With news this past week that Amazon has taken its “Just Walk Out” technology to Whole Foods, it is time to call it like it is.
Amazon’s “Just Walk Out” tech will soon be looked upon as the greatest retail innovation of the next 30 years.
The award won’t go to voice commerce. It won’t go to Zuck’s metaverse. It will go to the technology platform that first debuted inside of a small Amazon Go store in January 2018, forever offering the world a first glimpse of what checkout-free retail could and should look like.
This isn’t to say that voice or the metaverse won’t have their day in the sun at some point, too. It is just that Amazon Go is in the here and the now. What could be coming from either of them is still way too far off in the distance and likely to come, at best, in the next 30 year cycle of retail innovation.
And, make no mistake, the above mentioned “30 year cycle” matters within the context of this conversation.
Because retail innovation cycles like clockwork. Specifically, every 30 to 40 years some new invention comes around that throws retail on its head. It is a pattern that likely goes back to the dawn of time, possibly even as far back as when Jesus Christ himself first overturned the tables in the temple.
Saving the long drawn out history lesson though, one need only look back to the late 1800s to see the cycle clearly. In and around 1890, Sears debuted its first catalog. Then, in the 1920s, following the rise of the American automobile, Sears once again built its first department store in Chicago. In the 1960s, you had the dawn of the mass merchant supercenters, aka the Walmarts, the Kmarts, and the Targets of the world. And then, finally, in the 1990s you had e-commerce, aka Amazon.
Thus, that next “something” is due to shake up retail, and it is absolutely crazy to think that it could be Amazon who leaves its mark for the second 30 year cycle in a row.
One can dismiss the idea all he or she wants, but the case for why Amazon Go and its “Just Walk Out” technology platform will be the next great innovation in retail is about as straightforward and well-defined as Brad Pitt’s abs:
Reason #1 – Math
Physical stores still dominate retail. Despite the pandemic, which forced everyone to shut their doors and to order more goods from e-commerce than ever before, physical stores didn’t go anywhere. They still make up 60% to 70% of overall retail sales.
In contrast, something like the metaverse stands more likely to take a slice out of e-commerce sales than it does out of physical stores. Therefore, when attributing something as “the greatest retail innovation of the next 30 years,” it is important to keep the base of sales that the technology will impact in mind.
Amazon’s “Just Walk Out” technology (henceforth abbreviated as JWO) stands to impact grocery store shopping, convenience store shopping, and, if Amazon’s latest foray into physical fashion retailing is any indication, apparel shopping as well.
Whether by way of Amazon deploying JWO tech for its own initiatives, licensing the tech to others, or from copycat solutions providers licensing it within these same verticals, the pie is so large that the impacted store sales stand to trump any digitally-oriented shopping innovation hands down.
Reason #2 – It creates a better shopping experience
Amazon’s JWO technology just makes shopping easier and more convenient, plain and simple.
How it works is so intuitive in its design – customers take out their phones, scan a barcode to enter a store, take whatever they want off the shelves, and just walk out and pay electronically, like they are getting out of an Uber or a Lyft, without ever having to stand in line again.
Or, better yet, in some instances, Amazon even lets you just wave your palm to enter the store, which is about the coolest thing out there, especially when shopping with kids in tow.
Amazon bets on universal truths, and the idea that no one wants to spend any time waiting in line to pay is about as universal as it gets, like on par with Brad Pitt being handsome.
Try it. And, then ask yourself, if you had the same experience at your favorite grocery store, say at a Tesco, an Aldi, or even at a Circle K (the companies on the forefront of deploying Amazon-like tech themselves), and all else being equal, wouldn’t you choose the ability to walk out without standing in line every time?
You damn well know you would and are lying to yourself if you think otherwise.
Reason #3 – It leads to better omnichannel operations
One point oftentimes left out of the discussion of JWO technology is that it is, in reality, about far more than the checkout-free experience. It is also about streamlining the retailer’s store operations.
With cameras in the ceilings capturing everything that is going on in a given store, the technology platform gives unprecedented real-time visibility to inventory, at all times. In layman’s terms, this statement means that retailers can be more confident in their inventory levels on shelf and also be more secure in knowing if that inventory happens to be in the right place to maximize sales. Studies show that inventory accuracy in physical retail stores averages between 60% and 70%. Whereas with JWO technology, to operate efficiently, that figure has to be in the high 90s.
However, there is another benefit from improved inventory accuracy that goes far beyond just more accurate inventory counts and more assured inventory placement – namely, enhanced omnichannel capabilities.
As retailers look to ship from store or to offer buy online, pickup in store or at curbside to their customers, the inventory inaccuracies discussed above hamstring these efforts. Far too often this situation leads to canceled orders or requests for substitutions.
All of which has the potential to go away in stores where JWO tech is deployed.
Reason #4 – It better aligns supply to demand
Going back to my ECON 101 days, economies are most efficient when supply is appropriately matched to demand, and that is exactly what can happen inside of an Amazon Go-style store relative to any other physical shopping experience.
By knowing what is on shelf at all times and through the use of electronic shelf labels, retailers can see what inventory they have on shelf and adjust prices accordingly. Have too much inventory? Then they can mark items down or place them on promotion. Too little? Then they can also raise prices in real-time.
Net/net – the whole thing should mean more goods in the hands of people when they need them most, and oftentimes at even better prices than they would get normally, too.
In many ways, it is how online works today, just brought to life inside of a physical store for the first time.
Reason #5 – It creates better advertising relevancy
Finally, the last reason why JWO technology is so powerful is that it digitizes a retailer’s understanding of the physical store much in the same way that retailers currently understand e-commerce.
In e-commerce, retailers know every page their customers browse, every item they add to their carts, which items they actually buy, and so on and so on. In physical retail stores, retailers know none of this information. All they know is what happens at the end of the experience as items are rung up at the till.
JWO tech changes the dynamics of the game because it knows everything a customer does in a physical store, e.g. what aisles they go down, what items they pick up off the shelf and don’t buy, and even how long they might take to look at the local Sunday circular on display in the entry vestibule.
All of which means that this data can make the advertising retailers serve up to their customers at home, out of home, or in the store itself more relevant to their customers in the moments they want it most. The customer wins in this situation and so, too, does the retailer.
And, side note, this discussion is also why Amazon’s recently released ad revenue figures of $31 billion annually is just the tip of the iceberg.
So there you have it – better operations, better pricing, better relevancy, and an overall better experience bolstered by math on the side of progress.
While the preceding sentence may sound like the tagline to a Papa John’s commercial, it should be taken as seriously as a heart attack because the retail industry will be hard pressed to find another retail innovation that checks as many boxes as Amazon’s JWO tech does.
In the end, it is funny how history repeats itself.
Sears went from leading the way with its catalog in the late 1800s to rolling out department stores in the 1920s, and one could argue that e-commerce, roughly 100 years later, was just a better, refashioning of a catalog shopping experience, one which Amazon played a huge role in defining.
Will Amazon similarly define the technological foundations of physical retailing for the rest of the century? Will Amazon Go’s “Just Walk Platform” be the standard by which all physical retail shopping experiences are eventually judged?
Is Brad Pitt good looking?