Amazon’s tech-laden Go stores are disrupting in-store checkout. But as other merchants look to follow suit, it’s becoming clear there are lots of ways to get the checkout to check out.
Consumers so loathe waiting in line at checkout that half of all shoppers avoid entering stores with long lines, according to data from RetailCustomerExperience.com, a Web portal for retailers. Additionally, one-third of shoppers who enter a store will leave without buying if they think checkout will take longer than seven minutes.
That’s a lot of lost traffic and sales. To reduce friction and speed up service at checkout, retailers are looking at ways to marry more aspects of the e-commerce shopping experience to the physical point of sale.
The strategy, called cashierless checkout, goes way beyond the convenience of tap-and-pay mobile wallets. Amazon.com Inc. is the best-known developer of cashierless technology, but now a growing number of retailers of varying sizes are experimenting with the idea.
Some chains have for years deployed self-scanning systems, but these still require customers to show a receipt on their way out. Cashierless checkout enables a consumer to walk into a store, scan items into a virtual shopping cart with her phone, pay using her mobile wallet from anywhere in the store, then exit the store without ever stepping into a checkout lane.
Retailers are betting that enabling consumers to completely bypass checkout will create a more delightful in-store shopping experience that increases customer loyalty, frequency of visits, and, of course, sales.
“Two of the biggest sticking points for consumers when it comes to shopping in stores is parking and lines at checkout,” says Paul Zaengle, executive vice president, direct-to-consumer for Stance, a San Clemente, Calif.-based based apparel retailer that has rolled out cashierless checkout across its 14 stores. “We can’t do anything about making parking more convenient, but we can do something about removing the friction from checkout.”
The list of retailers lining up behind cashierless checkout includes some of the biggest brands in retail, such as Kroger, Macy’s, Meijer, Sam’s Club, and 7-Eleven in the United States and Tesco in the United Kingdom. But the biggest change agent so far is Amazon.
The king of e-commerce is already making noise with Amazon Go, automated grocery/convenience stores selling pre-packaged foods and beverages that feature no cashiers or checkout lanes.
Amazon Go stores are built from the ground up. Amazon buys a retail space, typically in a high-traffic area, then strips it to the studs. Next, it installs the technology, including cameras and computer-vision software that track a shopper’s every move from entry to exit, along with sensors that recognize any item placed in a shopping basket or returned to the shelf.
This process makes it easier to eliminate potential bugs in the system, which increases reliability, since there is no need to integrate with a store’s legacy systems.
To shop at an Amazon Go store, a consumer must download the Go app and scan a barcode from the app on her phone’s screen upon entering the store. Every time a shopper places an item in her physical basket, it is recorded in a virtual shopping cart assigned to her upon entering the store.
The cost of each item is captured on an in-store server and a running tally of the shopper’s bill is kept. When finished shopping, the consumer exits and her purchase is automatically charged to her Amazon account. Amazon refers to the experience as “Just Walk Out Shopping.”
Amazon, which launched the first Amazon Go store in Seattle in 2016 as a beta site for its employees, began opening stores to the public last year. As of March, the e-commerce behemoth had 11 locations in Seattle, San Francisco, and Chicago, and planned to open a store in New York City. Many more are coming: The retailer reportedly intends to open 3,000 stores by 2021.
Amazon, which declined comment for this story, has previously said it spent several years developing the technologies for Amazon Go, some of which are similar to the gear used in driverless cars. Amazon has yet to reveal how much it spent developing the technology.
The stores are relatively small, given the extensive—and expensive—web of technology needed to make the system work. But with no checkout lanes or need for cashiers, Amazon Go has immense potential to disrupt retail, experts say.
“The Amazon Go experience isn’t evolutionary, it’s revolutionary, because it changes the way people think about in-store experiences,” says John Bruno, vice president of product management at Elastic Path, a Vancouver, British Columbia-based provider of e-commerce applications. “With plans to open up 3,000 stores by 2021, it’s safe to say Amazon will have a similar effect on the offline-buyer experience as it has had on the online-buying experience.”
