Hey retailers, it might be time to ditch your stores, move your inventory to the metaverse, replace your staff with robots, switch from cash to crypto and invest all your profits in some blockchains.
But before you do, it might be worth stopping to consider all the technological utopias that have not come to pass.
Operational complexity, low margins and the eagerness to please hard-to-please consumers makes retail an ideal industry for marketing new technologies, both practical and fanciful.
The turbulence in the industry and jitters around Amazon’s rapid growth last decade has driven smart technological adoption like new inventory management systems, as well as lots of splashy experimentation that hasn’t come to much.
There’s more than a few technologies that, a few years ago, set retail observers and insiders abuzz with excitement. Some of them have taken longer to come to market or catch on than initially thought. Others simply proved less convenient or useful than advertised.
Below we look at just a few technological revolutions that are taking a little longer than boosters and techno-optimists anticipated, and might not ever advance like once thought.
1. Just-Walk-Out’s slow walk
In September 2018, Bloomberg published a story with the headline “Amazon Said to Plan Up to 3000 Cashierless Stores by 2021.”
At the time, the e-commerce giant had just a handful of the small-format Go stores. One of their main selling points was their just-walk-out payment technology, which allows customers to, well, just walk out of the store with their items. No stop at a cashier’s lane or even a self-checkout terminal. Go in, pick your stuff, walk out. Easier than easy.
Such an expansion would have made Amazon one of the largest convenience store operator’s nearly overnight. But it never happened.
At the time of this writing, Amazon has just 27 Amazon Go locations. The expansion of its cashierless technology has become broader than Amazon Go, but not that much broader. It has more than 40 locations of its Amazon Fresh grocery concept, which incorporates the cashierless technology, and the company also added the tech to its first Whole Foods this year. Most of those stores are in large, wealthy markets.
Amazon is not the only maker of the technology. Others, such as startup Trigo, have also developed just-walk-out payment systems. Even so, just-walk-out stores are nowhere near ubiquitous or even very common as of yet.
So what happened? Why hasn’t the country become a utopia of frictionless convenience, with not even a few button pushes standing between consumers and the transfer of their money to retailers? There are a few obstacles between reality and the mass adoption of this supposedly friction-free form of shopping.
A team from Alvarez & Marsal noted in a recent paper that first-time use by customers of just-walk-out technology can require “a little bit of patience.”
The Alvarez & Marsal team found that barcodes for goods on the Amazon app, for example, “took longer than it (probably) should have,” and they observed a crowd of five or six customers at the entryway an Amazon Go store who appeared to be “struggling in their own ways to determine how to enter the shop.”
At one of Amazon’s Whole Foods stores using the just-out-walk technology, the Alvarez & Marsal team were able to “trick” the system — by moving items around, returning them, returning them to the wrong spots and so forth — into ringing up four wrong items out of 19 on checkout, an error rate of over 20%.
“I went in, and I took my organic avocado, and I walked around the store and I stacked it with the conventional avocado. And then I switched,” John Clear, director in Alvarez & Marsal’s consumer retail group, and one of the study’s authors, said in an interview. “I did all that kind of stuff to try and get the cheaper stuff for the customer.”
While customers might not mind an error in their favor (the A&M team also found errors in the store’s favor as well), such mistakes by the system can inhibit retailers from using the technology.
Shrink is a major profit suck for retailers, and just-walk-out technology holds the promise of a solution, but whether it has fulfilled that promise is still an open question.
“In theory, this is a shrink killer,” Clear said. “You track the product the entire way through the store, and customers can't get it unless you have their credit card number on file. It's pretty difficult to steal, right?”
It’s not entirely clear today just how much the system is able to eliminate shrink, though. Amazon doesn’t disclose shrink numbers from its just-walk-out stores. And Clear pointed out that other firms that specialize in just-walk-out technology haven’t put a ton of emphasis on shrink elimination when marketing to retailers.
“I would have expected that they would put that front and center as a benefit,” Clear said. “But right now they haven't. So, it may not be impacting shrink as much as they expected.”
If using just-walk-out technology is difficult for customers at first, for a retailer it is exponentially more challenging to implement, and costly.
“It's an extremely expensive technology to employ. And I just think that is a major barrier to adoption,” Neil Saunders, managing director with GlobalData, said in an interview. “In a small store, it's expensive, but it kind of works. You think about a larger store like Walmart, how on earth do you deploy it? It would be an absolute nightmare from a cost perspective.”
For consumers, Saunders said that “I don't think most people are like, ‘You know what, it saves me four or five minutes of my time in the grocery store by not having to line up, I will therefore use this retailer.’”
