Crime Still Doesn’t Pay, But It Sort of Breaks Even at Cashierless Stores

Data more than makes up for losses, intentional or not

Eliminating traditional checkout not only enhances the customer experience, it yields much more data about shoppers. - Credit by Getty Images
Headshot of Lisa Lacy

Just 14 months ago, the idea of walking into a store, picking up whatever you want and leaving with it felt akin to shoplifting. Now, the concept is much more familiar as multiple options have emerged that allow customers to do this without fear of committing a misdemeanor.

Amazon’s Just Walk Out Technology at its expanding roster of Amazon Go locations is probably the best-known example, but retailers like Kroger, Walmart and Target are also experimenting with ways to eliminate checkout, which, until now, has served as a final touchpoint to ensure shoppers pay for the goods they take.

This move to eradicate a point of the shopper journey that has historically held them accountable comes despite research from the National Retail Federation and the University of Florida that showed shoplifting and “organized retail crime” accounted for 36 percent—or nearly $17 billion—of retail shrink in 2017.

“What’s important to realize is those who want to steal will find a way around any solution, so no solution is foolproof,” said Joanne Joliet, senior director analyst at research firm Gartner.

At the same time, she cited figures from BingoBox, an automated convenience store in China, which reported it had less than 10 cases of malicious theft in more than a million orders.

Similarly, drink brand Dirty Lemon—which previously sold products solely via text message—opened a 1,000-bottle-capacity grab-and-go walk-in vending machine of sorts in New York in September 2018—and the brand trusts its customers will text whatever they took to be charged properly. (But, to be safe, it also includes cameras, a heat map and an RFID tracker.)

Zak Normandin, CEO of Dirty Lemon and its parent Iris Nova, said the brand trusts its loyal client base and the focus at the first location is to provide the best possible experience for them.

“The way it works—you walk in, grab a bottle and get on with your day—that’s the level of convenience we’ve always tried to provide to customers,” Normandin said.

And, he said, it has worked so well that they plan to open additional locations this year, including another store in New York, as well as in Miami and L.A. or Chicago.

But it’s Amazon who pioneered the cashierless craze in the U.S. nine months earlier, when it opened its first Go store. At the time, it welcomed reporters to try to outsmart its technology—in effect shoplifting—and the most successful attempt was an accident that resulted in a free yogurt.

Their eyes were watching you

Sort of like in the Wizard in Oz, these companies are not eager to divulge what happens behind their curtains. But it’s clear cameras play a pivotal role.

Amazon said its cashierless stores are powered by computer vision, a field of AI that trains computers to understand and interpret images from cameras and videos; sensor fusion, which combines images from cameras with sensors that use thousands of data points to calculate the shape and volume of products; and deep learning, which, according to the MIT Technology Review “learns, in a very real sense, to recognize patterns in digital representations of sounds, images and other data.”

So, checkout-free though it may be, shoppers aren’t on the honor system. And, for the most part, competing offerings, such as those from retail automation platforms like Trigo Vision and Zippin, use a similar combination of apps, cameras, computer vision and/or sensors to track customers and products. And with this much monitoring, it’s easy to see how the reporters-turned-shoplifters were only able to lift one lousy yogurt.

Kiss anonymous shopping goodbye

But another deterrent to would-be shoplifters is that these stores know exactly who you are. Similar to Amazon Go, upon arrival at Zippin’s 200-square-foot store in San Francisco, customers must have already downloaded the app and added a credit card in order to generate a QR code to open the door.

“The minute I’ve signed into the store, I am deterred from shoplifting,” said Brendan Witcher, vice president and principal analyst serving at research firm Forrester. “The digital signing in of who I am plus my payment methods is absolutely a deterrent. Security is inherent in the technology.”

But retailers also stand to learn much more about what shoppers do and therein lies a huge bonus. For one, scan-to-enter functionality eliminates shopper anonymity.

“You can’t just walk in and pay cash and they’re none the wiser,” Witcher said. “Most people don’t realize the benefit of ecommerce is to have identification. They know your habits and can look back at past purchases … I can see what you looked at and didn’t buy—that’s important. It’s great to sell you a product if you’re already buying, but what are you interested in but not buying from me?”

Tracking who buys what also helps better inform inventory decisions and replenish out-of-stock items faster, said Jenya Beilin, COO of Trigo Vision.

“In the Amazon Go instance, if they’re seeing customers select fast, fresh prepared items, they can change the priority of what they make. That’s replenishment and potential production in that instance,” Joliet said. “And there are certainly merchandising decisions as they are seeing a propensity for certain products, they can change the merchandise offering or change the visual set to make certain products more appealing if they’re not jumping off the shelves.”

Beilin also noted CPG brands in particular will be interested in this data, which creates another potential revenue stream.

Gone in 14 seconds

So, intentional or not, even if someone gets away with a free product, it’s a short-term loss in pursuit of a much bigger goal.

“When looking at smart checkout, Amazon I don’t want to say isn’t worried, but they’re looking at success in a much larger way, which is customer experience,” Joliet said.

Making retail more like the seamless ecommerce experiences customers have come to expect will be vital moving forward, noted Jon Hamm, global CCO at WPP brand experience agency Geometry Global.

“The reason [Amazon Go] is a gold standard is because it is truly frictionless for the consumer,” Witcher added. “Aside from a momentary pause you need to take at the beginning to scan your QR code, the rest of it is fairly seamless. I’ve gotten out in 14 seconds with a sandwich and a drink.”

It also eliminates unloading a shopping cart onto a conveyor belt for products to be scanned and bagged, Joliet said.

“It’s fascinating that in all the years of retail, it took an online pure play to come up with the checkout-less store idea, but it’s also very telling about retailers’ unwillingness to think outside the box and sit on their hands and not being as customer-obsessed as they need to be,” Witcher said.

@lisalacy Lisa Lacy is a senior writer at Adweek, where she focuses on retail and the growing reach of Amazon.
Publish date: February 25, 2019 © 2020 Adweek, LLC. - All Rights Reserved and NOT FOR REPRINT