We have a longstanding prediction here at Street Fight that in-aisle payments will revolutionize brick-and-mortar retail. Also known as “cashier-less retail,” benefits include convenience, speed, yield optimization, and logistics like reducing check-out bottlenecks.
This is starting to play out, albeit later than we thought. Though Apple pioneered it, it’s a bit non-core for the hardware giant. The first real domino to fall is more fitting: Amazon. As you’ve likely read, it’s cashier-less Amazon Go stores employ a sophisticated system of automated payments and shopping flow.
But the ripple effect on the rest of the retail sector is the interesting part. It will throw gasoline on cashier-less functionality by creating demand among retailers who are pressured to keep up (some faster than others). Vendors are already emerging to meet that demand, a space that could get crowded, fast.
As often happens in emerging tech markets, there’s a sort of supply/demand osmosis to gain early market share. Vendors so far include Standard Cognition, Mercaux and Leap. And the venture dollars are flowing, with each securing recent funding including Standard Cognition’s $40 million series A last month.
We’re also seeing creative implementations such as shopping carts. Tel Aviv-based Tracxpoint has deployed it’s “Artificial Intelligence Carts” to 3000 CONAD locations in Italy. These manage shoppers’ purchases, and in a less capital-intensive way than Amazon Go’s sophisticated ceiling cameras.
The innovation including and surrounding cashierless checkout goes beyond payments to affect a broader set of functions like supply chain, inventory management, and store layouts. It’s like a retail toolkit in a box, with cash-flow friendly pricing, à la SaaS. You may have heard of it: It’s called retail as a service (RaaS), and it could transform the next decade of retail.
This is where Amazon comes back in. It will giveth (market validation & acceleration), then taketh away (market destruction) by entering. In other words, Amazon Go will drive demand for advanced retail functions—and thus startups to provide it—but then eventually bring its own RaaS platform to market.
This is supported by historical evidence. A prospective Amazon RaaS would follow the playbook it invented around AWS, one of the most successful tech products in years. Built initially to optimize Amazon’s own high-scale and variable compute needs, AWS then spun out for the rest of the market.
Amazon will likely enter RaaS by following the same formula—first as software for Amazon Go’s needs, then spun out as a service for others. Being more direct, Street Fight is predicting now that Amazon will package Go-like capabilities as a market-defining/destroying RaaS platform in the next 24 months.
Besides Amazon Go, it has a ready-made and higher scale test environment for that platform: Whole Foods. Its RaaS execution will be a sort of “lead-by-example” proof of concept to show other retailers why and how they should implement it. It’s sort of like how Google Pixel is a best-practices vessel for Android.
This is another place Amazon will giveth and taketh away. Though its RaaS will disrupt the startups mentioned above, it will create a platform-like ecosystem of third-party agencies, plugins, and services. It won’t handle last-mile implementation, leaving it to smaller companies and consultants to fill those gaps.
Amazon could also leave room for smaller RaaS startups in specific functions or nuanced verticals like luxury or autos. It could even help those companies by validating the model and warming the retail world up to it. That accelerated awareness and adoption will be needed in laggard corners of the retail world.
As we’ve written in reference to other innovations like in-aisle AR, tech adoption will be a retail survival imperative. This theory considers the last few years’ tech-laggard store closings, and the logistical innovations that Amazon will accelerate. Retail winners and losers will increasingly map to tech adoption.
So retailers and tech vendors alike will have to get ready for this shift or get out of the way. There will be lots of margin compression, which is signature-Amazon. Meanwhile, Jeff Bezos continues to live up to his word in warning the market of impending conquests. As he likes to say, “Your margin is my opportunity.”
Mike Boland is Street Fight’s lead analyst, author of the Road Map column, and producer of the Heard on the Street podcast. He has been an analyst in the local space since 2005, covering mobile, social, and emerging tech. More biographical information can be seen here.