Even with the challenges, Clear thinks broader adoption of just-walk-out is inevitable. “This is a when, not if, conversation,” Clear said, pointing to retailer’s struggles to procure enough labor in stores as well as the potential cost savings. “The retailers who are proactive stand the best chance to succeed in the long run, which is why you see innovative companies already looking at it in such detail.”
2. Alexa, how about you leave the shopping to us?
Like just-walk-out technology, shopping via virtual assistant promised a revolution in convenience for shoppers. Rather than typing words into a search bar and going through a digital checkout, a robot named Alexa or Siri or Google could do all the ostensibly arduous work of online shopping for you. In the most breathless imaginings, smart speakers and voice assistants can act as (algorithmic, corporate-controlled) personal shoppers and stylists.
But voice shopping, depending on a customer’s goals and preferences, can also introduce a host of new, unintended complications and frictions through its essential features, starting with its verbal nature.
“Shopping is very visual. People like to see products they're buying, especially with things like fashion but even some very simple things,” Saunders said.
He added: “If you say to Alexa, ‘Oh, reorder batteries’ — there's lots of questions over that. What batteries? What brand are they? How big is the pack size? What is the price? All of those things are very easy to do online, they're very easy just to quickly look on a website and make a choice. With voice shopping, it's actually very difficult to make that choice and selection because you don't get all the information you need.”
One study from 2018 found that 35% of voice assistant users had purchased products through the technology, and it projected that 40% of consumers would use the technology as an alternative form of purchasing versus mobile apps and websites.
For now, though, adoption is still fairly modest. In one of its most recent voice commerce surveys, payments publication PYMNTS found that 26% of consumers had used a voice assistant to make e-commerce purchases in May — a figure that has trended upward over time but is still short of some past projections. A survey from Commerce Next found that only 8% of consumers regularly purchase via voice assistant when shopping online.
At their most practical, voice assistants could save time and effort on repeat purchases. Adam Pressman, a managing director in AlixPartners’ retail practice, said in an interview that voice shopping might be a more attractive option for those purchases that are focused on replenishment, reordering or tracking the status of a purchase. “Where you run into more headwinds is in discovery, and searching and browsing and comparison,” Pressman said.
But reordering on many websites today is both easy and efficient. If the site has payment information for a customer already, it can easily take less than a minute.
Even for those simple tasks, many consumers may not be interested in shopping by voice. “You would in theory think, ‘Boy shopping is easier, because you can just do everything without having to scroll through websites,’” Saunders said. “It's actually more difficult. It actually puts a lot of friction in place. And I think that's one of the things that happens with a lot with technologies.”
Amazon may be rethinking its own technology. This company is reportedly laying off as many as 10,000 employees with a focus on its device division including Alexa.
3. Drones in a holding pattern
To look at the patent office files from 2017 and 2018, one might guess that Amazon and its rivals were engaging in a contest to see who might come up with the most science fiction-like concepts for e-commerce delivery.
Amazon, for example, described in some patent materials otherworldly possible machines, including a blimp-like aerial fulfillment center that would hypothetically float at 45,000 feet and serve as a launching station for drones to pick up and deliver packages to nearby customers as they placed orders.
Also consider Amazon’s drone “beehive,” a vertical fulfillment center design that would be a central station for delivery drone traffic. (Amazon also applied for patent technology to help drones respond to terrestrial signals such as screaming voices and frantic arm waving from future humans who might perhaps be trying to get out of the way of delivery drones.)
In 2013, Jeff Bezos predicted that Amazon’s drone delivery system could be operable in five years. But it’s been nearly 10 years since Bezos made that bold pronouncement, and Amazon and others are still testing technologies and systems that are still in their early stages. In everyday reality for the vast majority of consumers, packages are still dropped off by humans in trucks — and trucks that can’t even drive themselves at that.
Use of drones for delivery will likely depend on context. “The use case, like value of product, urgency of need, safety of delivery, all of those would need to factor in,” Pressman said.
Purchases like medications, where the urgency and value is high, could justify drone use more than others. Whether deployment of drones is a part of an overall last mile model or a core feature will also be a factor in their uptake, according to Pressman.
“I can see where it would have a component, but it’s not yet clear whether that becomes a primary vehicle or a complimentary vehicle, if you will,” Pressman said.
For all the setbacks and the elongated time frame, work is still being done on drone delivery. It’s hard to go through a quarter without a headline making test or development. Walmart is working with DroneUp to add more than 30 drone delivery sites by the end of the year that would give the retailer the ability to deliver 1 million packages per year by drone, David Guggina, senior vice president of innovation and automation at Walmart U.S, said earlier this year.
