The tests of unstaffed and checkout-less formats continue to grab headlines, but also point to a future of more frictionless, digitally integrated stores that suppliers must be prepared to support. There are now more than 1,000 unmanned and checkout-less stores in operation globally, most of which were launched in the last 12 months, owned by nearly 20 different companies.
Current tests are concentrated in Asia, particularly in China, where mobile-first and technology-savvy shoppers are willing to try more digitally integrated stores and generously share personal information. They are being tested by some of the largest retailers in the world, including Alibaba, JD.com, Amazon, and Auchan, and by technology companies making their first foray into retail.
While “unmanned” formats differ – some are essentially walk-in vending machines, others automate the checkout process in a physical store, while others can move the physical location altogether – they are all responding to the same growing consumer demand for convenience amid rising labour costs. They are particularly effective for keeping a store open 24 hours a day in urban areas where staffing it around the clock would be unprofitable, and in rural areas where having a manned store at all wouldn’t be economically feasible.
Unmanned format fundamentals
Most concepts are designed to fill a quick trip need, and carry a convenience assortment of groceries, snacks, drinks, to-go foods, and personal and household care items, 500-1,000 SKUs in total, with an average selling area of about 110 sq m (1,100 sq ft), but retailers are also expanding the unstaffed tests outside of food.
The stores are reliant on mobile technology. Typically, a unique code provided by a downloaded app enables the shopper to enter the store. A combination of RFID and cameras track what customers select, and payment is automatically deducted when a customer walks out or, in other cases, after scanning a code on their way out of the store. In the most advanced examples, biometric information like facial recognition or retinal scanning is used.
The future of unmanned stores
The explosion of unmanned stores will continue throughout 2018, with some companies claiming they plan to open as many as 100,000 stores over the next three years, but most are still in the testing stage, far too early to declare expansion plans. With daily revenues as low as USD150 to USD300and high upfront costs, these stores will need considerable scale or price markups to become a widespread, sustainable model, but will continue to find niche applications because of their flexibility.
While sales volume in these stores is currently tiny, the innovation is sure to permeate retail, including inside existing stores. One of South Korea’s largest retailers, Shinsegae, is already testing stores that switch from staffed to unmanned stores at night-time, something we will likely see more of in convenience-oriented formats. In countries with strict Sunday opening laws like Germany or Poland, this technology could allow retailers to operate for the full weekend and not further force customers online.
The data that unmanned stores can collect on shopper behaviour and preferences will inform future assortment and merchandising decisions across convenience portfolios, not just unmanned stores. The ‘just walk out’ concept made famous by Amazon Go will likely soon be tested in prepared foods sections of larger supermarkets, creating a faster on-the-go meal trip.