What if GroceryTech is the key to the future of meat?

Prime Future 041: the weekly newsletter highlighting trends in animal protein

In 2018, Amazon quietly began piloting a new store format, Amazon Go. The premise was this: a shopper walks into the store, scans their Amazon Go app to be allowed through the turnstile, selects items off store shelves, and then walks out of the store. Seconds later, the shopper receives an email with receipt. That’s it. 

The shopper just walks out.

How? According to The Verge, “Amazon Go stores use overhead cameras and computer vision technology to track both shoppers and items throughout the store. That way, the system can identify when a specific person has picked something off the shelf and placed it in their cart, and even when they decided to put something back.”

Two announcements by Amazon should catch the attention of primary and further processors:

1. Amazon is now expanding the use of the technology into a larger grocery format at their new Go Grocery store in Seattle.

2. More importantly, Amazon is now licensing the technology to other retailers. And branding the technology, cleverly, as Just Walk Out.

According to the Wall Street Journal, “Amazon hopes the grocery store will serve as a showcase for its technology as it seeks to sell its system to other businesses. The company has recently been in talks with potential partners and is targeting retail options including convenience stores and shops in airports and sports arenas, according to people familiar with the matter. Amazon has discussed multiple revenue models, including a fixed licensing fee or a revenue-sharing agreement, one of the people said.”

How could this impact the meat case, and the value chain of case ready plants and primary processing plants? 

Three reasons this creates an inflection point in the retail value chain:

1. Puts the consumer experience on the consumer’s terms. It lets them talk with a store employee when they want to do so, not because they have to in order to make the purchase. As consumers – all of us – continue down the path of customization options to buy when we want, how we want, and what we want, this is a big step in that direction for food retail. And on a related note, I expect this to dial up consumer expectations for the retail experience. How long will it be before checking out with an actual cashier will feel like stepping into 1950? 

2.  Frees up labor to increase service level / create opportunities for a new consumer experience at the meat case. How will retailers reassign labor and take advantage of a way to improve the experience as consumers shop for one of their biggest ticket items in a grocery store? How will packers equip retail partners to do this well?

3. Enables a data driven supply chain. Not just in theory, but in practice. Today, the only data that packers receive from their retail customers is sales data – SKU, volume, price. Imagine a world in which retailers are able to send packers not only data about shopper decisions, but about the shopper’s behaviors during the decision making process. e.g. the average amount of time a consumer spent looking at one item vs another, which 2 items a shopper picked up before selecting one, how many times consumers picked up one packaging type vs another, and how all of this correlates with actual purchases. Imagine all the ways an increasingly granular view into shopper behavior during decision making could drive relevant data upstream to packers to drive everything from packaging decisions to new product development.

A parallel example is Lemonade Insurance vs Every-100-Plus-Year-Old-Insurance. Insurance companies are set up to sell policies through a distribution network of agents, so the data that flows back to insurance companies only comes from shoppers who submit information to get a policy, or actually buy a policy. All the micro-behaviors in the middle of that buying process are lost because there is no mechanism to capture data for traditional insurance companies. 

But that’s not true for Lemonade Insurance, a startup with a buying experience that is digital first. Because Lemonade engineered an online buying process, they are capturing an enormous amount of data about micro-behaviors in the buying process such as, at what point do most shoppers drop out of the buying process. That’s incredibly valuable information to inform either product development OR engineering of the buying process itself. 

I see Just Walk Out as a technology that will enable retailers and their packer suppliers to move from making blindfolded decisions with sales data only, to being able to operate like Lemonade Insurance with an eye opening new level of data granularity to drive better consumer outcomes – either in the product itself or how its sold. 

Note: I wrote all of the above in January 2020. So after 12 tumultuous months, my take on the above hypothesis:

It didn’t happen.

Amazon didn’t expand the use of their “Just Walk Out” product….or at least it hasn’t made its way to Safeway in rural southern Arizona. But in a world relentlessly pursuing reduced human contact during in person transactions, why haven’t we seen this technology roll out either across Whole Foods stores or more broadly across other retailers? If ever there was a perfect moment and an external environment driving the rapid adoption of a tech product, a global pandemic seems like a pretty great reason to ridiculously accelerate adoption of this type of technology. Yet it doesn’t seem to have happened.

So, did Amazon table the roll out of this technology in order to focus all resources on their core business and keeping up with pandemic demand?

Or, did Amazon’s prospective customers (HEB, Wegman’s, Publix, etc) table their interest in the technology in order to simply focus on keeping shelves stocked amidst pandemic demand? What organization has the bandwidth to completely upend their customer facing operations in the middle of all that?

Or, perhaps the economics of this technology don’t actually make sense in the grocery business.

My hypothesis is that the lack of adoption of Just Walk Out is due to resourcing & timing for both Amazon and their prospective customers, and that over the next few years we will start seeing this tech in more grocery stores. If that’s right, this highlights the importance of adoption costs for tech products, aka the costs (money or perhaps as important, time) of implementing the product. Adoption costs are a corollary of switching costs but it’s more about going from status quo to Something New as opposed to going from Product A to Product B. Adoption costs matter for any tech product, whether the customer is a hog farmer in the Midwest, a cattle rancher in Montana, or a national food retailer.

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Prime Future Volume 1

From genetics to fintech to gut microbiomes to the meat case, we’ve covered <a lot> of ground since the beginning of Prime Future.

To make it easy to access all in one place, I’ve compiled all Prime Future content into an ebook, Prime Future Volume 1: Trends, Innovations & Tech across Livestock, Poultry & Meat.