UPDATE: Amazon says they don't plan on rolloing out 2,000 stores just yet. Still, if this works, it's going to be big.
I love when tech and retail collide. I've spent my entire professional career in both, and find them both utterly fascinating. Amazon has spent the last couple decades completely turning the retail space on its head, as it has grown from a simple online book seller to a diversified marketplace that seems almost as ubiquitous as Google.
Amazon's reach and influence on the larger retail world is impressive for a business that has been basically 100% digital. The changes you have seen in major brick-and-mortar shops like Walmart and Target are undeniable. As many readers know, I worked at Target for about 5 years and had an up close and personal look at what the impact Amazon was having on our business. Let's look at some of the things Target has done in recent years that you really have to trace back to following Amazon, or at least being clearly influenced by them.
- 2009 Target.com breaks free of Amazon who had previously handed the back end and fulfillment
- 2012 Target stops selling all Amazon products (Kindle and gift cards) as they start to see them as a direct competitor
- 2012 Target starts price matching Amazon and 4 other major competitors' online prices
- 2013 Target Subscriptions launches, going up against Amazon's product subscriptions
- 2013 Target Ticket, a streaming video service, is unveiled (and then closed less than 2 years later)
- 2013 Target starts in-store pickup for online orders, marketing this as better than waiting 2 days for Amazon to ship your goodies
- 2014 REDcard users get free shipping on all orders from Target.com (in response to Prime shipping's rocketing popularity)
Now you could argue that any of these moves were unrelated to Amazon, and they were all logically the next step in the retail space, but I flatly reject that notion. As someone inside the company, I can tell you that Amazon was perpetually on our minds.
How do we create an atmosphere that gets people to get off their computers and come into a real life physical store?
How do we push a digital strategy that embraces people's online shopping, but gets them out of the house, in the car, and into the store?
How do we promote the value products you can only get at Target and not at Amazon?
How do we get people to order online but pick up in stores?
These discussions happened at all levels of the company. I won't go so far as to say that it was he only thing we thought about, but it was absolutely a serious consideration, even if not always vocalized. In a few scant years we had moved from Walmart being our biggest threat, to Amazon. So when Amazon makes a move, Target, and the rest of the retail world takes notice.
That's why this week's news that Amazon is looking to launch upwards of 2,000 cashier-less retail shops (that's 11% more locations than Target currently has, for reference) around the United States raised my eyebrows just a bit more than the average tech news story. The fact that Amazon is getting into the physical retail space is not that surprising, but the fact that they intend to do it by employing zero cashiers is jarring.
The Department of Labor recognizes about 8.2 million retail employees in the United States (4.8M salespeople and 3.4M cashiers), which is exactly 2/3 the current projections for manufacturing jobs, which have been such a focal point of the Trump campaign. That's a huge job pool, and Amazon's new store model suggests that 3.4 million of those jobs can be eliminated. No, their stores aren't active at scale yet, but hear me out on why this is going to be a widespread thing faster than many are expecting.
First, I'll reference my opening; major retailers are eyeing Amazon, and following their lead. Let's say this isn't just another Fire Phone disaster, but a successful project that Amazon sees through to scale. By eliminating 1/3 or more of their required workforce, they will be able to kill the retail incumbents on price as they already do online. Remember that Amazon is a revenue over profits company, and they will not hesitate to take another $5 off that Catan board game if it means they make the sale and grow their consumer base.
Retail margins are very tight, and payroll is a major limiting factor in their performance. Have you ever been to a store and wondered why the lines at the front are so long or that there never seems to be an employee around when you need one? Payroll. It's razor thin, and as a store manager, you are routinely given less than you need and are told to "make it work."
If Amazon proves this cashier-less store is possible, you can bet other retailers will be testing out similar systems to roll out as soon as they can. If Target and Walmart don't already have prototypes of this technology running in their model stores, I'd frankly be shocked.
The second reason this will take off is that people just don't like dealing with cashiers. We appreciate having people on the sale floor to help us find something or to give us a little information about what we're buying, but we could do without the cashiers and be just as happy. That's not to say anything bad about cashiers, seriously some of them are great, but it's a tough gig. More often than not a customer's feeling towards their cashier is "why aren't they going faster?" or "okay, let's get through the awkward small talk," or "I wonder what loyalty program they're going to try and guilt me into this time." Sometimes a cashier makes your day, but it's incredibly hard to do that.
Trust me, I've checked many people out in my time and most people don't care how nice you are, they just want you to go faster, faster, and if you can, even faster.
You can see this in action already at any store that has installed self checkout systems. You'll routinely see longer lines for the self checks than for the lanes with living, breathing humans. I'd be dishonest if I said I didn't find myself in that line more often than not too. I'm not totally opposed to going to the regular check out, but yeah, I'll wait another 30 seconds or so in line if it means I can check myself out.
The Amazon Go solution takes this concept and keeps all the good things while cutting out all of the bad. What if the self check line at the grocery store was never backed up, and you didn't even have to scan your own items, they were just charged as soon as you walked out the door?
Sounds great, right?
This is won't be easy for retailers to adopt, as there is tons of smarts they would have to add to their existing stores to make it work, but you can see the appeal. Retailers can save boatloads of cash by hiring 41% fewer employees, they will increase customer satisfaction by eliminating the most frustrating part of shopping (the lines), and they will give people a way to shop that might entice them to come into the store more often than they check out online. It will help customers by eliminating the frustrating checkout experience and even potentially lowering prices (but let's not get our hopes up too much on that one).
The real losers in this sort of future are the cashiers currently making up 41% of the retail workforce. If this takes off, those people are going to have to find other jobs, and I just don't know a good adjacent career they can transition to.
I am always in favor of technology taking over tasks that we no longer need to handle. The things we have automated in the 21st century are astounding and I would not want to go back to a world without these modern niceties, but these changes always have repercussions. I certainly don't have the solutions, but we should not take obsoleting one of the most common jobs in the United States lightly.
Politicians don't seem to have the hard on for retail jobs the way they do about manufacturing, but I wonder what the fallout will be when a major industry starts cutting jobs significantly not by outsourcing, but by flatly eliminating and entire job category. Watch this space, because the retail world is going to get very interesting in the next 10 years.