Season 4, Post 8: Just walk out
London’s midtown district of Holborn has neither the glamour of the West End nor the bustle of the City but it is home to some exciting retail trends, so much so that your author spent a recent weekday lunchtime in the area. Walk east from Chancery Lane underground station and you reach the headquarters of Sainsbury’s, the second largest food retailer in the UK. Almost opposite is their ‘concept store’, a small location where the supermarket trials innovations (coincidentally, WH Smith, another retailer, also has its concept store on the same block). We were drawn to the Sainsbury’s outlet by a comment in Amazon’s recent quarterly earnings release where the company highlighted that its ‘Just Walk Out’ technology had recently been licensed to a third-party – Sainsbury’s – for the first time.
Having seen the technology in action in both San Francisco in 2019 and when it first came to the UK last year, it was interesting to observe the way in which it is evolving. Sure, there remains a novelty element attached to literally walking out of a store with a bag full of shopping without having to make any physical payment. As a reminder, users need to create an account (with the retailer) and link this to a payment card via a smartphone app. Items are then scanned remotely (via camera sensors) and a receipt emailed to the customer upon departure. However compelling this approach may sound, there is still the ‘hassle factor’ for first time users in having to set up an account before shopping. There is no option to enter the store other than scanning a QR code generated by the retailer on its app. Sainsbury’s customers also have to ‘tap out’ (as well as in) to the store with their QR codes, something which is not the case at Amazon’s own venues.
If in the Holborn area, keep walking west from Sainsbury’s and cross to the other side of the road and you will – coincidentally – come to an Amazon Fresh store. There are now 15 spread across London and it seems likely that Amazon will continue expanding this franchise, in the UK and potentially beyond. Amazon’s outlet was notably busier than Sainsbury’s, perhaps a function not only of the easier user experience but also since the former had markedly more items available than the latter. Your author made small purchases in both locations.
What are the implications? First, expect more retailers to offer this technology. It’s all about reducing friction for customers (as well as minimising human interaction in a post-COVID world). Next, cashierless check outs only help drive the acceleration away from cash to digital payment, benefiting the ‘pipe’ providers such as Mastercard and Visa. Finally, it’s not all bad for humans. Staff were still present in both stores to help customers gain entry. They were also stationed by the store sections selling alcohol, since the technology is currently unable to distinguish minors from adults.
24 February 2022
The above does not constitute investment advice and is the sole opinion of the author at the time of publication. Heptagon Capital is an investor in Mastercard. The author of this piece has no personal direct investment in the business. Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise.
Alex Gunz, Fund Manager
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