Just as eye-popping is the potential transaction volume through its digital wallet that Amazon could rack up, provided it reaches its store-count target. A January research brief by RBC Capital Markets analyst Mark Mahaney estimates that each store generates between $1.1 million and $1.95 million per year.
Figuring an average of $1.5 million in sales per store annually, Amazon is potentially looking at $4.5 billion in sales through those 3,000 locations.
Mahaney also estimates that between 400 and 700 customers visit an Amazon Go store daily, generating an average ticket of $10. During a trial visit by Mahaney’s team to a Go store in San Francisco, it took as little as 44 seconds and as long as four minutes to shop and check out, with an average per-visit time of two minutes and 33 seconds. As a disclaimer, Mahaney says some team members did spend a minute or two browsing in the store.
“[Amazon Go’s] in-store technology enables shoppers to have a very efficient and pleasant shopping experience,” Mahaney says in the brief. “While not a significant financial contributor yet, we believe the overall opportunity is huge.”
‘Yet Another Option’
The potential sales volume and shopping efficiency of cashierless checkout has sent other retailers scrambling to catch up, though with departures from, and variations on, the Amazon technology.
Last month, supercenter chain Meijer Inc. announced it was rolling out its Shop & Scan mobile-shopping and checkout program to 23 stores in the Chicago area and Northwest Indiana. This comes after the company tested the technology in its home state of Michigan, where 31 stores are reportedly using it.
Grand Rapids-based Meijer re-quires shoppers to download its Scan & Pay app before it can be used in-store. Shoppers scan items’ bar codes using their phone, and a running total of the purchases is shown in a virtual shopping cart in the app.
When finished, the shopper scans her phone at the self-checkout lane, pays, and bags her items. Shoppers have the option of placing items in reusable shopping bags as they move through the store to eliminate bagging at checkout.
When the technology debuted in April 2018, Meijer’s chief information officer, Terry Ledbetter, said in a prepared statement that the retailer views the technology as “yet another option for Meijer customers to personalize their shopping experience” along with the retailer’s curbside-pickup and home-delivery programs.
While Meijer executives were unavailable for comment about expansion plans for Scan & Pay, the chain reportedly plans to roll Scan & Pay out to all its 235 locations. The Shop & Scan app is available at Apple and Android stores.
Unknowns And Uncertainties
One reason Meijer and other retailers deploying cashierless checkout are opting for app-based solutions is cost efficiency. The cost of an Amazon Go store, which can range in size from 1,700 to 2,400 square feet, is reportedly at least $1 million dollars.
“While Amazon can afford to spend that kind of money per location, most retailers can’t,” says Ken Morris, principal for Boston-based BRP Consulting. “Self-service technology can be an expensive proposition for retailers, just look at in-store kiosks. But if the phone can be the gateway to a frictionless checkout environment, it’s worth a look, provided it can deliver the adoption levels needed to make it work.”
While there are no hard figures on what it costs to develop a cashierless-checkout app that consumers download or access through their browser, estimates range from as little as $50,000 to several hundred thousand dollars, payments experts say.
The unknowns around cost and adoption levels are why so many flavors of cashierless checkout have emerged.
Indeed, uncertainties about app- based systems are a big reason Stance opted to deploy browser-based technology from Boston-based Moltin Ltd.
“When we decided to move into cashierless checkout, we sought a cost-effective solution and realized that only the most loyal customers would download our app, because most consumers are suffering from app fatigue on their phone,” Stance’s Zaengle says. “With a URL-based system, anyone entering the store can access cashierless checkout.”
Plus, it’s the kind of economical solution the small but growing retailer sought. Stance decided to make the move to cashierless checkout two Christmas-shopping seasons ago when it noticed holiday shoppers getting bogged down in the checkout line at the six stores it had then.
