In Europe, too, unmanned or cashless store concepts such as Amazon Go will break through: it is an ongoing process in which retailers are gradually replacing manned services with technology. The question is: which technology?
Strong growth predicted
More and more retailers worldwide are testing the potential of unmanned or automated stores. In the US, Amazon was of course the big instigator with the launch of its cashless Amazon Go concept in January 2018. In Europe, Albert Heijn, Auchan, Carrefour, Edeka, Migros, Valora and Tegut, among others, have since embarked on more or less similar store concepts.
Does this segment carry any weight in the retail sector? According to research firm Research and Markets, the unmanned stores market accounted for revenues of 67.5 million dollar (57 million euros) in 2019 and, thanks to a 52% annual growth rate, would reach revenues of 1.64 billion dollar (1.38 billion euros) by 2027. Most of the autonomous stores would then be in Asia.
Courtesy of the corona virus
On the demand side, the trend towards unmanned stores is driven by increasing consumer expectations for a seamless shopping experience, long opening hours, accessible locations and product availability. Consumers of all ages are increasingly familiar and comfortable with technology. The corona pandemic has also given an additional boost to the demand for contactless store concepts.
Retailers, for their part, are faced with a difficult search for employees and high staff costs, while technology is becoming cheaper and cheaper. Still, one cannot speak of a mass roll-out just yet. In most cases, it is about test projects.
Need for insight
Several high-profile projects did not have a follow-up: for example, the Moby Mart that opened its doors in Shanghai in 2017. This store offered products for immediate consumption, such as milk, ready meals and medicines. Customers just walked in, took what they needed and walked out again. It was a project of the Swedish start-up Wheelys, in cooperation with China’s Hefei University of Technology. The promised expansion did not materialise.
Closer to home, Albert Heijn is sticking with one digital AH to go container store, which was first tested at its head office and then at Schiphol Airport. Amazon Go, for its part, despite its big ambitions, still only has about thirty branches, five of which are in London. Possibly retailers still lack insight into which models are best accepted by shoppers. Recent research by Professor Sabine Benoit of the University of Surrey, commissioned by the Competence Centre for on-the-go Consumption, does a good job of mapping out this relatively new branch of retail.
What exactly are we talking about? Unmanned stores are those where shoppers can check in and out on their own without the need for staff. Of course, the stores are not really or entirely unmanned: for example, restocking requires staff, and so does customer service. In an Amazon Go store, there are quite a few employees walking around. However, they are not required to operate the cash registers and can therefore be deployed for other tasks.
The main difference with vending machines is that the products are freely accessible to the customer and that a check-in and check-out process is required to enter and leave the store. There is no hard distinction between manned and unmanned stores: there are gradations. For example, there are manned stores with self-check-out counters. The trend towards unmanned stores will therefore gradually increase: stores will be partly unmanned, or part-time unmanned.
Unmanned stores are appearing in a variety of locations, where they meet different needs. We see unmanned stores at traffic hubs such as airports or train stations. Ahold Delhaize is testing its 14 square metre small unmanned container store (with Chinese technology from AiFi) at Schiphol airport. Switzerland’s Valora Group opened a cashless convenience store called ‘avecbox’ in Zurich’s main train station and on a university campus in 2019. The store offers a carefully curated range of around a thousand references. These are mainly fresh food on the go, everyday items such as coffee and the most necessary household products.
Unmanned stores are also opening in locations with a lot of passages. Lidl opened an autonomous ‘store.box’ convenience store in combination with a pick-up point on the university campus in Heilbronn. Employees and students can choose from 250 to 300 products. The Chinese Sun Art Retail Group has already opened more than 500 container stores with the name BingoBox. They sell a convenience range of 500 to 800 references. Customers gain access with an app and facial recognition – a technology that is not an option in Europe due to GDPR rules.
Unmanned stores can also be a solution for so-called ‘food deserts’: very sparsely populated areas where retailers have difficulty operating physical stores profitably and where the population therefore has no access to fresh food. Examples can be found in Sweden (Coop) and Finland.
Retailers are testing their unmanned concepts both in brick-and-mortar stores in regular retail premises and in mobile versions, such as containers. These have the advantage that they can be moved: the concept is suitable for temporary pop-up locations – think of holiday resorts during the high season. The assortment varies according to the location and the function of the store: in residential areas or in ‘food deserts’ it will be more about a range that covers daily needs, whereas in traffic hubs and high traffic locations a ‘food to go’ range will be more important.
Questions about privacy
What do consumers think of unmanned stores? Research in Germany indicates that a majority of those surveyed are positive or neutral towards the phenomenon. Shoppers are open to technology and curious, but expect similar products and prices as in manned stores. The fact that no personal contact is necessary is an advantage in times of corona.
Shoppers who are more negative towards unmanned stores value personal interaction with store associates more. They are apprehensive about technical problems, have questions about security and about privacy – with the presence of cameras – and also fear that technology will eventually lead to job loss.
Who are the main target groups for unmanned stores? In locations where there are sufficient alternatives (city centres, for example), unmanned stores will appeal mainly to younger consumers who are familiar with digital technology. But in other locations, everyone is a potential customer, especially after corona.
The question is which technology has the strongest assets. Amazon Go’s ‘just walk out’ approach is a very easy, seamless and tamper-proof solution but requires high investment costs and has observers questioning whether it can ever be profitable. Amazon can sell the technology to other players: in particular, Hudson, an American operator of airport stores, will use the solution in its convenience stores. From China, software company AiFi sells its camera technology to Ahold Delhaize and Wundermart, which is rolling out unmanned office stores, among others. In collaboration with Portuguese start-up Sensei, Continente opened the first automated convenience store on the European continent in Lisbon.
But there is no such thing as one perfect model: it’s about the right store concept in the right location. Nor is it a black and white story: there is a gradual transition from manned to unmanned. Rewe, for example, is testing a store in Cologne with autonomous Pick & Go technology, where customers who wish to do so can still shop in the traditional way. Some stores are temporarily unmanned – at night, for example – but manned during the day. Others are unmanned all the time. And one can also see a transition from vending machines over walk-in vending to fully-fledged unmanned stores.
Conclusions? The trend towards unmanned stores will continue in Europe, but the evolution will be gradual, the researchers believe. Retailers will gradually replace manned services with technology. Stores will be operated on a part-time basis without staff, or specific parts of the store will be unmanned. On the other hand, we see vending machines becoming larger and taking on the appearance of a fully-fledged store. Unmanned collection points for online orders are also appearing more frequently. In the course of this process of change, we should not see stores as manned or unmanned, but as more or less manned.
Currently, the sector is still in a phase of competing technologies. Amazon will try to sell its seamless ‘just walk out’ solution to other retailers. It is possible that this technology will become the industry standard.