How close are we to the end of the traditional checkout?
Jan 11, 2019
12% of North American in-store retailers told us they plan to introduce an Amazon Go-style, checkout-free experiences in six months’ time. But is this achievable? And are consumers ready for them?
Ever since Amazon brought checkout-free shopping into the mainstream consciousness, other retailers have been keen to get in on the action. Retail giants such as Tesco, Co-Op and Albert Hejin have all started trialling their version of what Amazon calls ‘Just Walk Out’ technology, with many planning wider rollouts in the coming months.
That top brick-and-mortar retailers would use technology to fight back as Amazon encroaches on their territory is to be expected. What’s more surprising is that small and medium-sized businesses (SMBs) have short-term checkout-free ambitions too.
In the fourth edition of our Lost in Transaction study, 12% of North American in-store retailers told us they plan to introduce an Amazon-style, checkout-free experience in six months’ time. And a further 28% expect to make this happen within two years.
But is this actually doable? Could the checkout disappear in the next few years?
Pulling up the technological socks
According to our research — which surveyed merchants across Canada and the US — six-month and two-year timescales may be a tad too ambitious.
Amazon’s checkout-free experience involves a complex interplay of automation, machine learning, sensors and a specially designed customer-facing app. But for many of the merchants we surveyed, even accepting contactless payments is currently a challenge.
As things stand, only 36% of US and Canadian SMBs accept contactless. And adoption of other frictionless technologies is even further behind: 9% have self-checkout options, 8% have order-ahead apps and a mere 1% have biometric capabilities.
Upgrades are on the horizon for many merchants. 33%, 30% and 23% respectively plan to start accepting mobile wallets, mobile apps and contactless in the next two years. That said, going from frictionless payments to checkout-free shopping will require a much bigger technological leap.
“Online merchants think frictionless payments make fraud more likely, but offline merchants disagree. Only 26% think removing friction increases the risk of fraud, compared to 52% of their online counterparts.”
Outsourcing: the key to a checkout-free experience?
Of course, the road to a checkout-free shopping experience isn’t one SMBs can travel alone. Developing the technology requires know-how, manpower and financial resources they’re unlikely to have in-house. This means third-party providers will have a crucial role to play.
Having patented much of its technology, SMBs’ appetite for ditching the checkout could be the perfect opportunity for Amazon to make its mark as a payment services provider. Then again, given its ambitions for Amazon Go — rumour has it that it’s planning to open 3,000 stores across the US as well as launching in the UK— what are the chances of this happening, at least in the short-term?
The more likely route is that SMBs will be looking to their payment services providers for help achieving their goal. Which means payment services providers may be about to have an even more important role in ensuring SMBs succeed.
Frictionless payments and fraud: an increasingly dynamic duo?
Interestingly, where online merchants think frictionless payments make fraud more likely, our research found that offline merchants disagree. Only 26% think removing friction increases the risk of fraud, compared to 52% of their online counterparts.
Yet, the evidence seems to point to the contrary, at least where self-checkout is concerned. In the UK, the average consumer steals £23 worth of goods a month from self-checkout tills. Similarly, a 2015 University of Leicester study which tracked a store over a period of one year found that $850,000 worth of goods left without being checked out or paid for.
Removing the checkout altogether has added fuel to this fire by creating a new breed of shoplifter — the unwitting one. As early as Day One of Amazon Go’s launch, customers reported not being charged for some of their purchases.
Amazon’s faith in its technology has emboldened it with a devil-may-care attitude. As Amazon Go’s vice president Gianna Puerini put it: “this happens so rarely we didn’t even bother building in a feature for customers to tell us it happened.”
But can SMBs afford to take the same approach?
“Checkout-free technology flies in the face of centuries of ingrained behaviour. But the issue may run even deeper.”
The proof of the pudding
It goes without saying, but whether the checkout-free store will triumph over the status quo doesn’t just rest on merchants’ ability to deploy the technology successfully. At the end of the day, the buck stops with those who’ll be using it: consumers. Walmart was given a timely reminder of this back in May 2018, when it placed its Scan & Go technology into hiatus due to low participation.
Despite being received with widespread enthusiasm, Amazon Go has had teething problems too. Many customers have noted that buying from the store feels like stealing, with some even asking staff whether it’s really ok to just walk out.
Clearly, checkout-free technology flies in the face of centuries of ingrained behaviour. But our research suggests that the issue may run even deeper.
When we asked consumers about their attitudes to invisible payments, 47% of said they worry about being charged for things they didn’t buy, 31% said they worried about controlling their spending and 28% said they worried about inadvertent purchases. These numbers suggest they might not be ready to take their hands off the wheel completely just yet.
SMBs’ enthusiasm for checkout-free shopping seems to form part of a wider strategy. In a continually shifting landscape, merchants are increasingly convinced that, the faster and smoother their checkout process is, the greater their competitive edge.
While the timeframes many have set themselves may be overly ambitious, the truth is that, as technology evolves, it’s likely that checkout-free shopping will become a more and more common experience.
But does this mean the checkout is about to go the way of the dodo? Ultimately, it’s consumers who’ll decide. And, as things stand, the outcome isn’t a given.
Want more insights on how SMBs plan to stay competitive in 2019 and beyond? Download our latest Lost in Transaction report.