Grocers to Retreat from Risky Tech Bets Amid Economic Uncertainty
With economic challenges requiring a focus on near-term profitability, grocers are rethinking their technology investments.
Retail giant Amazon, for one, appears to be reconsidering the costs versus benefits of the expansion of its Amazon Fresh grocery chain, of which the most recently opened stores have been equipped with the company’s Just Walk Out checkout option. This system equips the entire store with a considerable computer vision and sensor technology investment.
In recent weeks, reports have been circulating from across the United States of stores apparently designed to be Amazon Fresh locations sitting empty and not on track to open any time soon. The stores have a distinctive, tiered design and recognizable elements, such as the black and green stripes above the entrance.
Axios reports that a handful of these locations have been spotted, with construction halted in the Twin Cities area. ABC 10News reported recently that a store that appeared ready to open in San Diego, California, with the grocer’s logo up top and a sign advertising the availability of Just Walk Out technology, has been in limbo since April. Additionally, real estate news publication The Real Deal notes similar stalled Amazon Fresh locations outside of Philadelphia, Pennsylvania; in Staten Island, New York; and a few in New Jersey.
In fact, PYMNTS was not able to find reports of a new location Amazon Fresh location opening since the grocer cut the ribbon on a new location in East Pasadena in September, according to local publications.
Consequently, it seems that the cost of operating these technology-powered stores is such that it is cheaper to hold onto the real estate and do nothing with it than to open these locations.
Amazon opened dozens of new stores last year, at a time when investors were willing to bet on the long-term success of more innovative technologies, such that the retailer could incur losses in the hopes of improving the economics of the system in the future. However, it appears that even the tech giant does not have the leeway to take these chances and is keeping mum.
“We do not comment on our future roadmap,” an Amazon spokesperson told PYMNTS via email.
In an interview with PYMNTS, Raz Golan, CEO and co-founder of Shopic, a company that offers smart carts, retail media integrations and store analytics, argued that companies reach a point of diminishing returns on this kind of autonomous checkout technology when store formats get too large.
“[Considering] what it takes from the store from the retailer to set up [the technology] and what they have to invest in deployment and in maintenance in order to get it done, [I] think that we can say that cart-based solutions are very suitable for the medium and large grocery format, while the Just Walk Out is very good for the convenience store format.”
Yet, it is not only Just Walk Out technology that appears to be facing a reckoning, as grocers are forced to be more conservative in their innovation. Smart carts, too, do not appear to be expanding as one might expect. For instance, grocery technology giant Instacart announced the widespread availability of its Caper Cart smart carts in September. Yet this move led to few grocers adopting the technology.
Many grocers looking to add self-checkout options continue to turn to the traditional kiosk model rather than betting on next-gen systems like cashier-less checkout, smart carts or scan and pay (the latter of which has yielded mixed results in recent months).
Similarly, after a wave of innovation in mobile, few grocers have been unveiling new loyalty programs or announcing major app upgrades. Rather, with ongoing economic challenges, the focus now appears to be on the tried-and-true, looking to maintain profits in the short term rather than bet on growth down the line.