Checkout-free Stores: Challenges and the Way Ahead

Retailers are focusing on differentiated propositions at every stage of the omnichannel journey to sweeten the pot for customers seeking superior shopping experiences. But all their endeavors come to a naught at the customer’s last touchpoint at the store—the checkout—forcing merchants to innovate and offer a plethora of options, from mobile wallets to scan-and-go to checkout-free stores, the ultimate in frictionless retail.

The idea of walking in, making a purchase, and walking out without any checkout is appealing, but such an experience at the neighborhood retail store is still some distance away. The inherent challenges of scaling the rollout of such stores are huge.

Challenge 1: Huge technology investments

Enabling an experience that offers complete autonomy to customers involves a hefty price tag. It needs an array of cameras and sensors to cover the store and specialized video-processing hardware to track customer behavior, besides backend cloud technology and integration with multiple software systems.

While such a setup is currently best suited for convenience and small-format grocery stores, scaling it up for larger formats—with store layouts spanning thousands of square feet and over a million SKUs—can be quite expensive. Moreover, since the artificial intelligence and machine learning (AI-ML) techniques for checkout-free stores is still at the nascent stage, results will not be always accurate. However, as adoption becomes mainstream, technology costs are likely to come down and accuracy may improve.

Challenge 2: Inclusivity

Amazon is pushing the idea of checkout-free stores through Amazon Go. But access to the stores is limited to people having smartphone and an Amazon account with credit card details. This excludes people without smartphones or credit cards. Also, senior citizens visiting the stores may require assistance, for instance, to reach the top of the shelves or carry a heavy bag. Similarly, without assistance, those who are differently abled or have limited mobility might not find a fully autonomous store friendly.

Challenge 3: Data privacy

While customers are primed for fully autonomous stores, deep surveillance and analysis do not necessarily involve individual consent. With cameras and video analysis powered by sophisticated AI-ML algorithms monitoring and tracking every move, retailers will be privy to a huge amount of customer data. Companies will have to be more forthcoming in their disclosure and efforts to protect customer data to overcome privacy concerns.

Challenge 4: Socialization hurdles

Going to a store is as much about socializing and experiences as it is about shopping—the occasional hello with fellow shoppers, helping someone, or small talk with the cashier as your purchases are bagged. While checkout-free technology per se does not prohibit interaction, retailers have come up with guardrails. For instance, Amazon Go cautions shoppers may be charged for helping someone struggling to reach the top of the shelf, increasing isolation among shoppers. When customers are shopping as a family, they are likely to tell their kids not to interact much or help anyone else in the store.

Challenge 5: Fear of large-scale job cuts

Just as autonomous cars threaten drivers’ jobs, checkout-free stores are seen as portending job loss for millions of cashiers. As associates will be required only for greeting or answering customer queries, and stocking shelves, the job cuts may be deep. With future store automation technologies in the pipeline, the number of jobs at risks may go up manifold. In the absence of viable alternatives to this potential crisis, retailers might face stringent regulations, thwarting large-scale adoption of checkout-free stores.

Every cloud has a silver lining

Despite the challenges, checkout-free stores offer a glimpse of future retail, scoring highly on user experience, convenience, speed, and safety, especially during vulnerable times. Technology providers are aware of some of these hurdles and are working to overcome them. For instance, Imagr, a New Zealand-based start-up, is piloting a new approach of tracking and scanning items in the customer’s cart rather than people. This shift from ‘people’ to ‘products’, combined with a simple and clear data privacy policy, will reduce data privacy concerns and eliminate socialization hurdles. Smart tweaks in the store design (making it more friendly for differently abled) and innovation in payment methods can help integrate cash and government coupons or vouchers. Apprehensions about job loss may also be misplaced as history suggests technology creates more jobs than it destroys.

Conclusion

Checkout-free stores are inevitable as shoppers expect retailers to make their lives not only easier but also safer, especially in a crisis like COVID. They are likely to be a big boon especially for countries like Japan with aging population, labor shortage, or high labor costs. However, many challenges have to be surmounted for checkout-free stores to become ubiquitous. Innovators will have to come up with a holistic strategy that will go beyond customer experience and cost savings to ensure it is a win-win for all.