
Grocers need to figure out how to get the consumer in and out quickly but without sacrificing the customer experience and that has been the challenge. No doubt using self-checkout registers was a great idea except that too often they jam, and you still need an associate to help you out. That makes the experience frustrating. ShopRite allows you to scan items with your phone, so at the end of your shopping you already have your total, you pay with your credit card, and you’re all set. They have a system where every so often they spot check shoppers to make sure they correctly scanned all the items. It’s fast and easy, and what I like is that there are still associates roaming the store, handling the specialty food departments and the shopping experience is perfect. So figuring out ways to get the consumer in and out quickly is smart and technology is providing the answer but equally important is keeping the store associate to provide human interaction. Only human associates can smile at customers and provide personal assistance when necessary.
I don’t think they are getting ahead of themselves. They aren’t going fast enough. This is consumer-driven, not Amazon-driven. Amazon just happens to have the most frictionless solution so far. As technological capabilities improve to handle an experience similar to Amazon Go, you will see retailers adopt it versus scan and go or other stop-gap solutions.
After watching customers fly in and out on a tour of the Amazon Go store in Seattle, I was amazed at the ease and satisfied expressions on the customers’ faces. Could this be a huge snapshot of what is to come? I think so.
As you stated, the checkout has always been where the friction lies. The customers spending the most money are the ones waiting the longest (e.g. the 10 items or less folks are out the door pretty quickly). For most grocers adding the ability to “scan and go” or other quick checkout technology will be a must. However, I don’t seeing it completely replacing the checkout aisle. There will always be a contingent of consumers who don’t want the onus of scanning or being 100 percent responsible for the final transaction.
It is the wave of the future, but not as suggested by the photo of a shopper pecking at their smartphone. That is imaginary crap from tech neverland. Although the personal device may remain a valuable connection as part of the overall store experience (in your pocket or purse!) it is as Clive Humby is reported as saying, “Not ‘custom’-ary.”
As I have said repeatedly, “As long as shoppers live in bricks-and-mortar HOUSES, they WILL BE shopping in bricks-and-mortar stores!” But then I note that “predicting the future is HARD! Particularly the part about saying what will happen … ” 😉
I had taken for granted the pain of checkout until I shopped an Amazon Go store for the first time. There is no question in my mind, after that one shopping experience, that this is the way of the future, and that it will accelerate the culling of the retail herd. This is something hard, and expensive, that all retailers will need to do well.
The use of checkout-free technology by regional grocers will not only give them an equal footing with Amazon but in many cases a competitive edge over the larger national chains. Consumers do not want to stand in a line and some still even leave a full shopping cart and walk out. Many retailers are attempting to save labor and many more cannot even find people willing to work, so again using the technology is a must and quite honestly it’s about time they implement it or fall even more behind!
I visited a Vancouver, B.C. store way back in the late 1990s that aimed to have no human interaction throughout the shopping experience. They pulled it off very well for the technology available at that time. Retailers do need to ensure that the shopper sees a benefit, and not just the retailers. Good old-fashioned self checkout can be extremely frustrating for shoppers if the technology doesn’t cooperate.
Certainly these technologies create a far better experience for consumers than exists today and they will continue to develop and deploy.
One point I’ll make that is never talked about is shrinkage. These systems are far from perfect and through their own errors can increase shrinkage measurably. That cost and the cost of deployment will be paid for by consumers. So grab and go technologies are a great convenience, but not really a free benefit for users.
Scan and go will likely be a pervasive way for shoppers to check out in the near future. I am still skeptical of Amazon’s ambitions to open 3,000 Amazon Go stores within two years. It is hard to believe that the stores can be profitable with the level of technology investments. Leveraging consumers’ devices as the new POS seems like the best solution and I think consumers will like the independence and convenience it offers.
Regional grocers are trying to keep pace with a potential competitor like Amazon. They are also looking at reducing their labor costs and hassles. The pilots are sensible and necessary for the grocers to learn how well the technology works, modifications that need to be paid, and implementation lessons. The role played by cashiers in traditional stores is mostly to check out the shopper, and eliminating the need for this labor will lower the store’s costs.
The greatest point of friction in the grocery shopping experience remains the checkout process. In some stores, a bad checkout experience could lead to customers shopping elsewhere. The pace of innovation is relentless, especially with what Amazon has accomplished with their Amazon Go pilot.
However traditional grocery stores such as Kroger should take a far more conservative approach to test, pilot, and measure how the cashless experience resonates with their core customers. Certainly the Amazon Go convenience model works quite seamlessly in a smaller scale store. However the challenge is to scale up that operation, and if a Kroger chooses to take this route, what are the downstream implications and impacts to their cashiers and other members of their team?
It’s very much an organizational change management play, as it is an innovation strategy.
Having lived the “just walk out” experience at a few Amazon Go stores I can also say that not only is it a great experience, but it is as far removed from self-checkout as a Ferrari is from a bicycle. Once you experience the convenience this represents, you don’t want less as a shopper anywhere else and I am sure Amazon Go customers have less tolerance for checkout delays in other stores.
The grocery segment is still lagging behind other retail segments in terms of tech innovation and more important integration into the shopping experience. However, I am still skeptical that the technology Amazon uses can truly scale to the size of a full grocery store reliably and securely enough to avoid shrink losses. Scan and go technology using the shopper’s device is likely to become the near-term mainstay before we see much more “just walk out” approaches.
