Retailers Race Against Amazon to Automate Stores
Retailers Race Against Amazon to Automate Stores
By NICK WINGFIELD, PAUL MOZUR and MICHAEL CORKERY APRIL
1, 2018
SEATTLE — To see what it’s like inside stores where
sensors and artificial intelligence have replaced cashiers, shoppers have to
trek to Amazon Go, the internet retailer’s experimental convenience shop in
downtown Seattle.
Soon, though, more technology-driven businesses like
Amazon Go may be coming to them.
A global race to automate stores is underway among
several of the world’s top retailers and small tech start-ups, which are
motivated to shave labor costs and minimize shoppers’ frustrations, like
waiting for cashiers. They are also trying to prevent Amazon from dominating
the physical retail world as it does online shopping.
Companies are testing robots that help keep shelves
stocked, as well as apps that let shoppers ring up items with a smartphone.
High-tech systems like the one used by Amazon Go completely automate the
checkout process. China, which has its own ambitious e-commerce companies, is
emerging as an especially fertile place for these retail experiments.
If they succeed, these new technologies could add further
uncertainty to the retail work force, which is already in flux because of the
growth of online shopping. An analysis last year by the World Economic Forum
said 30 to 50 percent of the world’s retail jobs could be at risk once
technologies like automated checkout were fully embraced.
In addition, the efforts have raised concerns among
privacy researchers because of the mounds of data that retailers will be able
to gather about shopper behavior as they digitize their locations. Inside
Amazon Go, for instance, the cameras never lose sight of a customer once he or
she enters the shop.
Retailers had adopted technologies in their stores long
before Amazon Go arrived on the scene. Self-checkout kiosks have been common in
supermarkets and other stores for years. Kroger, the grocery chain, uses
sensors and predictive analytics tools to better anticipate when more cashiers
will be needed.
But the opening of Amazon Go in January was alarming for
many retailers, who saw a sudden willingness by Amazon to wield its technology
power in new ways. Hundreds of cameras near the ceiling and sensors in the
shelves help automatically tally the cookies, chips and soda that shoppers
remove and put into their bags. Shoppers’ accounts are charged as they walk out
the doors.
Amazon is now looking to expand Go to new areas. An
Amazon spokeswoman declined to comment on its expansion plans, but the company
has a job posting for a senior real estate manager who will be responsible for
“site selection and acquisition” and field tours of “potential locations” for
new Go stores.
“Unanimously, there was an element of embarrassment
because here is an online retailer showing us how to do brick and mortar, and
frankly doing it amazingly well,” said Martin Hitch, the chief business officer
of Bossa Nova Robotics, a company that makes inventory management robots that
Walmart and others are testing.
Nowhere are retailers experimenting more avidly with
automating store shopping than in China, a country obsessed by new tech fads.
One effort is a chain of more than 100 unmanned
convenience shops from a start-up called Bingo Box, one of which sits in a
business park in Shanghai. Shoppers scan a code on their phones to enter and,
once inside, scan the items they want to buy. The store unlocks the exit door
after they’ve paid through their phones.
Alibaba, one of China’s largest internet companies, has
opened 35 of its Hema automated grocery stores, which blend online ordering
with automated checkout. Customers scan their groceries at checkout kiosks,
using facial recognition to pay electronically, while bags of groceries ordered
by customers online float overhead on aerial conveyors, headed to a loading
dock for delivery to shoppers.
Not to be outdone, JD, another big internet retailer in
China, said in December that it had teamed up with a developer to build
hundreds of its own unmanned convenience shops. The businesses put readable
chips on items to automate the checkout process.
At its huge campus south of Beijing, JD is testing a new
store that relies on computer vision and sensors on the shelves to know when
items have been taken. The system tracks shopping without tagging products with
chips. Payment, which for now still happens at a kiosk, is done with facial
recognition.
JD and Alibaba both plan to sell their systems to other
retailers and are working on additional checkout technologies.
Back in the United States, Walmart, the world’s largest
retailer, is testing out the Bossa Nova robots in dozens of its locations to
reduce some tedious tasks that can eat up a worker’s time. The robots, which
look like giant wheeled luggage bags, roll up and down the aisles looking for
shelves where cereal boxes are out of stock and items like toys are mislabeled.
The machines then report back to workers, who restock the shelves and apply new
labels.
At 120 of Walmart’s 4,700 American stores, shoppers can
also scan items, including fruits and vegetables, using the camera on their
smartphones and pay for them using the devices. When customers walk out, an
employee checks their receipts and does a “spot check” of the items they
bought.
Kroger, one of the country’s largest grocery chains, has
also been testing a mobile scanning service in its supermarkets, recently
announcing that it would expand it to 400 of its more 2,700 stores.
New start-ups are seeking to give retailers the
technology to compete with Amazon’s system. One of them, AiFi, is working on
cashierless checkout technology that it says will be flexible and affordable
enough that mom-and-pop retailers and bigger outlets can use it. In the United
States, venture capitalists put $100 million into retail automation start-ups
in each of the past two years, up from about $64 million in 2015, according
Pitchbook, a financial data firm.
“There’s a gold rush feeling about this,” said Alan
O’Herlihy, chief executive of Everseen, an Irish company working with retailers
on automated checkout technology that uses artificial intelligence.
While such technologies could improve the shopping
experience, there may also be consequences that people find less desirable.
Retailers like Amazon could compile reams of data about where customers spend
time inside their doors, comparable to what internet companies already know
about their online habits.
“It’s combined with everything else Amazon might know
about you,” said Gennie Gebhart, a researcher at the Electronic Frontier
Foundation, an online civil liberties organization. “Amazon knows what I buy
online, what I watch and now how I move around a space.”
In China, there is less public concern about data privacy
issues. Many Chinese citizens have become accustomed to high levels of
surveillance, including widespread security cameras and government monitoring
of online communications.
Depending on how heavily retailers automate in the years
to come, job losses could be severe in a sector that has already experienced
wave after wave of store closings by the likes of Macy’s, Toys “R” Us and
Sears.
Retailers are playing down the threat to jobs. Walmart,
the largest private employer in the United States, says that it does not
anticipate automation will lead to job losses, but rather that the new
technologies are meant to redirect employees to spend more time helping
customers find what they need.
“We see this as helping our associates,” said John
Crecelius, vice president of central operations at Walmart. “We are a
people-led business that is technology enabled.”
Some traditional retailers are also skeptical about
whether the sort of automation in Amazon Go can move to large stores. They say
the technology may not work or be cost effective outside a store with a small
footprint and inventory.
“That’s probably not scalable to a 120,000-square-foot
store,” said Chris Hjelm, executive vice president and chief information
officer at Kroger.
But he said it was just a matter of time before more
cameras and sensors were commonplace in stores. “It’s a few years out,” he
said, “before that technology becomes mainstream.”
Nick Wingfield reported from Seattle, Paul Mozur from
Shanghai, and Michael Corkery from New York.
A version of this article appears in print on April 2,
2018, on Page B1 of the New York edition with the headline: Retail Races to
Automate.
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