Although they are just single-store tests at the moment, the efforts by Amazon and Starbucks to eliminate cash from any transactions offer some predictions about the future that are hard to ignore. Both of these global powerhouses have determined that consumers relatively rarely use cash to purchase their products, prompting them to seek technology-supported and seamless innovations that would enable them to eliminate it altogether—along with most of the human staffers who previously were required to take the dollar bills and make change.
For Starbucks, the test store sits on the first floor of an office building in Seattle, where corporate employees often stop on their way in to work. Noting that mobile pre-orders through the Starbucks app already have increased to account for about 10 percent of all purchases, the company wants to determine how consumers might respond if they must pay without cash, whether through the mobile app or with a credit card waved over an in-store terminal. If this experiment is a success, it likely will roll out the design to other relevant locations.
As might come as no surprise, Amazon’s experiment is even more technologically advanced. At its test Go store, located in its Seattle headquarters, Amazon employees can shop for groceries without ever pulling a payment form out of their pockets. As they enter the store, they scan their phone, to identify themselves. Then cameras mounted throughout the store track and monitor their movements, including whether they place particular items in their shopping baskets. After completing their shopping trip, they simply walk out, and their account gets charged for the items they have selected.
This sophisticated operation continues to deal with various challenges though, which is part of why Amazon has opened the Go store only to employees thus far. For example, the monitors have difficulty following individual customers when the store is very crowded. The underlying software does not rely on facial recognition, to avoid privacy concerns, so each shopper is represented simply as a three-dimensional figure. Specifying each individual customer thus is difficult if they are bunched together in a crowd.
In addition, the software has not quite perfected its ability to recognize precisely which product a customer has selected. Tubs of sour cream and cottage cheese look pretty much the same to a video monitor, for example. Human shopping habits complicate this effort even further, in that when people grab products from the shelf, their hands often cover the label information that might allow the program to determine precisely which item they have chosen.
In both these experiments, human employees might diminish, but they are unlikely to disappear completely. For now at least, baristas still need to make fancy coffee drinks, and store personnel are still required to check identification when shoppers want to buy age-restricted products like alcohol. But conceivably, such tasks could be performed by advanced technology in the near future, implying the possibility of daily shopping experiences totally devoid of human service providers.
Furthermore, both retailers have signaled their intentions to expand these operations. For Amazon in particular, an “unwritten rule” requires that any new innovation must offer the promise of being expandable on a vast scale—a novel idea cannot be just a one-time goof, to see if it can be don. Considering the bugs in the system, and the possibility that modern consumers are not quite ready to give up a pleasant interaction with a friendly barista, those expansions might be years in the future. But their likelihood is hard to deny.
Discussion Questions:
- In which circumstances do you use cash in retail stores? What percentage of your retail store transactions do you pay for in cash?
- Why are stores like Starbucks and Amazon experimenting with cashless transactions?
- Do you expect the practice of cashless transactions in stores to grow? Why or why not?
- What impacts might cashless transactions have on firms’ strategic profit models?
Source: Laura Stevens, The Wall Street Journal, January 21, 2018. See also George Anderson, “Starbucks and Amazon Go Cashless in Seattle,” Retail Wire, January 25, 2018