Amazon has also added locations for its (still-budding) drone delivery program, with the company adding drone delivery to two cities, in Texas and California, this year. The company also recently unveiled a new model of delivery drone, set to come into service in 2024.
4. ‘It’s just kind of dumb’: A failed robot uprising
More than five years ago, Retail Dive staff stood face to hangdog face with Pepper, a four-foot humanoid robot developed by SoftBank Group, walking the convention halls at NRF’s Big Show in 2017.
Pepper had already been deployed in stores around the world by that point. Its creators trumpeted the number of interactions it had with customers.
“You can extrapolate out, then — not only can Pepper walk you through a decision tree, but also calculate how many people walked by, how many people engaged, and how long they engaged for,” SoftBank Robotics’ general manager told Retail Dive in 2017. “And then, because we have emotional software built in, it can gauge your facial expression to get a sense of whether you were happy, were you not happy, so now you can start to gradiate those impressions.”
Along with the nuanced customer interactions, the technology promised to free up employees for other, more meaningful and valuable tasks while the robot took on the menial stuff.
Such has always been the process of automation and robots, which have, to be fair, taken on a lot of rote tasks over the decades. Since Retail Dive has been introduced to Pepper, the poor robot has reportedly been fired and assaulted, but mostly ignored in the U.S. Reuters reported last year that SoftBank axed the Pepper line as the Japanese company scaled back its ambitions in robotics.
“There is a lot of potential for robots behind the scenes [in] digital fulfillment and automation centers,” Saunders said. “Robots on the shop floor doesn’t really work. First of all, because a lot of robots are just silly. You ask a robot where something is and it takes you there. It’s just kind of dumb, to be quite honest.” (Other words Saunders used to describe in-store robots include: “pointless,” “gimmicks” and “expensive.”)
Pepper didn’t thrive in stores, but its robot brethren have made some inroads recently. Sam’s Club, as one example, has deployed robots to check inventory and clean floors.
But Saunders noted that even those robots focused on specific physical tasks can be expensive, and misguided.
“The thing that a lot of people miss about them is, actually, you don't really want a robot doing that. You want a member of staff doing that,” Saunders said. “Yeah, [human workers] may be a little bit more inefficient, and maybe it costs a bit more, but the staff looking and making sure things are in stock on shelves — they're a presence on the shop floor.”
Saunders added: “You can say, Hey, there's someone, I can go and ask if I need to find something. There's someone I can talk to. There's someone who smiles at me and says, ‘Hello.’ These are all really soft things that robots do not fulfill and accomplish.”
5. Paper books: the un-disruptables
The paper book was once a disruptive technology in its own right. In the digital age, paper books and the brick-and-mortar stores that sell them have proven stalwart, harder to knock aside than many technologists and analysts might have thought.
To be sure, there has been retrenchment in book retail with the death of Borders and other closures. The number of bookstores fell by roughly half between 1998 and 2019, according to the Census Bureau.
That happens to coincide with spectacular growth at Amazon, which, you might recall, started out as an internet bookstore. Whatever cause-and-effect relationship, Amazon’s cheap shipping of paper books may well be the starker disruptive force for book retail rather than the company’s e-reader (the Kindle) and e-book business.
Some analysts in the years prior predicted that ebooks would match or overtake printed books halfway through the 2010s. As things played out in reality, unit sales of e-books went years without growth after 2013 before getting a bump in 2020 due to the widespread closure of retail stores during the early pandemic — only to fall again in 2021, according to NPD Group. In the first half of the year last year, ebooks made up less than one-fifth of all book sales, making them vastly outsold by paper books.
That matters for retail. Consider the digitization of other media, including movies, music and video games. Consider the fates of Blockbuster and other video stores, Tower Records and Sam Goody, and the current struggles at GameStop as video games become increasingly sold in digital form. Meanwhile, Barnes & Noble is still standing (though has its scars). And the ranks of independent booksellers has actually grown since the pandemic started.
As a retail product, and medium for pleasure and knowledge, paper books and the physical stores that sell them have proven durable. Perhaps for the simple reason that physical books are just more fun to curl up with.
“A lot of people like the physical product, they like the touch and the feel of a book,” Saunders said. “They like the sort of history of a book, especially if it's a used book. They can pass it among friends. There's also people who just say, ‘Look, you know what? I spend most of my day looking at the screen, through my work. I do not want on my downtime to pick up another screen.’”