A grocery shopping experience almost completely devoid of human interaction is just over the horizon, and it could be just what supermarkets need to prosper. Rising labor costs and increasingly intense competition are driving grocery purveyors, including Wal-Mart (NYSE:WMT), Amazon.com (NASDAQ:AMZN), and more recently Kroger (NYSE:KR), to venture into a world without cashiers.
Get up and go
Amazon really gave the idea a jump-start when it opened its first Amazon Go store for employees in 2016. On the shelves at Amazon Go are food items including ready-to-eat meals, grocery staples, and meal kits. Using a mobile app that's activated upon entering the store, the customer picks up items and adds them to her cart just as she normally would. However, rather than having to go to a register to tally the total, an Amazon app keeps a running count, and when the customer leaves the store, the app totals the purchase, charges the customer's Amazon account, and sends the shopper a receipt. Amazon calls it Just Walk Out technology. So far, the company continues to test the concept.
Now Wal-Mart is reportedly working on a similar concept. Recode reports Wal-Mart's prototype is dubbed Project Kepler and uses the same type of "computer vision" and machine learning technology that will eliminate the need for cashiers. Without the high cost of labor, profits can fall straight to the bottom line.
Same goal, different path
Kroger's, the largest supermarket chain in the U.S., plans to expand its Scan, Bag, Go technology to 400 stores this year, making its effort more widespread than Amazon Go and similar technology currently available at a handful of Wal-Mart and Sam's Club stores.
Using either an app downloaded to a smartphone or a scanner provided by the store, a Kroger's customer scans items he's placing in his cart as he walks around the store. At checkout, he logs the scanner or his phone into the register and pays for his groceries before exiting.
As previously noted, a number of supermarkets already have this technology in place, including Wal-Mart, but it's not nearly as widespread or ambitious as Kroger's efforts. Though Wal-Mart recently said it planned to implement the technology at an additional 100 stores.
Coupled with online grocery shopping, whether the customer picks it up or has it delivered to the house, the need for cashiers is rapidly evaporating.
Rise of the machines
We're seeing it in other industries, too, such as restaurants that are installing self-serve kiosks in greater numbers. From fast-food chains like McDonald's and Wendy's to fast-casual outlets like Shake Shack, as workers have demanded dramatically higher wages for performing menial tasks, they have simultaneously priced themselves out of the market, and we're seeing more computers and robots replacing them.
Labor is one of Wal-Mart's biggest expenses, and with some 1.4 million U.S. employees, it needs to contend with rising minimum wage rates. Some 18 states and 20 cities hiked the legal minimum wage on Jan. 1, so in a bid to stay above those levels, retailers like Wal-Mart are forced to raise their base wages even higher. It's an unsustainable cycle that will push more employers to seek out alternatives for unskilled workers.
Even as Wal-Mart recently announced a raise in its minimum starting wage, it also said it was closing 69 Sam's Club stores (though it will try to find positions for everyone).
While labor costs were not the only reason for the Sam's Club move, and maybe not even the primary one, it still entered into the equation, and as technology improves it will enable retailers like Wal-Mart, Amazon.com, and Kroger to more easily eliminate positions that their higher costs can't justify. Cashiers may soon be more rare than paper grocery bags.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool is short shares of Shake Shack. The Motley Fool has a disclosure policy.