Amazon (NASDAQ:AMZN) has a massive retail business, but it generates the bulk of its profits from services like cloud computing, third-party seller fulfillment, and advertising. 

The latest service to join Amazon's portfolio is the company's "Just Walk Out" technology, which powers its cashierless Amazon Go convenience stores. Last month, Amazon launched a larger-format cashierless grocery store. That store's perhaps as much an opportunity to push deeper into the grocery market as it is a proof of concept that Amazon's tech works in stores with bigger footprints.

The tech titan already has several agreements with retailers to include its Just Walk Out technology in their stores. Amazon's service could save retailers billions of dollars per year by reducing head count and inventory breakage. And Amazon's top line ought to see a nice boost as a result.

The sidewalk outside of an Amazon Go store.

Image source: Amazon.

A $50 billion market

U.S. restaurants and retailers pay cashiers about $85 billion per year in wages. That number will only climb higher as state minimum wages increase over time. Cashiers have other non-wage costs as well, including hiring, training, and turnover. They might even get sick from time to time, drawing the attention of store managers and decreasing their store productivity for a day or two.

Amazon's technology will reduce those costs for stores, and it could be paid handsomely as a result. Loup Ventures' Andrew Murphy once estimated that the total addressable market for Amazon's cashierless technology to be $50 billion.

Amazon doesn't provide any pricing details on its website announcing Just Walk Out as a service. But the company reportedly spends about $1 million on the technology needed to operate each of its small-format Amazon Go stores. The e-commerce specialist will likely install equipment at cost.

Amazon will also collect recurring revenue from stores that license its technology, whether that's a monthly licensing fee, a cut of sales, some form of commitment to using Amazon Web Services for running the service, or all of the above. The company may also collect revenue from processing payments for stores using its technology since it's completely replacing the standard point-of-sale system.

The potential benefits to Amazon's other businesses

There are several ways Amazon could benefit from retailers adopting its Just Walk Out technology.

First, the technology will require considerable computing power in order to run. Retailers may opt to use Amazon's AWS platform, which could simplify set-up, support, and billing. That said, many retailers have been moving away from using Amazon's platform, as cloud competitors like Microsoft (NASDAQ:MSFT) have developed more focused features for physical retail operations.

Amazon will also collect a lot of additional shopper data. Shoppers will dip their credit card into a machine when they enter, and optionally add their email address to receive a receipt when they walk out. An Amazon representative says that email address and credit card will be used solely for charging retailers' customers and sending receipts, and the data will only be used to support Just Walk Out technology retailers.

That said, Amazon could use the additional data to help retailers develop better loyalty programs, manage inventory, and provide other retail services. And it might also use the data and other learnings from stores licensing its technology to develop its own physical store footprint.

Just Walk Out technology is a big opportunity for Amazon. While it's unlikely to become a multibillion-dollar source of revenue for Amazon very quickly, the company has shown the ability to scale services quickly and effectively. (Its $11 billion advertising business was just a blip a few years ago.) So, it might be sooner than you think.