Checkoutless stores: a mega trend?

Saturn, Migros, Valora, Würth, tegut – the list of retailers experimenting with checkoutless stores grows longer by the day. What’s behind this trend and how mature is it?

A few days ago, tegut opened its latest store in Fulda. But the shop, called “teo”, has no checkouts or (visible) sales staff. After a few months of in-house pilot operations, the chain is now taking the step of opening to the public. And as the company recently announced, it plans to open 20 of these stores over the coming 12 months.

In the past two years, many well-known retailers have launched similar projects. Valora is opening “avec box”, while the Dutch chain Albert Heijn and Saturn are also experimenting with checkoutless format. The same goes for Migros, which is planning small-scale Migrolino stores.

And it’s not just about catering to end customers: initial concepts are also being drawn up in the B2B segment. At “Würth 24”, tradespeople can also shop around the clock at one store without any staff.

Amazon Go the inspiration for the sector

The “Amazon Go” concept, in development for four years according to Amazon, made a big impression throughout the retail world when the first store using the format opened its doors to customers in early 2018. Nearly 20 shops are now operating under the concept, without checkouts or (visible) staff. Until now, mainly very small retail spaces have been used, due to the complexity of the underlying technology, but Amazon now believes its approach is mature enough to be used in larger scale stores. The company is aggressively offering the technology to other retail chains.

The idea of saving customers a long and annoying wait in line at the checkout has inspired the sector and brought about a whole range of similar concepts that can essentially be reduced to two main solutions.

Two approaches

Solutions in which customers themselves need to play an active role are very easy to implement. They gain access to the store via an app. They take the goods they want from the shelf and scan them using the app provided by the retailer. Once finished, they pay directly via the app or at a self-service checkout, such as by scanning a QR code generated by the app.

The difference to a traditional store lies in app-based entry control. Within the store, regular self checkouts are combined with self-scanning. Many store operators rely on solutions provided by MishiPay (e.g. Saturn) or Snabble (e.g. tegut).

Systems which allow customers to simply take products off the shelves and place them in their bags (essentially closer to the approach taken by Amazon Go) are much more demanding. The goods taken are detected automatically and the payment process requires no action on their part. For this to work, the goods need to be detected accurately. To achieve this, the systems combine various technologies, including cameras, image recognition supported by artificial intelligence and sensors fitted to shelves. A challenger to Amazon, the Israeli start-up Trigo, has now made quite a name for itself in this area.

24/7 stores as local corner shops?

In Japan, small convenience stores (such as those from 7-Eleven) are an everyday part of consumers’ lives, supplying residents with snacks, drinks and daily essentials that would not warrant a trip to a large shopping center. Japan is in the midst of a considerable demographic change. The population is shrinking and the average age of its citizens is increasing year on year. This is making increasingly difficult for retail chains to staff their small stores and means they’re increasingly looking for concepts that manage without checkouts and staff.

Germany, by contrast, has a dense network of grocery shops in its cities. But in rural areas, the picture is quite different as major chains do not believe it is worth their while to operate branches there. On the other hand, not every rural resident has a car for driving to the nearest town. This means smaller format stores with a reduced range and flexible opening hours could help to supply these areas.

No checkout doesn’t mean no staff

Despite what some retailers may claim in public, this move is of course not just about enhancing the shopping experience. If the customer checks out their own purchases, staff no longer need to perform this task and costs can be reduced. But checkoutless stores still need staff, as shelves need stocking just as in conventional branches.

Is the pandemic driving the trend for checkoutless stores?

By looking at how checkoutless stores are presented in the media, you would think they’re much more significant than they actually are. Even if tegut opens more than 20 of its “teo” stores by the end of 2021, they would make up just under one in ten of the retailer’s branches. And tegut is one of the smaller chains.

The technology also leaves a number of questions unanswered. For instance, while all of the operators of these experimental stores claim to be pleased with them in their public statements, none provide any concrete figures about their usage. This makes it difficult to assess how profitable it is to install the necessary technology, especially when it comes to sectors in which margins are tight, such as food retailing.

But the more important question is whether customers will accept stores without staff in the first place. In recent years, there have been an increasing number of studies in which consumers state that the personal advice and on-site staff are part of the essential advantages of high street retail.

The retail sector would be doing away with these benefits altogether if they convert their stores using automation across the board.

That said, the need for social distancing and uncertainty surrounding the pandemic will likely make these sorts of businesses a more appealing alternative or supplement to the traditional supermarket for a certain consumer segment. Whether the pandemic helps automated stores break through into the mainstream remains to be seen.