Editor's note: Portions of this article have been corrected. An Amazon spokesperson reached out to The Motley Fool after this article was published to note that Amazon "associates validate a small portion of shopping visits by reviewing recorded video clips to ensure that our systems are performing at our high bar for accuracy," but no transactions are viewed live. The Just Walk Out technology will be removed from all Amazon Fresh locations in the U.S., but the Amazon spokesperson noted that "there are more than 130 third-party Just Walk Out technology locations in the U.S., UK, Australia, and Canada -- and we will open more Just Walk Out enabled stores this year than any year prior -- including at travel retailers, sports stadiums, entertainment venues, conference centers, theme parks, convenience stores, hospitals, and college campuses."
Amazon's (AMZN 0.74%) Just Walk Out technology, long showcased by the company as a revolutionary retail innovation, is apparently not as game-changing as some thought.
The Information reported last week that Amazon would be dropping the technology from its Amazon Fresh stores. This news got picked up and combined with a year-ago report from The Information that had said the network of cameras and other devices that powered the cashierless Just Walk Out technology in Amazon Go, Amazon Fresh, and Whole Foods stores mostly depended on humans to verify the transactions. The 2023 report said that about 70% of transactions at Just Walk Out stores had to be reviewed by an Amazon team of more than 1,000 people in India. Amazon says this is inaccurate and that Amazon associates "validate a small portion of shopping visits by reviewing recorded video clips."
So what could the Amazon Fresh changes mean for investors considering Amazon stock? Let's dive in.
Image source: Amazon.
What's happening with Just Walk Out
Amazon is pulling the Just Walk Out technology from its Amazon Fresh and Whole Foods grocery stores in the U.S. A little more than half of Amazon Fresh stores had Just Walk Out installed only recently. The technology will remain in the Amazon Go convenience stores.
Rather than using Just Walk Out, Amazon is leaning into its smart Dash Carts, which have a scanner and screen contained in the shopping cart so they can track your purchases as you shop and show you how much you've spent.
Amazon sees these carts as a more reliable and practical solution, and they give shoppers the ability to see how much they're spending as they shop, which Just Walk Out does not do.
Is it just cost-cutting or is there a bigger problem?
Under CEO Andy Jassy, who took over from Jeff Bezos in 2021, Amazon has focused more on cost-cutting and driving profitability rather than innovating -- its historical strength.
Scaling back the Just Walk Out technology seems like a logical step under that regime as the technology was not living up to its promise in the Amazon Fresh stores. But it also represents a stumble in an area of artificial intelligence where Amazon seemed to have an advantage.
Other signs have emerged that call Amazon's AI strategy into doubt. The company just announced it was cutting several hundred jobs at its Amazon Web Services cloud computing division, a sign that growth in that segment may not be living up to expectations.
The Amazon spokesperson said that the "reductions in AWS are not a reflection of the strength of our business. We've identified a few targeted areas of the organization we need to streamline in order to continue focusing our efforts on the key strategic areas that we believe will deliver maximum impact."
Amazon also recently made a second investment in Anthropic AI, spending $2.75 billion on top of its initial $1.25 billion last fall. Anthropic is the parent of the Claude chatbot and also counts Alphabet as a major investor. In fact, Alphabet was the first to forge a relationship with Anthropic. For Amazon, even the Anthropic investment seems to signal it's late to the AI race, making the move after Alphabet and after Microsoft invested in OpenAI.
Amazon stock is approaching a record high, but the qualities that made the company great seem to be a bit lacking these days. Even as it's generating record profits, AWS is growing more slowly than rivals Microsoft Azure and Google Cloud. Its e-commerce business is also losing market share to Walmart.
That might not be cause for alarm yet, but Amazon's bull run looks due for a breather. With Amazon appearing to trail its big tech peers on some fronts and pulling back on innovations like Alexa and Just Walk Out, its traditional competitive advantages perhaps don't look as strong as they once did.
