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Will AI Stores Without Employees Ever Become Mainstream?
Retail is evolving. With technology and changing customer behaviors guiding the way, more businesses are shifting toward automated systems and AI stores. In fact, according to Retail Innovation Hub’s 2022 research, there was an 11% increase in brands using self-checkout technology globally compared to a year prior.
Amazon Fresh has already paved the way with its cashier-less stores but has also been looking for ways to overcome the many challenges it faces. In the U.K., top supermarket chain Tesco introduced a checkout-free store called GetGo. But it doesn’t stop there.
The trend is gaining even more momentum in Asia, with Tokyo-based FamilyMart planning 1,000 unmanned stores by 2024 and Singapore’s Pick&Go chain launching three AI-powered unmanned grocery stores so far.
Looking toward Hong Kong, HKTV’s subsidiary brand, Shoalter Automation, is readying for the debut of its first entirely automated retail store in Manchester, U.K., in 2023. This big plan includes an offline shop equipped with automated storage and retailing systems capable of taking orders and restocking merchandise without any human help.
Automated stores are hugely beneficial for businesses. They offer around-the-clock operations and predict stock needs, analyze shopping trends, and optimize inventory management. Another bonus is the simplified data collection process. Once a brand sets up its systems and hardware, data collection is a breeze, and the businesses can then expand easily into new markets.
The charm of automated stores extends to the consumer side, too. The demand for convenient and efficient shopping experiences has spiked. A study by Axis Communications reveals that nearly half of Hong Kong consumers are more likely to visit unmanned stores, particularly in the post-pandemic era. The convenience, enhanced customer experience, and ability to shop at any time make these stores significantly appealing.
7-Eleven Japan Breaks Ground With Unmanned Mini-Stores
7-Eleven Japan is revolutionizing the country’s retail landscape by launching small, staffless outlets in the spring. This progressive move is a response to help alleviate the severe labor shortage that the retail industry in Japan is currently grappling with.
While there won’t be traditional staff, each store will have a single employee responsible for tasks like product stocking and ordering. These smaller, 50-square-meter outlets will offer a limited selection of products, such as rice balls, bread, chilled boxed lunches, and everyday necessities, as well as freshly brewed coffee. The total number of items will be capped at 1,200 — significantly less than the typical offering.
Customers accessing these stores will use a dedicated app to scan a QR code upon entry. Once they’ve chosen their items, customers scan the barcodes using their smartphone and then pay via credit card or other payment methods. Mobile payments will be the primary transaction method, making the shopping experience quick and efficient.
The giant convenience store chain also intends to establish these unmanned outlets in previously hard-to-reach locations, such as tower condominiums and factories. Central Tokyo’s tower condos, as well as factory and research institute cafeterias that are closing due to labor shortages and inflation, are being eyed as potential spots. The company is targeting locations that have at least 500 employees and projected daily sales of about 100,000 yen ($682). This is significantly lower than the average sales of a regular outlet, which is around 700,000 yen. Many will also be open 24/7/365.
7-Eleven’s initial step will be to open these innovative stores in Tokyo and other regions. The company already has a few prototype outlets in Tokyo and Osaka prefecture and is in talks with about 20 firms that are keen on having these stores in their facilities. The eventual goal is to have several dozen of these unmanned stores throughout Japan. Although it might not be feasible for 7-Eleven stores in the U.S. to match the level of Japan’s stores, it would be interesting if the company decided to experiment with this concept in America someday.
Some competitors in Japan are also coming out with similar stores. For example, FamilyMart has already expanded to over 30 nationwide outlets using an unmanned payment system. Meanwhile, Ministop has started extensive developments of tiny unmanned stores. Even Daiei recently opened an unmanned supermarket in Yokohama. 7-Eleven’s venture into the unmanned store market marks a significant step in reimagining the Japanese retail sector.
While many see the benefits of automated stores, some customers still value the personal touch of a human cashier, and certain products or services may need the expertise of a trained employee. Also, unmanned stores might present more security risks without staff to monitor customer behaviors. Especially since the industry has recently experienced a surge of chaotic retail theft.
As technology becomes more affordable, the shift toward unmanned automated stores is likely to continue, but the traditional retail model still holds its ground for the moment. The next chapter of the retail industry promises to be an exciting blend of efficiency, convenience, and personalized service, a harmonious fusion of the new and the old.
Discussion Questions
As retail technology advances, how can businesses strike the right balance between providing personal humanized service and implementing automation to enhance customer convenience and efficiency?
With the potential increase in security risks due to the absence of staff in unmanned stores, what innovative and practical measures could retailers introduce to mitigate these risks without compromising the customer’s shopping experience?
