Is 'Just Walk Out' the new showrooming?

Mobile technology continues to challenge brick-and-mortar stores on multiple fronts, forcing retailers to adapt to digital-first consumers. A March 2019 survey of 3,200 Asian shoppers by Transcosmos Inc. found 62 percent of respondents examine products in physical stores before ordering them online.

Retail analysts have noted the practice, known as showrooming or webrooming, initially threatened to turn physical stores into warehouses, but retailers fought back with price-matching; buy online, pickup in store (BOPUS); and various omnichannel strategies.

Cashierless technology platforms pose a new threat to brick-and-mortar merchants, according to Richard Crone, CEO at Crone Consulting LLC. Powered by artificial intelligence, the technology enables consumers to autonomously check in when they enter a store, scan items with their smartphones and automatically check out when they leave. While the technology is attracting positive reviews and investment capital, third-party service providers could potentially turn stores into warehouses, Crone warned.

Autonomous check-in facilitates personalization in a store by continuously learning consumers' behavior and product preferences, Crone stated. Retailers that control in-store search data can command premium advertising rates from consumer packaged goods (CPG) brands and product manufacturers that stock their shelves. Retailers must control autonomous check-ins and not allow third-party service providers to disintermediate the process, he added.

"Third-party service providers with access to a retailer's SKUs and in-store search data can charge retailers up to 30 percent to complete a transaction on their platforms," Crone said. "This is disruptive because many retailers make more money from slotting, placement and trade promotion fees from CPGs, brands and product manufacturers than they do in profit."

Fast food chains vulnerable

In an article titled "Amazon Will Consider Opening Up to 3,000 Cashierless Convenience Stores by 2021," Bloomberg journalist Spencer Soper reported that Amazon Inc. sees reinventing the brick-and-mortar store experience as a long game, and Amazon CEO Jeff Bezos "is willing to lose money on long-term initiatives when he smells opportunity," as he has previously done with Amazon Web Services and international expansion in general.

Noting that Amazon is targeting high-density urban areas, Soper suggested that AmazonGo may take market share from Quick Serve Restaurants by offering speed and convenience to affluent young residents. "The target locations make it less of a threat to suburban gas station-convenience store combinations and more of a threat to big cities' quick-service eateries, such as Subway Restaurants, Panera Bread Co. and Pret a Manger," he wrote, citing chains that offer "fresh, healthy grab-and-go foods."

Jeff Lenard, vice president, strategic initiatives, at the National Association of Convenience Stores, agreed AmazonGo could threaten urban fast-casual restaurants, stating, "AmazonGo already has no lines. The key to success will be convenient locations."

Check-in is the new checkout

Crone warned retailers against participating in proof-of-concept pilots without first defining their check-in strategies. "Doing nothing is not a strategy," he said. "Unicorn startups that control the personalization and user interface will turn a participating retailer into a warehouse, essentially eroding their franchise value."

Like Uber and Lyft, these startups need massive amounts of capital to seed the market for autonomous checkout, he explained. Several, with deep pockets, have launched free proof-of-concept pilots with leading retailers in exchange for the most precious ingredient in artificial intelligence: the data. The more AmazonGo sees, the smarter it gets, and the smarter it gets, the more it sees, Crone noted.

There is a distinct viewer-first advantage in the autonomous checkout game, Crone stated. Retailers who understand a pre-authorized, known customer before checkout can significantly enhance that customer's experience across multiple channels with curated, personalized offers. "That is why 'check-in' is the new 'checkout,'" he concluded.

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