Microsoft and Walmart are a poor match for Amazon Go
Microsoft is the latest to try to help a big retailer jettison cashiers — and the latest to discover how hard that is.
The software giant is reportedly working with Walmart on a rival to Amazon Go, the e-commerce giant's checkout-free concept store. At first glance, this would seem to be a formidable challenge to Amazon, given Walmart's huge footprint when compared to Whole Foods, the biggest physical property Amazon owns.
Amazon competes with Microsoft on cloud delivered technology and is in a fierce e-commerce arms race with Walmart. If Microsoft and Walmart team up on a concept that Amazon is heavily invested in, they could put a major dent in Amazon's encroachment into traditional retail. Such a move would also give Walmart the same ability as Amazon to pair e-commerce and in-store shopping.
But there are problems for all of the players involved. The complexity of outfitting a full-sized store with digital sensors — the foundation of Amazon's process for automatically detecting which products a shopper intends to buy — means it will likely be a long time before cashiers disappear from either Walmart or Whole Foods.
Microsoft is reportedly using a crew of about a dozen developers to build its cashierless payment technology, and is reportedly considering attaching cameras to shopping carts instead of Amazon's approach of attaching them to the ceiling. That would be less costly and easier to mass deploy, but would still need to be proven in a real-world setting.
Michael Suswal, co-founder of Standard Cognition, a San Francisco-based company that is developing in-store digital payments technology for retailers to counter Amazon's brick and mortar encroachment, likens Microsoft's rumored approach to Smart Basket technology, which is considered less robust than Amazon Go's approach.
"Smart Basket technology came and went in 2016," Suswal said. "I'd be surprised if Microsoft went down that route."
Microsoft and Amazon would not comment for this story, and Walmart did not return requests for comment by deadline.
Microsoft also has developers working on cashierless technology on its cloud, Reuters reports, adding some developers are trying to incorporate the shopping and payment technology into iPhones.
Using a handheld scanner or smartphone approach is similar to an option that Walmart has already rejected, Suswal said. Walmart recently killed its Scan & Go app, which lets consumers use their own smartphones to pay for items and void checkout, because of low consumer usage—though Walmart is considering giving staff smartphones to perform the same service.
"Most retailers are moving away from this approach, not toward it," Suswal said.
Also, Microsoft is only in talks with Walmart at this point, so the collaboration is not set in stone.
The choice of Walmart as a partner may be a challenge, given the average size of Walmart's stores. As iconic as Microsoft is as an innovator, the details that have leaked out about how it's approaching checkout-free technology don't fully address the problems that have already come up in the market.
For example, Amazon's Go store — a much smaller setting than a typical Walmart — had to delay its opening due to issues it reportedly had with handling crowds. When the Amazon Go store finally opened its doors to the public, it required people to line up by the door to limit the number of shoppers inside.
"If Microsoft's solution in this case mirrors Amazon Go's technology, this means it can only operate right now in a retail store with a small, convenience store size footprint," said Raymond Pucci, associate director of research services with Mercator Advisory Group.
Walmart's smallest store model, the Walmart Express, is about 15,000 square feet. Amazon Go's only store is 1,800 square feet, and its pending new stores in Chicago, Seattle and other cities are expected to be of a similar size.
The supporting technology has also been a problem. The patent application for technology that tracks consumer movements in stores and links those movements to Amazon accounts goes back almost three years. The Amazon Go store itself became known almost two years ago, when it attracted considerable attention during testing with staff.
But it took a long time for Amazon Go to welcome the public. Amazon contends the January opening — about half a year behind its original schedule — was due to the company gaining more insights from its employee-only tests, rendering a public opening less urgent.
Since its tests, Amazon has also been calculated in deploying its Go stores. It has not committed to deploying Go in its Whole Foods network; and only plans a handful of new stores for the rest of this year.
It's also picking up competitors as several other companies are trying to build no-cashier stores. Suswal's Standard Cognition has attracted investors to its retail-focused model; a Chinese chain called Bingobox has deployed similar technology; and the merged Albertsons and Rite Aid are planning to build their own version.
Despite the delays, Amazon is still the furthest along relative to other efforts to remove cashiers from stores, according to Pucci.
"They’re still the only one with a pure play self-checkout in Amazon Go, and by that I mean, no human exit door monitors," Pucci said. "Most of the tech development I see now are the mobile scan and go apps that require an exit monitor or some station to verify goods vs payment receipt."