Amazon Has Competition In 'Just Walk Out' Grocery Stores

Amazon.com (NASDAQ:AMZN) doesn't seem to have gotten very far yet on its cashierless Amazon Go convenience stores. There are only 13 in operation, a far cry from the 3,000 locations it purportedly wants to have operational by 2022.

But by opening the first one and then continuing to incrementally build on the lessons learned, Amazon has spawned broad interest in so-called "just walk out" technology. And we're now beginning to see competitors pop up all around the country, which could become the future of retailing, at least as it pertains to grocery stores.

Eliminating the need for cash

Regional supermarket chain Giant Eagle announced it is testing cashierless technology at one unnamed pilot store in partnership with Grabango -- which, like Amazon Go, uses a combination of computer vision, artificial intelligence, and cameras positioned around the store to automatically track what customers pick up.

Its checkout-free technology, however, is for use in existing brick-and-mortar stores. Amazon reportedly spent $1 million outfitting its first Amazon Go store with the sensors and cameras necessary for a cashierless shopping experience; presumably, Grabango's technology to retrofit existing locations costs less, though the announcement doesn't say.

Eliminating checkout chokepoints has long been on the radar of supermarkets, since numerous studies show that this is the primary pain for consumers. But it was the launch of Amazon Go that brought it all to the forefront, and now there are several start-ups looking to exploit the opportunity.

The express lane to grocery's future

Trigo Vision announced late last year that it was partnering with Israeli supermarket chain Shufersal to test its cashierless technology, and more recently has been rumored to be working with U.K.'s largest grocery chain, Tesco, to implement the tech there.

Another early player, Standard Cognition, runs its own store in San Francisco to show off its cashierless technology, as does Zippin, while Skip targets convenience stores with a scan-and-go app.

Among the biggest retailers, 7-Eleven is testing a mobile checkout process in the Dallas area called Scan & Pay that uses QR codes to avoid the register, and Walmart (NYSE:WMT) has outfitted a Sam's Club warehouse store in Dallas with scanners for bypassing the register, while also reportedly working with Microsoft on a broader application of cashierless shopping.

Caper, a start-up, has an intriguing technology that can also be readily applied to existing supermarkets of all sizes by using smart shopping carts to know what a customer is buying.

A chance to gain ground

Yet, as has happened with Amazon Go stores sprouting up around the country, politicians are more than ready to jump in and thwart the proliferation of this forward-looking technology by banning any store that won't accept cash. New Jersey and Philadelphia earlier this year joined Massachusetts in passing laws forbidding a store from not taking cash, saying they represented "discrimination and elitism," meaning retailers still have a chance to catch Amazon in this new arena.

Amazon's second-quarter earnings report last month showed that despite a big jump in online sales, physical-store revenue was up just 0.4% to $4.3 billion -- and that was almost all from Whole Foods Market.

Amazon's physical footprint is only slightly larger than Giant Eagle with 481 Whole Foods Markets, 18 Amazon Books stores, 13 Amazon Go convenience stores, three Amazon 4-Star outlets, and four Presented by Amazon outlets. It will be adding three more Go stores in Chicago and Seattle soon. Giant Eagle operates 460 stores.

Supermarkets done right

Reports of the death of the physical grocery store have been greatly exaggerated. Improving the shopping experience by eliminating the checkout line for those who want to avoid it could cause a rebirth of physical stores.

While there's an argument to be made that the supermarket industry has too many stores (and online grocery shopping reduces the need for them even more), Amazon has led the way in renewing interest in them. As more companies explore the potential for "just walk out" technology, it could make the physical supermarket experience more relevant again. Amazon is blazing the path, but this market may become a crowded one very soon.

This article originally appeared in the Motley Fool.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Microsoft. The Motley Fool has the following options: long January 2021 $85 calls on Microsoft. The Motley Fool has a disclosure policy.