Shoppers entering a Stance store are greeted with signage promoting cashierless checkout and the URL to access it. Once connected via their phone’s browser, shoppers can scan items into their shopping cart. At checkout, shoppers have two payment options, their mobile wallet, if they have one, or Stripe, a San Francisco-based online payments processor. Stripe recently made its processing software compatible with point-of-sale hardware devices.
Part of what sold Stance on Moltin’s cashierless technology was that it could have a hand in developing the consumer interface, Zaengle says.
“We’ve worked closely with other retailers in other segments, such as pop-up stores,” says Jamus Driscoll, chief executive at Moltin. “Stance takes a customer-first approach and this technology is about making the customer experience more delightful. This isn’t a way to shop faster, it’s part of the overlay of the digital experience in stores.”
‘Giving up Control’
Delivering what consumers want when it comes to cashierless checkout is going to be critical. Retailers in general, especially those operating on slim margins, such as grocers and convenience stores (which earn a 1% to 2% margin per sale), are notorious for hanging on to their point-of-sale infrastructure.
The reason, payment experts say, is that when the cost of adding new technology is multiplied across hundreds of stores, the financial outlay adds up quick.
That’s why brandable, white-label applications developed for a general audience are viewed by retailers as more cost-friendly than Amazon’s customized approach.
The downside is that white-label solutions deny retailers the chance to use the technology as a point of differentiation, since it is essentially the same as that of any competitor using the same app.
“A lot of retailers rely on fintech startups developing generic systems to get new technology implemented, but that means giving up control because the technology is not unique to a retailer’s business, like Amazon Go,” says Richard Crone, principal at Crone Consulting LLC, a San Carlos, Calif.-based financial-services consultancy.
Adopting white-label solutions also raises questions about their reliability and scalability. The biggest question surrounding white-label cashierless checkout apps is whether the barcode of every item scanned can be matched to that of the item put in the shopper’s physical cart.
Without a cashier to check items before the customer leaves the store, what’s to prevent a user from scanning a lower-priced item and placing a higher-priced alternative in her cart, payment experts ask.
Questions have also been raised about how well white-label technology can handle non-packaged items that need to be weighed to determine a price, such as produce or items requiring identification for purchase, such as tobacco and liquor.
Other questions include how retailers will move consumers through checkout if the technology breaks down and who will be available to fix the problem in the event of a glitch.
Bottomline, says Mark Bunney, U.S.-based director, go-to-market, for Paris-based POS-terminal maker Ingenico, no technology is perfect.
“Any technology can break down,” he says. “But before the technology can be deployed, it has to be cost-effective. That’s why there are different flavors of cashierless checkout, because what works for one retailer is not going to work for another.”
One tactic to guard against a system failure is redundancy. Grabango, a Berkeley, Calif.-based provider of a cloud-based cashierless technology that does not require shoppers to download an app, claims to have full redundancy for its hardware and software.
“If one camera or server goes down, we have the hardware and software redundancy to keep the system up and running,” says Andy Radlow, vice president of marketing.
Grabango recently received $12 million in venture capital, bringing its total funding to $18 million, a sign that investors are getting behind cashierless checkout.
Spending at retailers deploying cashierless checkout is projected to grow to more than $45 billion by 2023, up from an estimated $253 million in 2018, according to Hampshire, United Kingdom-based Juniper Research.
The majority of cashierless transactions during that period are expected to take place in convenience and general-retail stores, with an average ticket of about $30, Juniper says.
Who Will Succeed?
Whether cashierless checkout takes hold is up to the consumer, payments experts say. Since e-commerce became a mainstream shopping channel, merchants have tried many ways to re-invent the in-store experience, and not always successfully.
“The concept of cashierless check- out is not new, it was put forth more than a decade ago as part of the retail store of the future, which led to self-scanning and payment technology,” says Bunney. “Retailers are looking to unify the in-store experience and e-commerce with cashierless checkout, but the technology is still too new and imperfect.”
So who will succeed? Says Bunney: “The retailers that succeed will be the ones that think about consistently tying the online and mobile experiences together with the in-store shopping experience.”