Poll
Loading …BrainTrust
Neil Saunders
Managing Director, GlobalData
Brian Numainville
Principal, The Feedback Group
In the heart of Tokyo, you can leave an unlocked bike in a public place and still find it there hours later. That tells you all you need to know about why cashier-free stores will likely work quite well in Japan. Moreover, small very automated stores are, in some ways, a sophisticated extension of vending machines – which are a massive market in Japan. Back in the US, and other nations, I am not quite so sure that customer culture is as well-suited to the concept. There is also a point to be made that many people want interaction with staff in stores; it’s one of the reasons self-checkouts aren’t universally popular. My view is that, over time, there will be a lot more automation but, in most cases, it will work alongside the human elements of retailing.
To your comment, “In the heart of Tokyo, you can leave an unlocked bike in a public place and still find it there hours later.” When class is over, the helmets are still there. And, no
I teach at a 20,000-student university in China. Almost all students have Vespa-type scooters or motorcycles to get around campus. They wear helmets, as they should. When they ride to class, they leave their helments unlocked, uncovered on the seat or handlebars. And, no, they don’t lock their vehicles, either.
Yes, completely agree. These are important cultural differences and they cannot be overlooked when it comes to store execution.
It is not a matter of “when”, or “if”. It is rather the strategic set of questions “should we” and “how do we” make such a transition happen in a manner supporting the retailer brand’s value proposition, while maximizing the customer experience – the person who is swinging the doors of that “unmanned store” in the first place.
It should always start with the “strategy” and end with “enabled by the technology”. One could argue it started 20 some years ago when the self-automated checkout machine was introduced by NCR in a Kroger in Atlanta. Ever since, it continues to be about “front-end strategy” – efforts to redesign and improve how customers check-out and how operators operate at the max yield of both sales and customer experience.
My advice – keep testing, keep building, but ALWAYS follow the data. The autonomous store format may work for plenty, but building it for the shake of saying “I have one too” is not foundationally building towards a model of “less friction”. Notice, I did not say “frictionless”.
Technology to mitigate shrink, recover the loss, while optimizing operational efficiency and improving customer experience exists at scale in our retail industry. In its current form, it reminds us that this is a value journey, a path with growth outcome expectations. It also points to how one can evolve alongside technological improvements, as well as the ever changing needs and requirements of our shopper/consumer base. Generation A, grew up with an iPhone/iPad in their lap/hands, we need to look to them on how we evolve the shopping experience, while still letting the rest of the generations experience optionality based on shopping trip and occasion.
Stores without employees have long existed….they’re called “vending machines”. and, perhaps not surprsingly, given the setting of this article, they’re quite popular in Japan. Their modern day successors, I expect, will see a similar trajectory: not unknown here, but far less prevalent than over there (wherever “there” might end up being).
The potential of today’s technology to provide emotional connections and a human-like experience has never been greater. Couple this with its 100% consistency and lack of bias (if well designed) means a tech-only store will absolutely NOT be like a large vending machine but more like a personalised boutique experience previously only available to a few luxury shoppers.
AI stores without employees have the potential to become mainstream, but their widespread adoption will depend on overcoming an array of hurdles. As technology evolves and society adapts to new ways of shopping over time, these stores could play a significant role in the future retail landscape. However, it’s going to be a (very) gradual process that will coexist with traditional retail models for the foreseeable future.
Retailers have been dealing with the challenges and friction of the checkout process for decades. The new operating models supported by autonomous capabilities provide a compelling value proposition for some retail operations. The business case can be made in the grocery, convenience, QSR, airport retail, sporting events. However, across most of the retail arena, there will always be a need for human interaction, service and advice about products.
Autonomous stores help to significantly reduce operational costs, with increased access to consumer data across channels. Additionally, as demonstrated at the NRF, autonomous stores drive efficiencies, enable personalized experiences, minimize theft, empower dynamic pricing capabilities, and seamlessly integrate with unified commerce strategies, including the following capabilities:
Autonomous stores extend beyond retail operations. The list includes grocery, fashion, electronics, convenience stores, and QSRs, which are keeping pace with the digital-first customer, seamlessly navigating across digital, physical, and social platforms, quickly shifting from discovery to purchase.
According to Business Insider Intelligence, the number of global stores with autonomous capabilities will increase from only 350 in 2018 to 10,000 stores in 2024, with revenues forecasted to rise significantly from $70 million to over $20 billion.
Brandon, thanks for laying your thoughts out in this manner. Great points all around…Quick question – have you tallied the 2024 final count for autonomous? Would you agree that the count is nowhere near the 10K stores?