Is it necessary? Yes, grocers and other retailers need to move faster at improving the checkout experience. Let’s face it — Amazon wouldn’t have gone down this path if they didn’t see an opportunity to be disruptive and innovative. And that they have!
The technology has been there; the will to experiment has been lacking. What Amazon did was to take chances. I still question the financial performance of the stores and whether they would scale. Amazon Go is really a convenience store/corner store model and they haven’t opened as many stores as planned. I think grocers need to have a holistic model for multi-model checkout experience based on the consumer, store location/layout, basket analysis, etc. There is no one-size-one-tech-fit all option anymore.
Smartest comment here today, Kenneth. Everybody else take heed: “Multi-modal checkout” could dominate this conversation very soon.
Eliminating the checkout bugaboo will create a huge win/win for grocer and customer. Self checkout is a variation on the current process, checkout-free technology completely reinvents the process and challenges your the underlying business assumptions.
To compete and thrive, regional grocers must invest in their stores, update their assortments, and stay in tune with tech advances. Of course it’s sensible and necessary for regional grocers to pilot check-out experiences. The alternative is to watch their market share sink with negative sales comps, stubborn fixed costs, and even lower net margins. Applying technology to the customer experience race, you can never out run the competition unless you redefine the game.
Building on Kenneth Leung’s great observation here today about “multi-modal checkout” in grocery, I think we must also ask the question, “in what retail formats and trips?”
By that I mean Amazon Go is a convenience store, not a supermarket. It caters to a certain kind of transaction that fits the “grab and go” concept well. Eliminating checkout friction during the lunch rush adds significant value.
Shifting the scanning task to the shopper for a full-basket grocery order is not eliminating friction — it is transferring it from the front end to the aisle. Price-lookup items like produce are going to especially clumsy in this regard. Has anyone carefully studied whether any time is actually saved? Maybe it’s all about perception.
I would counsel grocers to study this proposition hard. True, there is great pressure to offer services that match best experiences anywhere. Perhaps a grab-and-go option should be on the “multi-modal” table for supermarkets, but the benefits may be elusive.
Customers will continue to gravitate to and demand the most convenient option. Being able to literally grab and go, walking out of the store without having to stand in line to pay is the next step in in making convenience stores truly convenient. I did not have a full appreciation of just how powerful that experience was until I recently visited an Amazon Go store, it truly was a very effortless way to shop.
The Go tech is not revolutionary and it’s been around for decades. It’s the application in the store that makes it innovative. The value will come with repeat, consistent experiences that make current shopping behavior obsolete.
Amazon has tinkered with white labeling its tech capabilities in Go. However, the grocers are just experimenting — and there’s nothing wrong with that, but it’s not game changing now. Companies like Kroger rolled out Quevision in 2012 — seven years ago — to track customers in the store and optimize cashiers to customers at the checkout lines. Those technologies were supposed to upend the market then.
The challenge with Amazon’s intermediary stages towards development is that they are intermediary, not the end state (though Amazon’s marketing machine makes it sound like this is the biggie). The grocers that can move themselves faster along this path may have a slight advantage when the market adopts. But for this tech the universal demand isn’t there yet. Customers will experience Walmart many times more than they experience Amazon Go and until that changes, there will be no tipping point for the concept. How many customers have entered an Amazon Go store? Not even close to the 265MM that enter your local Walmart.
The challenge for larger format grocery stores versus the smaller Go convenience model is twofold. As other commenters have referred to, there will still likely be a need for cashiers to handle weighted items. This could be mitigated by adding sensors to the carts, but the amount of use a typical shopping cart sees during the day would likely require regular recalibration. Bloomberg has an in-depth article titled “Amazon’s Most Ambitious Research Project Is a Convenience Store” that talks about the challenges of fresh items in this environment and the reasons they abandoned that type of merchandise.
The second and larger issue is the costs associated with cameras, compute, and bandwidth. In the Go model, there are about 300-400 cameras covering the 1,000 sq. ft. store, which implies 1 camera per 3 sqft. A large format grocery store is typically 50,000–100,000 sq. ft. This suggests the system would require 15,000 – 30,000 cameras! Each camera produces 30 frames per second of RGB-depth data. With aggressive assumptions on the reduction in compute, camera and scale hardware costs over time, implementing this type of system will likely not prove a positive ROI in large format grocery until 2040 compared to the baseline method of operating the front end with cashiers. Here is a link we published on how we came to that conclusion.
The ease and convenience of being able to choose an item, put it in your cart, and basically walk out of the store without the need to empty your cart on the conveyor belt and wait in line to check out, is huge. In today’s hectic environment, consumers don’t have the time or patience for hassles. Whether the technology is as cutting-edge as Amazon’s Go stores, or a little more simple like Sam’s Club’s Scan & Go, the customer benefits from a faster and easier process and the retailer benefits from a less congested checkout area and happier customer.
I wonder if the days of DPP (direct product profitability) will make a comeback. Can you imagine … you can buy that item for $2.99 and wait a bit for a cashier, or if you want to go to a scan and go outlet you can pay $3.50 until the equipment is paid off….
This is a solution looking for a problem. Regional grocers aren’t going to lose market share to Amazon because it has discovered a way to do this (it has but at a tremendous cost). There are so many other issues which need to be addressed rather than using AI to empower checkout-free technologies in a grocery store. Pricing, out-of-stocks, broader availability, non-gmo alternatives, etc. Amazon’s boast about building hundreds of stores like this over the next two years is nonsensical and unbelievable.