While tech giants have their heads in the clouds, this is why other retailers don’t need to follow suit

By Ofri Ben Porat, Chief Executive Officer at Edgify

As counterintuitive as it is, we all know losses are an accepted norm in retailing. Factored into the bottom line, as sales increase for stores, so will the losses of product inventory. Loss prevention teams call this inevitable outcome “external shrinkage”.

But it wouldn’t make good business sense to continue to accept this as part of the cost of doing business. Every store would ideally like to cut down the unnecessary outgoing each month. Which is why it is so encouraging to see retailers utilising new technology to reduce the impact of shrinkage.

There have been exciting developments in the past year with a wave of  ‘just walk out’ pilot stores, dispensing with cashiers and even check-outs. But is this a prime example of too much, too soon? It would certainly appear so. As sophisticated as they are, this way of shopping can hardly enter the mainstream – retailers can’t afford the overhauls needed and won’t be able to establish an entire new IT infrastructure from the ground up.

Innovation in retail needs to remain affordable and scalable. There needs to be a more achievable way to improve the retail experience, reduce shrinkage and expand the sector’s technological capacity for more advanced adoptions later down the line.

The industry limits

Any supermarket looking to replicate this checkout-less model will already be crushingly aware of their own technological limitations. Integrating dozens (if not hundreds) of cameras, deploying Computer Vision technology, and building entire server rooms on premise, just isn’t feasible for the market, and some of the tech giants’ big shows of technological and financial prowess can be intimidating to retailers wanting to improve operations without the fiscal impact.

However, these limitations are not a bad thing. All established retailers are facing similar challenges with improving their adoption of new technologies. Grocers especially can struggle to overhaul operations when their services are needed every day of the year. There’s not any time to shut down all operations for a major overhaul even if the budget existed to do it.

More than one way to sell an item

These barriers do not mean retailers can’t innovate. Businesses can use existing infrastructures to get similar benefits, develop better customer experiences and use technology to enhance loss prevention. Instead of building an entirely new retail experience from scratch like those opened by Big Tech companies, stores should be looking for smarter solutions that can integrate into existing operations.

Artificial Intelligence (AI) is a natural answer to enhancing existing processes and with the right kind of approach, retailers can avoid the investment in time and money that comes with training and rolling out AI in stores. Instead, it’s possible to train deep learning AI models at the point of sale (PoS).

Self-checkouts are edge devices, meaning a connected network of these smart machines can ‘collaborate’ and train the model that recognises barcodeless grocery items. Crucially, because these devices are at the edge, there is no need for data to be uploaded to the cloud. This makes it more accurate – through training on the entirety of the data – and secure.

As items are scanned, not only does the AI algorithm become more reliable, but then the information gained on each PoS is shared between all the devices. This technique is called federated learning, and it allows supermarkets, grocery stores and convenience shops to actually own their own algorithm, training their AI models with their own customers for a more reliable experience.

Meeting customer demand

Needless to say that this alternative to ‘just walk out stores’ presents a more realistic future for the retail industry. Retailers can feasibly implement this type of technology without overhauling existing operations. The added benefit of this approach is that the retailer will not be demanding any more of the customer – their interaction with shopping and PoS will remain largely unchanged.

This is an aspect that tech brands and ‘just walk out’ stores may be overlooking. While consumers like efficiency and ease of use, if it requires a change to how they normally operate, problems can arise. Though it may one day be normal to walk in and out of a store without having to pay, for now that’s a significant leap in shopping habits for consumers to have.

While tech giants’ innovation continues to grab headlines and make the industry consider how to innovate, it does not mean that businesses should follow suit. Retailers can gain incredible advantages to their processes with smaller innovations – reducing external shrinkage and ultimately improving the bottom line.

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