Amazon Go's Cashierless Stores Have a New Rival

The future is in a Shell gas station in the sleepy Silicon Valley suburb of Campbell, Calif.

Customers who walk into the service station’s adjacent convenience store to buy Kettle Chips and Arizona Ice Tees never deal with human cashiers. Instead, technology is the shopkeeper.

The store, owned by the chain Loop, officially opened in December after a few months of testing. AiFi, the startup that created the software for managing the store, is pitching its technology as a way to help retailers remain competitive by converting their brick-and-mortar shops into cashierless markets.

“We can use the technology to have a store entirely run by itself,” said AiFi CEO Steve Gu, who previously worked at Apple and Google moonshot factory X. “We call it a self-operating store.”

AiFi is among a number of startups aiming to supply retailers with technology to automate their stores, which saves on employee costs, expands operating hours, and lets shoppers avoid waiting in check out lines. Standard Cognition, Zippin, and Grabango sell similar technology.

EMarketer retail analyst Andrew Lipsman says that automation technology will be one of the biggest retail trends in 2020. An increasing number of cashierless stores from Amazon Go has prompted retailers to seriously consider the technology, in the same way they’ve been forced to revamp how they operate because of Amazon’s rise.

Amazon has over 20 Amazon Go convenience stores nationwide in cities including San Francisco, Seattle, and New York City.

AiFi’s Campbell store, which is in a shipping container, resembles a hip coffee shop in San Francisco or Portland, Ore. The store is equipped with 12 cameras that capture people’s movements and servers that analyze the data.

To get the store’s door to open, shoppers must download an app so they can connect their payment accounts to AiFi’s digital checkout system. For help with getting started, shoppers can consult a digital kiosk outside the store that provides basic instruction about how to access the store and shop.

Once inside, the store’s cameras and sensors track the movement of shoppers while computer vision technology notes what they pick up and what they put down.

“If you walk into the store with a dog, our system won’t confuse it with a person,” Gu said.

Checking out is painless—customers grab what they want and then leave. Receipts are immediately delivered by email.

AiFI claims that its technology prevents theft because people cannot enter the store without validating their payment methods prior to entering. If a would-be thief sneaks into the store as another person enters, any stolen items would be charged to the person who entered the store legitimately. An AiFi spokesperson said that the person can ask for a refund for any stolen goods if such a scenario were to occur.

In the case that a customer is overcharged, the AiFi spokesperson said that customers can contact a customer support team, handled by both Loop and AiFi if they have in issue. Eventually, Loop will handle all customer complaints.

AiFi said that it has three stores that are fully open in Netherlands, Shanghai, and Campbell. Seven others are being tested in European countries like France and Poland, and the company plans to develop more stores in Sweden, Germany, and Austria.

Gu said that European retailers are increasingly interested in autonomous store technology because of laws in certain European countries requiring them to close on Sundays. Autonomous stores could let these retailers keep their stores open on those days, Gu said, as well as help retailers deal with labor issues, because in Europe, “it’s very hard to hire people.”

Paco Underhill, the founder of market research and consulting company Envirosell, cited a more pragmatic reason European retailers are looking to cashierless stores. Using cashierless technology is one of the ways these retailers can “reduce their dependencies or subservience to retail unions,” he said.

Gu declined to comment on how much the store costs to set-up, but implied that it’s pricey.

The shop’s interior resembles a typical convenience store, except it’s noticeably smaller. Shoppers have only one aisle of shelves, making for a limited selection of bottled water, flavored iced-teas, potato chips, and candies. Customers seeking Aspirin, toothpaste, or batteries are out of luck.

Still, AiFi faces many challenges, particularly from Amazon, which CNBC reported may be interested in selling its Amazon Go store technology to other retailers like movie theater operators and concession stands in baseball stadiums.

An Amazon spokesperson declined to comment to Fortune about possible plans.

Gu dismissed Amazon’s threat, claiming that most physical retailers don’t want to do business with Amazon because it has already significantly disrupted the industry.

“Retailers hate Amazon,” Gu said. “I think there’s a real tension.”

Lipsman, from eMarketer, agreed that many retailers would prefer to buy or lease autonomous store technology from companies other than Amazon. Additionally, Lipsman said companies that supply autonomous store technology could be attractive acquisition targets for big retailers or even Microsoft, which is increasingly marketing cutting-edge data crunching technology to retailers and big grocery chains.

Underhill, from Envirosell, said that technology sold by companies like AiFi could be a “perfect solution for a segment of the market.” For high-tech hubs like Silicon Valley, where it is common to not use cash to pay for goods, autonomous stores may make sense.

However, that may not be the case in other cities where many people still use cash to buy goods.

“If you look at rural America or suburban America or small businesses in America, there’s cash in circulation,” Underhill said. “In those places, the idea of putting a cashless store is sort of shooting yourself in the foot.”

The AiFi spokesperson said that while the company’s current stores require digital payments, AiFi can “set up systems to take cash at our stores” if its retail customers wish.

Additionally, a cashierless store may work well in places where Internet connections are good, but they could stumble where they aren’t, like in certain rural areas, which would cause headaches for store operators and consumers.

“Based upon my thirty years working on technology in retail, this is a perfect solution for a segment of the market—it’s not a reflection of the entire market,” Underhill said.

Another challenge facing AiFi and similar startups is the high cost for their customers of buying and operating the cutting-edge tech. Because autonomous stores require power-hungry Nvidia chips to operate, the stores are essentially mini-data centers. That means that retailers that use AiFi’s technology could end up with hefty energy bills.

“Blame Nvidia,” Gu joked. That said, he added that AiFi is talking with Nvidia about how to reduce energy costs.

Anything Gu can do to lower the cost to customers, which he declined to comment on, will help because, as he put it, “retailers are very frugal—they operate at a very thin profit margin.”

Story updated on Dec. 20 at 1:30 PM PT to include additional countries AiFi plans to expand to and the company’s comments on accepting cash at stores.

Amazon Go’s Cashierless Stores Have a New Rival

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