Author(s): Raghu Gopal
There's no doubt that the modern-day retail experience is evolving. Customers are crossing their digital and physical shopping into a single point. Several retailers who understand this are creating experiences that blend the online and offline world, in an effort to address this new behaviour.
For example, Amazon unveiled its first checkout-free grocery store, Amazon Go, in the US in early 2018 (see Comfort Food). The shop caters to people who are comfortable with being digitally tagged from the moment they walk in the door. Every movement and decision becomes part of the shopping algorithm, supporting a smooth shopping experience that eliminates cashiers.
Now, Microsoft is reportedly working on similar technology that would allow retailers to build checkout-free stores. Its artificial intelligence team has been developing systems that track what shoppers add to their physical carts.
Microsoft's solution uses a combination of computer vision, cameras, sensors and lidar-enabled technology, in a similar way to Amazon Go. One aspect these retail systems have in common is that they rely on mobile connectivity to drastically reduce the need for retail employees on the shop floor.
Unlike Amazon, which is building systems for its own stores, Microsoft is in talks with retailers like Walmart about implementing the digital technology in retail locations. Those are companies that would be seriously uncomfortable buying core technology from a strong retail rival like Amazon.
This is a particularly interesting development as the retail experience is becoming a new battleground for innovation, and one that Amazon's competitors cannot afford to ignore. Although online sales account for only about 10 percent of retail sales in the US, the long-term trajectory is clear. Retail shopping is still morphing from a pure bricks-and-mortar experience to a combination of digital and physical. This was a main motivation behind Amazon's purchase of Whole Foods Market. Despite advances in e-commerce, physical stores still produce the majority of retail purchases. This is an area ripe for new technology investment.
With the right partnerships, especially with companies that compete against Amazon as retailers, Microsoft could place itself in a pivotal retail position. If its solution is transferable to many different retail environments, the company could be a leading innovator in this field for years to come. For now, its efforts show that the industry is playing catch-up with Amazon.
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