What is Just Walk Out?: How Amazon Will Take Over Physical Retail

Amazon’s takeover of retail in the real world won’t stop anytime soon. There is no clearer sign of this than the launch of its game-changing automated checkout solution, which Amazon is now offering to other retailers.

Just Walk Out is Amazon’s new cashierless technology built on the proprietary tech behind Amazon Go stores. Now, by licensing Just Walk Out, other merchants can allow customers to walk in, pick up items, and walk out, all while accurately tracking selections in a virtual shopping cart and charging credit cards appropriately at the end. In a deal with hospitality and airport retail conglomerate OTG, a CIBO Express Gourmet Market in Newark Liberty Airport is the first publicly-announced outlet to benefit from the new tech. It launched on March 16th.

Going live with the concept at the NYC-metro area airport will be an important field test for this new business direction. Amazon already owns digital retail, with its commanding 39% slice of all US eCommerce. Just Walk Out will help Amazon corner new markets, gain new data, and add a new high-margin business to its empire.

From Amazon Go to an Attractive Proposition for Retailers

It all started with Amazon Go, the concept convenience store that lets paying shoppers walk out with their groceries as easily as they entered. Among the many proposed benefits were better-optimized store resources, fewer painful waits in long lines, and a faster, more convenient experience for shoppers overall.

We predicted in 2019 that Amazon would license the technology to retailers and would become unstoppable in real-world commerce in doing so. After refining and successfully piloting its own cashierless tech with 26 Amazon Go stores in major US cities and a new 10,000+ square foot Amazon Go Grocery outlet, it would only make sense for the tech behemoth to jump on selling the solution to incumbent retailers. Now Amazon has made that a reality.

Even if legacy retailers balk at the idea of giving this level of access to Amazon, the selling points of a “Just Walk Out” are huge. For one, cashierless tech would be effective at reducing lossage. Grocery stores, in particular, lose money with unpurchased, perishable items that end up spoiling, and theft is a problem all retailers face.

A frictionless shopping setup also helps retailers optimize profit and loss in numerous ways. It will free up square footage for more productive use, and allow for the reassignment of in-store employees to what Amazon deems “more valuable activities,” such as restocking and personally assisting customers. Realistically, Just Walk Out will also reduce labor costs as fewer employees are needed to operate a large store once the checkout aisle disappears.

These benefits are substantial, especially when you look at the bleak state of affairs in traditional retail. More than half of US retail stores are finding it hard to make the financials work, with 84% of their eCommerce counterparts reportedly “thriving.” Burdensome overhead and low foot traffic are creating a survival-of-the-fittest scenario for retailers, with holdouts trying everything from digital supply chain solutions to AR customer experiences to stand out, optimize operations, and recoup losses.

As pressures on the incumbents mount, it’s hard to see retailers’ initial resistance to Amazon lasting for too long against Just Walk Out’s attractiveness, especially as the software improves and the hardware required inevitably becomes cheaper and easier to set up.

Two Realms Amazon Stands to Dominate

By opening up Just Walk Out to other retailers, Amazon stands to make insurmountable gains in two worlds: retail and consumer intelligence.

First, with Just Walk Out, Amazon can get insights it’s never had about all flavors of brick-and-mortar retail, all without taking on additional inventory or retail footprint as linear businesses do. As a platform conglomerate, Amazon has gotten good at spinning off new initiatives (such as AWS, the cloud services platform it proved internally) and scaling them up at high margins.

Accordingly, by licensing Just Walk Out, Amazon gets to learn what works and what doesn’t across numerous verticals, including what sells best, where and when.

Amazon’s tech could also collect unprecedented data on customer journeys, ostensibly on behalf of retailers. That is, even within the lines of the somewhat-opaque promise to only meet retailers’ needs with Just Walk Out. Customers at a Just Walk Out retailer provide their credit card information at a bare minimum, as well as their email addresses if they wish to get a receipt. If Amazon helps retailers leverage this data — consumer privacy concerns notwithstanding, with kinks sure to be ironed out — a lot could be learned.

Shoppers could be matched with online shopping accounts and purchase histories. Personalized recommendations could be made based on in-store purchases. Customers can be remarketed to based both on purchases and items they showed interest in, yet didn’t buy. Just like Amazon is able to do in its digital shopping world today.

By creating an attractive complementary solution for retailers, and delivering a superior experience for customers that helps participating retailers even more, Amazon can’t be beat. Add the payment-processing savvy Amazon uses to make “checkouts” virtually unnoticeable and how much that can influence shopper preferences, and major credit card companies like Visa and Amex have something to worry about.

How Amazon Might Own the Platform Future of Cashierless Tech

Just Walk Out has enormous potential as a new payments platform connecting retailers and shoppers. However, it has additional as a B2B development platform that changes the face of retail.

By inviting third-party developers to build software around Just Walk Out tech and the data it gives retailers, we could see new horizons in cashierless commerce that no other company is offering right now, or can offer as completely. This could run the gamut from AR and AI-enabled personalization and behavioral analytics, to digitized inventory management and other enhancements that help retailers’ bottom lines. It would give Amazon even more solid footing in retail, and make it nearly impossible to take down.

Given its scale and significant head start, Amazon can only be successfully challenged in this arena by a consortium of big retail, payments leaders, and innovative tech startups that can build the software, cameras, sensors, and in-store logistics to bring it all to life. The effort would have to be similar in scale to the Google-led Open Handset Alliance in its stand against Apple’s iOS in the smartphone wars.

But as more retailers and consumers discover how fun and convenient the future of shopping will be, time is quickly running out before Amazon begins to take over physical retail, too.

Filed under: Platform Innovation | Topics:

B2B Distribution Technology

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