In 2012, Amazon Founder Jeff Bezos was asked by TV host Charlie Rose if his e-commerce company would one day venture into brick-and-mortar stores. Bezos said shoppers were well served by existing retailers and that Amazon was not interested in launching a “me-too” product.
“We want to do something unique for Amazon,” Bezos said. “If we can find this idea, and we haven't found it yet, but if we can find this idea, we would like to open physical stores.”
Six years later, Amazon came up with a revolutionary retail concept that it hoped would change the way people shop in brick-and-mortar stores. The company launched its first Amazon Go convenience store featuring a new type of technology called “Just Walk Out.”
In practice, customers will be able to load their shopping cart and walk out of the store without standing in a checkout line. Amazon quickly brought cashless checkout to its Fresh supermarkets and two Whole Foods locations. In 2020, the company began licensing Just Walk Out technology to third parties, contracting with retailers in stadiums, airports and hospitals.
But the company has since taken a sideways turn.
In April, Amazon announced it would remove cashless payment from its U.S. Fresh stores and Whole Foods locations, a move that coincided with CEO Andy Jassy's efforts to rein in costs to meet rapidly changing macro conditions.
As part of this effort, Amazon has also reevaluated its retail plans. The company has discontinued some of its retail chains, closed eight Amazon Go stores, and paused the opening of new Fresh stores. It has launched a few new Fresh stores in recent months.
Instead of Just Walk Out, which typically requires ceiling-mounted cameras, sensors on shelves and gated entry points, Amazon Fresh stores and Whole Foods supermarkets will have Dash Carts. The carts track and count items as shoppers place them in bags, allowing people to skip the checkout line. Amazon continues to use Just Walk Out in its fast food markets and UK Fresh stores.
A woman uses a dash cart as she shops for groceries at a Whole Foods store as Amazon launches smart shopping carts at Whole Foods stores in San Mateo, California, US on February 25, 2024. The smart shopping cart makes grocery shopping faster by letting customers scan products directly In their shopping cart while shopping and then skip the checkout line.
Taifun Coskun | Anatolia | Getty Images
A key challenge for Amazon and other self-checkout startups is the need to scale it to enough locations and retail categories that it becomes a normal part of in-store shopping, said Jordan Burke, founder and CEO of retail consulting firm Tomorrow.
“Until that happens, it's an uphill battle,” Burke said. “Technology providers, including Amazon, will have to provide support and continue to invest to train retailers, train consumers, train the marketplace, and that is a mainstream experience that we can all trust and don't need to think about as we walk in and out of the store.”
“The hardest problem to solve”
At some point, Amazon saw Just Walk Out become an essential part of the shopping experience in its physical stores. The company planned in 2018 to open as many as 3,000 Amazon Go stores within a few years, Bloomberg reported at the time, citing people familiar with the plans.
Bezos has recruited top talent from across the company, including a longtime Amazon executive who built the original Kindle e-reader, to work on cashless payments. This technology was considered a key element in Amazon's long-term quest to become a giant in the US grocery market, which is worth $1.6 trillion.
When Amazon first launched Just Walk Out in January 2018, it was an “earthquake moment” for the industry, causing Walmart And “almost every other retailer” to jump into action and consider developing their own vision-based payment systems, said Burke, who previously led Walmart's e-commerce business in China.
Amazon and other retailers quickly learned that automating the checkout process is “the hardest problem to solve,” Burke said. Cashless payment systems require a huge upfront investment to cover the store with overhead cameras and hire staff to label and review shopping data.
“This meant the store had to significantly increase its sales in order to repay that investment,” Burke said.
Walmart teams found as part of a cost analysis in early 2019 that it would run a retail store worth $10 million to $15 million to create a similar computer vision-based inspection system for a 40,000-square-foot supermarket, Burke said.
Just Walk Out has become an expensive venture for Amazon as well. In 2019 and 2020, the company spent nearly $1 billion annually, including research and development costs and capital expenditures, to “learn and scale” the technology, Burke said. He said those numbers are based on discussions with a former Just Walk Out executive who left Amazon to join Walmart. Amazon did not provide comment on the numbers.
Many retailers have since moved on from computer vision in favor of simpler methods such as mobile payment through an app, Burke said.
Walmart is using self-checkout in its stores, while supermarket chain Kroger is experimenting with it Instacart Shopping carts attached to the cart at some locations. Retailers love goal and Dollar General They are rethinking self-checkout entirely due to concerns about increased theft in their stores, and have added more traditional checkout lanes.