There are numerous reasons ecommerce never became the physical retail killer it was hyped to be and numerous reasons today’s AI is already losing some of its original hype. One of those reasons is humans and our darn humanity. We’re still years away from Rosey (Jetsons) or C-3PO (you know) or Pris (Blade Runner, orig.), truly AI, human like equivalents. Ironically, those fictional examples demonstrate our need for “human” interactions. But, until then, and ignoring the hype, hybrids will suffice. I remain an avid supporter of self-checkout especially in stores that require very little assistance like grocery stores. In other stores, like hardware stores or specialty stores, I believe there’s a stronger need for human interaction and assistance though those humans may be assisted by advances in data analytics, like today’s AI. Ignore the hype. Keep experimenting. And know your business case, use cases and customers. Now, back to my AI powered keyboard to drink my AI powered mocha in my AI powered coffee mug in front of my AI powered monitors…AI is in everything! It’s just amazing!!!
I mean, sure, AI stores are a thing, but how long it takes to move beyond vending machine status for convenience items is the question. I think we have a long way to go before “robots” can deliver fulfilling experiences in specialty. Time will tell (as always), but I suspect that’s still a pretty long way off…
Shopping without employees is fairly prevalent. Seventy percent of Americans shop online.
As for today’s discussion, stores are pretty diverse, and while I don’t need a single employee at the supermarket, I do need them in certain apparel stores. (Sadly, it is often easier to get help at the supermarket than at an apparel store.)
Shrink and security is an issue in America. There was a recent comment in an NYTimes Magazine article quoting someone, “It’s just stuff.” Essentially saying, it doesn’t matter to anyone if it is lifted.
I do not consider myself conservative, by any definition. I am sometimes a traditionalist. In this case, I hope I don’t live to see the day…
I don’t think there will be a day when all stores are completely AI. That is the dream of some in the technology industry but, across many customer journeys and for many store types, human interaction is an important part of the experience. That’s really not going to change: even technically savvy Gen Z and Gen Alpha love going to physical spaces for the experience and human element.
Disclaimer – I work for Microsoft.
I have worked extensively with Zabka on their autonomous stores project.(https://news.microsoft.com/source/features/digital-transformation/a-grocer-that-sells-smoothies-snacks-and-easier-lives-welcome-to-zabkas-autonomous-stores/)
What is incredible about this work is how pasionate the Zabka teams and customers are about the experience provided within these stores.
In a convenience setting, the ability to walk in, pick up a product and walk out is hugely beneficial for customers. What I find fascinating is how, as a customer, when using convenience stores I feel frustrated at needing to either queue or self-scan. So in-short I am a convert because in reality most of our shopping transactions are not necessarily enhanced by human interaction.
The question about striking a balance between automation and personalized human-to-human interaction is the right question. The company that figures that out is successful. If all the store wants to be is a utility, then little or no human interaction is necessary. The store becomes a large vending machine. And as technologically advanced as some of the new vending machines are, they still need to be restocked and, on occasion, repaired. So, an unmanned store is not realistic.
As a purely academic exercise, ever wonder what a $100 @ retail product would sell for if a retailer accepted cash only, and shop in store only. If you removed credit card fees, online fulfillment fees, cost of returns, (write offs, inventory carrying costs, transportation, etc) cost of front-end automation…….betting that $100 product would sell for about $80, there would be decent service in store, and the Retailer would be doing just fine. Now it might not be convenient…but once in a while we should really add up what we pay for convenience.
To strike a balance, retailers can adopt a hybrid staffing model, automating routine tasks and enabling skilled staff to focus on personalized service. Implementing customer-centric technology, such as interactive displays and virtual assistants, enhances the shopping experience. Additionally, providing flexible automation options allows customers to choose between self-service and human assistance based on preference. Examples include AI-driven inventory management and checkout processes, ensuring efficiency while maintaining a personalized touch, as seen in stores like Amazon Go and 7-Eleven Japan’s unmanned outlets.
To tackle security risks in unmanned stores, retailers can deploy advanced surveillance systems, AI-powered theft detection, and strategically positioned security personnel. Implementing smart shelving with sensors can alert staff to suspicious activities
The increase in security risks derives from crime that is not prosecuted, leading to store closings in (now) unprofitable areas. And the “shopping experience” in a store where everything is locked up leaves quite a lot to be desired.
What we need is RoboCop, from the Paul Verhoeven film. Robocop would mitigate all the risk while making everyone safer.
I believe, finding the right balance between human service and automation is crucial for businesses to cater to diverse customer preferences. While automation enhances efficiency and convenience, customers still value the personal touch provided by human interaction. Businesses can achieve this balance by integrating automation for routine tasks like checkout processes and inventory management while retaining human staff to offer personalized assistance, address complex queries, and create memorable shopping experiences.
Additionally, if automation is really necessary, then retailers can invest in advanced surveillance systems, AI-powered monitoring tools, and robust security protocols to mitigate security risks in unmanned stores. Implementing these measures will ensure customer safety without compromising convenience, fostering trust and loyalty in the long run.