Corner Store Disrupted
Corner Store Disrupted

What automation does and does not mean for convenience storefronts

One segment of the retail industry that looks primed for revolution is non-grocery basic commodities, the stuff you’re used to buying at Wal-Mart or the neighborhood drugstore or the corner bodega, depending on where you live. And Amazon is the company that’s making the biggest push right now to disrupt it – or rather, making two pushes in different directions. Amazon Dash aims to take the hassle out of buying your weekly or monthly necessities by means of dedicated purchase buttons that automate online shopping through the Internet of Things. Meanwhile, Amazon Go seeks to reinvent brick-and-mortar retail by eliminating the checkout experience entirely.

Amazon is smart to predict this bifurcation in the evolution of basic-commodities retail and to chase both of the diverging trends. As we see it, both of these models are going to exist comfortably side by side in the future. 24-hour drugstores and bodegas aren’t going anywhere: There’s always going to be demand in the form of business travelers grabbing some forgotten toiletries, revelers filling up on snacks and bleary-eyed parents picking up medicine for a sick kid. The no-checkout experience is going to define the future of commodities retail, but it involves some major challenges—and while Amazon Go provides a useful template for envisioning the future, we don’t think that it captures the whole picture.

Eliminating the checkout would make everyone happy, with no long lines and no unwanted human interactions when everyone would rather be in bed. It would also make employees safer by keeping them out of the path of potential armed robbers. But taking away the cashier stations doesn’t mean that managers will be free to stop staffing the stores. Skilled employees will be needed to troubleshoot the problems that will doubtless occur during any automated process, and security will need to be on hand to stop would-be thieves from helping themselves to the merchandise. These people will need to be constantly available, but they can stay safely behind locked doors working on other tasks until they are called for.

 

 

The Amazon Go model requires customers to own a smartphone, download the proprietary app and set up an account, which we think is fine for areas with lots of upwardly-mobile young professionals, but it isn’t likely to appeal to lower-income customers, the elderly or the visually impaired. So alongside higher-end stores like this, we anticipate the rise of the discount automated corner store. Such an establishment is likely to use a physical token like a card or keychain that carries funds and can be recharged via kiosks inside the store. Providing a tech-enhanced experience for customers who aren’t themselves tech-savvy is going to be a major challenge for retailers, but mastering it could provide a huge payoff.

The big drugstore chains like Walgreens and CVS are going to need to figure this out, but in the long run they’re probably going to be fine (or to be replaced by stores with similar business models and more forward-thinking practices). But independently owned corner stores are going to have a hard time adjusting to the new reality of automated checkout. Unfortunately, this is a change that is probably going to drive a lot of small-business owners into bankruptcy. A third-party vendor that can design and install generic, easy-to-use technology for independent stores is going to make a fortune—and help save a vital and beloved segment of the retail industry.

The no-checkout corner store is going to be huge for customers and business owners alike, but it will be difficult for managers to accept that automation doesn’t mean they can skimp much on staffing. Creating a successful business model for lower-income customers will mean acknowledging the digital divide and keeping barriers to adoption low. And finally, the costs of implementing the new technology will be hard to absorb for small-business owners. Mastering these challenges will be difficult and highly disruptive, but they could lead to retail experiences that are faster, safer and happier.

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