With Amazon Go’s “just walk out” grocery store finally up and running as of January 2018, everyone in the supermarket industry from cashiers to CEOs are watching with bated breath. Is Amazon intending to implement throughout the Whole Foods network? Will other grocers adopt the same strategy? Will governments start taxing and regulating automation with rollouts halfway through implementation? How will customers react as job losses move from a few hundred here and there, to thousands and then millions?
When it comes to automation, the only certainty is that more will come, but how things will change as governments and customers adapt is anything but clear.
The Current State of Automation in Grocery Stores
Grocery stores are continuing to automate the check-out process through the use of self-serve kiosks. This move has been accelerated by minimum wage increases in places like Ontario, Canada, with companies like Metro announcing they will cut 280 jobs as kiosks are introduced in more stores. The problem is self check-out kiosks do not greatly improve the customer experience. In fact, Marketplace timed cashiers versus self-check outs, and found that cashiers were able to do the job faster and with fewer mistakes. Although self-serve check-in kiosks at the airport reduced the average cost of a check-in from $3 to 14 cents, those savings have been pocketed by the airlines, not passed on to consumers. These automated processes primarily benefit the company by asking customers to do the work themselves.
This is what makes Amazon’s new store so interesting. It addresses the consumer’s pain point of standing in line. By downloading an app, customers can simply pick up and walk out with their items. It makes the experience easier for the consumer and offers companies the opportunity to reduce in-store staff, and costs at the same time. While the cost of implementing this technology is prohibitive for most large grocers today, eventually the ticket price will decrease. But how the marketplace will react is hard to predict, given many unknown factors.
One concern retailers need to think about when it comes to automation is the impact of future regulation and taxation. Bill Gates, Elon Musk and Stephen Hawking are among those calling for government regulation of automation, and it is poised to become a powerful political issue.
While some CEOs are down-playing the impact automation will have on jobs, there is no doubt that cutting the number of humans working at a given location is a key reason to automate. Many of the disenfranchised workers, who voted for Donald Trump, lost their jobs to automation, and there will be more to come. As entire classes of workers find themselves unemployed, economies will be destabilized and governments will be forced to respond.
Andrew Yang, a New York businessman who is reportedly seeking the Democratic presidential nomination in 2020, argues that self-driving trucks could be enough to cause serious international economic damage.¹ McKinsey & Company conclude that by 2030 as many as one-third of jobs may be eaten up by automation.² Three reputable sources on the issue, McKinsey & Company, Oxford, and OECD, predict job losses anywhere from 9 to 47 percent.³ While some claim jobs will be created by automation, these most thorough studies point to a huge shortfall even when factoring in job creation. Governments will be forced to respond, and how exactly that will affect companies that have heavily invested in automation is a big unknown. Bill Gates is calling for robots to pay income tax – an idea many call impractical, even while agreeing it is philosophically sound. Investing in automation may make sense today, but it should be considered with the expectation that financial benefits may be offset by future government intervention.
Does Automation Improve the Experience?
Customers may reach a point of frustration if automation does not offer some benefit, or if it adds friction points to their experience. For example, on a recent trip to a drugstore, I used a self checkout kiosk which appeared to work seamlessly; however upon leaving, one of the items I had paid for activated an alarm. I was forced to return to the teller, who advised me that the self checkout counters are not capable of deactivating alarm tags -this is a job that can only be done by a human teller. This kind of irritating experience will deter customers from using automated systems and potentially send them to competitors that do a better job. Any automated experience needs to be at least as good as the one already provided, and in order to really be worth the investment, it ought to make the customer experience better. A poor system will become obsolete quickly, and any immediate savings made will be eaten up by the cost of updating to newer technology.
Does it Help Build Connections? Or Break Them?
Supermarkets can learn a lot from retail banks when it comes to the race to automation. In an effort to out-do each other and beat off fin-tech, online-only competitors, retail banks went all out and automated every basic transaction banks perform. They managed to address the consumer pain point of convenience by allowing customers to bank from anywhere, anytime. The banking industry was so focussed on addressing a singular pain point that others were forgotten. Banks made little effort to build meaningful relationships with their customers based on trust, compassion and expertise. As digital banking became ubiquitous, it lost any competitive edge. Banks found themselves struggling to overcome negative perceptions in spite of the convenience they were now offering. They had forgotten about how important it is for consumers to feel understood and valued. This kind of nuanced and deep connection can only be made through human interaction. Banks are now rethinking their customer experience strategies and finding not everything should be automated simply because it is an option. Supermarkets should take this lesson to heart and consider how brand loyalty can be impacted by the role human interaction can play within the store.
Automating certain aspects of the customer journey can be a benefit to supermarket brands – at least given current economic, cultural and regulatory circumstances. However, in order to future proof against sea changes that may happen quickly and without warning, brands must ensure that automation has a positive impact for the customer as well as the brand’s bottom line. Additionally, brands must not neglect the human aspect of the shopping experience. Ideally automation should relieve staff from mundane tasks that do not allow for the building of relationships, and move human beings into more specialist roles where customers are likely to be engaged.
1. See The New York Times (2018), for a more detailed discussion on this concept.
2. See McKinsey & Company (2017)
3. Other research supports similar conclusions. See Frey and Osborne (2013) and Arntz, Gregory, and Zierahn (2016)