Although it no longer prominently displays Just Walk Out in its own stores, Amazon says it has signed deals with a growing list of customers. More than 200 third-party stores paid Amazon to install the cashless system. The company expects to double the number of third-party Just Walk Out stores this year, John Jenkins, who previously served as vice president of Just Walk Out technology at Amazon, said in a recent interview. Jenkins left Amazon in late September to become chief technology officer of electric bike and scooter startup Lime, according to his LinkedIn page.
John Jenkins, Amazon's former vice president of Just Walk Out technology, tours the mock store where the company is testing its boxless checkout system in Seattle, Washington, on August 22, 2024.
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Jenkins disputed characterizations that Amazon's phasing out of Just Walk Out from its supermarkets represents a setback or a sign of the technology's demise. He said that Amazon has proven through tests in its grocery stores that the technology is “incredibly capable,” noting that it has deployed the system in large supermarkets with “600 people in the store at the same time.”
Other startups such as AiFi and Grabango have developed standalone systems for supermarkets, convenience stores and other retailers, but widespread adoption has been slow, as the technology remains expensive and challenging to operate in large store formats.
Inside the laboratory
Amazon is still working on improving the Just Walk Out technology.
In August, CNBC got the first on-camera look at a mock convenience store where Amazon is testing the system before rolling it out to third-party retailers and its own stores.
The testing lab, which she calls a “beverage base camp,” is located at Amazon’s headquarters in Seattle. It has fake gates that mimic the experience of scanning your smartphone or credit card to enter a Just Walk Out store. The walls are lined with shelves of traditional products like Milky Way bars, pita chips and gum, and there are also coolers stocked with food and drinks. coke Canned goods and other drinks.
Amazon sets up Just Walk Out stores by first creating a 3D scan with LiDAR devices or iPads that help it decide where to place cameras so they get the clearest view.
“The goal is to have as few cameras as possible, so we're optimizing camera placement so we can get enough coverage of each fixture to know what's going on in the store,” Jenkins said.
The system determines what shoppers have purchased using several inputs, including 3D scans, a catalog of product images, video footage, and weight sensors on shelves. Amazon in July updated the AI system behind its Just Walk Out technology to handle all in-store inputs at once.
The new “multi-modal” system can generate receipts faster by more accurately predicting which items shoppers have picked up and put back on the shelves. The company said these changes should make it “faster, easier to deploy and more efficient” for retailers installing the system in their stores.
Amazon's “primary focus” is selling the technology to outside companies and deploying it in small and medium-sized store formats, where the system “tends to have a slightly better (return on investment),” Jenkins said. Earlier this year, Amazon also began selling connected grocery carts to third parties.
In September, Amazon announced several new third-party Just Walk Out stores on campuses and sports stadiums.
CNBC
At one Just Walk Out store, inside Lumen Field in Seattle, home of the NFL's Seahawks, the company said it boosted sales by 112% last season, with an 85% increase in transactions during the game.
“It was great to have our own stores as a laboratory to build and launch this,” Jenkins said. “But over time, like many things at Amazon, the success of this project and product will depend on third parties adopting the technology. There will always be more third-party stores in the world than first-party stores.”
Amazon has used a similar playbook in the past. Amazon Web Services, the company's highly successful cloud computing unit, grew out of the company's need for IT infrastructure to support its rapidly growing online retail business. In recent years, Amazon has leveraged its logistics and fulfillment network to provide services to third parties.
With Just Walk Out, Amazon faces the challenge of convincing retailers that they can trust one of their biggest competitors to handle valuable shopper data.
In 2022, Amazon moved the Just Walk Out team from its retail organization to AWS. It was one of the clearest signs yet that Amazon is serious about selling the technology to other retailers, and could help ease some concerns among competitors.
“They are clearly in sales mode,” Sucharita Kodali, a retail analyst at Forrester Research, said in an interview.
Amazon still has a “long way to go” before the technology becomes ubiquitous, Kodali said. Getting there will require patience from Amazon investors and data showing that retailers and shoppers are embracing the technology.
“There's almost a viral effect that's going to happen over time,” she said. “It's going to take a long time because you have to navigate through everyone in America who has this experience, and for the most part, Amazon is the only one fighting this battle right now.”
Watch the video for a behind-the-scenes look at Just Walk Out:
