NEW YORK — Cashierless checkout systems like Amazon's Just Walk Out are targeted first and foremost at removing friction from the point of sale. Or are they?
The technology, which debuted in small
"If you want to know why Amazon is rolling out Amazon Fresh stores, it has a lot more to do with gathering first-party purchase data in-store to power [its] advertising opportunity than it does with making a profitable physical retail business," Andrew Lipsman, principal analyst for retail and e-commerce at Insider Intelligence, said in a panel discussion at the National Retail Federation's Big Show last week in New York.
More retailers are turning their stores into advertising venues, replicating the experience of shopping online — not only in how they present marketing at every touchpoint but also in how they collect vast amounts of data on shoppers.
"We tend to think of customers as foot traffic, but they're also eyeballs," Lipsman said. "And those eyeballs can be influenced while they're in the shopping mindset, close to the point of purchase."
Data over drudgery
The goal of Just Walk Out is not to create a "robot store," Jon Jenkins, Amazon's vice president of Just Walk Out technology, said in a separate presentation.
Each setting is unique. A convenience store can sell packaged goods, which can be tracked through cameras and sensors on the shelves; a full-size grocery store, by contrast, also has a butcher counter and prepared food that a customer gets handed instead of picking up off the shelf. And all these items have different prices based on weight or customization.
In a stadium setting, such as the Just Walk Out locations at Seattle's Lumen Field, most customers are dressed in nearly identical jerseys. In a grocery store, children or pets may be riding in a cart instead of walking alongside it. All these variables have to be taken into consideration.
But the payoff — for both the merchant and consumer — is worth overcoming these challenges, Jenkins said.
"It's not limited to the drudgery of just checking people out. And the types of data that you can get out of a store like this are really quite incredible," he said.
With the exception of customers who
The Nordstrom network
Nordstrom is taking a different approach to its use of customer data. The retailer launched a media network in 2019 to allow the brands that sell through its stores and websites to present targeted advertisements to its shoppers.
Those advertisers are "looking to get in front of high-value customers, and I can't think of an audience that will have more high value than someone at Nordstrom searching for a specific item … they are ready to purchase," Aaron Dunford, senior director of digital merchandising and marketing at Nordstrom, said in a panel discussion.
Nordstrom operates two brands — Nordstrom and Nordstrom Rack — and each has its own digital presence as well. Across those brands, about half of customers begin their in-store purchases through the company's website or mobile app, Dunford said. Some will even start on Norstrom.com and then go into a Nordstrom Rack store for their next purchase.
Nordstrom built a platform in-house to aggregate the data across all of these brands and channels.
"We've all known for a long time that digital advertising drives in-store sales; at least, that was our hypothesis," Dunford said. "But now we're actually seeing we can connect a digital touch — someone engaging with Instagram or searching an ad — with an in-store purchase. And that is a huge driver for us. It was much more surprising than we anticipated; it was also validating."
This complete view of the customer improves Nordstrom's ability to target the marketing it does across all channels.
Its next step, which Nordstrom plans to launch this quarter, is to integrate this advertising network with its stylists, whom Dunford describes as "influencers in and of themselves." Shoppers can make an appointment in-store or follow the stylists on social media, learning about styles that can be purchased in either channel.
It's no coincidence that this strategy gained traction during the pandemic. Nordstrom, like many retailers, leaned heavily on technology such as
The grocery chain Albertsons, which began development of its own
"You're not going to do a ton of [grocery shopping] online, though you are probably going to create lists and look at … pricing and things like that before you take your trip, so it's incredibly important that we figure out how to … pull all of our in-store transactions into our retail media practice," said Kristi Argyilan, senior vice president of retail media for Albertsons Media Collective.
Lipsman predicts that retail media networks (which cover both online and offline advertising) will be bigger than search and social media advertising, based on the category's rate of growth. Search took 14 years to grow from $1 billion to $30 billion in digital ad spending; social took 11 years to reach the same milestone, Lipsman said. Retail hit that mark in just five years — with much of that growth taking place during the pandemic — and is projected to reach $45 billion this year, he said.
Amazon is the dominant force, at 77% market share, and is unlikely to slip from this lead spot, Lipsman said. "Nevertheless, even 1 percentage point of this market is extremely valuable, representing $450 million in very high-margin revenue," he said.
The only constraint is the lack of available ad space, and that is solved in part by the ways retailers and payment companies are overhauling the checkout experience. Checkout aisles and "
"And in-store data will become the fuel for targeting these high-powered ads," Lipsman said.
