By Jifeng Li, Jinghong Liu, and Xueyang Zhong
The Alibaba Tao Cafe:
In July 7th, 2017, Alibaba’s first self-service market, the “Tao Café,” opened in Hangzhou, China. The 200-square-meter store offering beverages, fast food and snacks can accommodate 50 customers at a time. The whole shopping process is very simple and convenient: before customers enter the market, they should use the Alipay app on their phones to scan the QR code to access their Alipay accounts. They scan another QR code to pass the gate machine (see the photos below).
Now the customers can shop in the market like they usually do in other shopping malls. Products can be held in their hands or even be put in their backpacks. At the exit of Tao Cafe, there is a glass walkway. When customers pass it, the automatic system will settle their accounts and send them messages about the shopping list and total amount of payment.
Although a market like this seems like a distant future, it’s really cool. The purposes of this blog post are:
- to present the benefits this future technology offers to consumers,
- to explore Amazon’s motivations for developing this technology,
- to overview the innovation ecosystem surrounding the technology and the technological underpinnings that make the automated shopping process possible,
- to present use cases in virtual shopping and micro-markets, and
- to address key barriers to the successful commercialization of this technology? 
Why Self-Checkout Technology?
A New York Times article said that,
“for many people, supermarket checkout involves seemingly endless periods of tedium and frustration. Waiting in line can be boring and annoying, especially if you are caught behind a full cart or two. In addition, watching a cashier scan groceries is often even more irritating. It seems as though half the time, the process takes too long, and the other half, the items flash by so quickly you can’t easily tell whether the price charged is the same one you saw marked on the shelf.”
This quote captures why customers and supermarkets are interested in self-checkout system in supermarkets. The self-service market revolutionizes the way people shop. By eliminating grocery stores’ time-consuming checkout lines, it will win over shoppers seeking convenience, ease and speed.
In addition, according to Morgan Stanley’s research, more than a third of online shoppers expect to buy groceries over the Internet in 2016 (34%), while in 2015, it was only 21% (see Figure below) . Moreover, U.S. online grocery penetration is predicted to climb from 8% to 26% for fresh food and from 16% to 28% for packaged food. (See second Figure below).
Among consumers who have never shopped for groceries online, 67% say it is because they like to select the fresh products themselves (see Figure below).
The self-service market will overcome that barrier: people can save their time with no need to wait in checkout lines, and pick products by themselves. Companies like Amazon or Alibaba hire lots of high-value engineers to develop these technologies to differentiate by making their shopping experience more fast and convenient for shoppers.
The Amazon Go Self-service Market:
The grocery industry is looking for an efficient way for customers to check out, and to save the operation costs. As one of the biggest retailers in the world, Amazon also is exploring how to change the traditional check-out method. Could consumers walk into the store and just grab what they want, then go without any another check-out process? In this way, consumers could save their time spent checking out and also get a better shopping experience. Currently, Amazon is beta-testing Amazon Go in Seattle, and it is open only for Amazon employees to test the system.
“We use computer vision, deep learning algorithms and sensor fusion, much like you’d find in self-driving cars. We call it ‘Just Walk Out’ technology. Once you’ve got everything you want, you can just go. When you leave, our ‘Just Walk Out’ technology adds up your virtual cart and charges your Amazon account. Your receipt is sent straight to the app”.
Why is this new technology so important for Amazon? And why is Amazon willing to invest so much money in this new technology? The answer is the importance of this new technology and the benefits this technology will bring to Amazon. Amazon bought Whole Foods for $13.7 billion dollars  early 2017. This acquisition may relate to Amazon’s future grocery store plan.
As an online retailer with few physical stores, Amazon lacks the advantage of other retailers who have both physical stores and also online stores, such as Walmart, limiting potential for Amazon. This provides the explanation why Amazon wants to develop the physical store.
Another reason that the self-service grocery looks so important is it relates the offline shopping experience with digital technology very well.
Consumers would like to use the online website to shop rather than the physical store in order to save time. Amazon Go allows Amazon to keep the time-saving advantages of self-check-out.
For the grocery industry, Amazon Go offers a high-technology solution that can serve grocery consumers looking for a high efficiency shopping experience. Amazon Go can eliminate the checking out process in any shopping, and save customers at least five minutes in their shopping process.
The Innovation Ecosystem for Self-Service Markets:
For the self-service markets technology, the major players in the innovation ecosystem are the retail customer, sensor manufacturer, software designers, graphic designers, and also chip designers as well.
The customer of this technology is the retailer who desires to use it to create a check-out free store, like Amazon Go and Alibaba’s Tao Café. The sensors manufacturers sell this technology to the retailers. The software designers, graphic designers and also the chip designers provide the technology support to the retailers. The end-consumers must have mobile phones with the proper apps to be scanned and charged. Of course, self-service technologies will continue to need human resources to complete, such as linking the database of goods to the self-service check-out system.
- Skeleton Analysis
Facial recognition is common in daily life. For example, the iPhone X uses it to unlock the screen. But what is skeletons analysis?
In simple terms, skeleton analysis uses cameras and sensors to identify people walking in the market by their skeletal structure. Alibaba uses skeleton analysis instead of image recognition technology, which is more mature, because image recognition technology has a big problem: When over 50 people are in the market, the cameras cannot identify who takes what products.
In contrast, skeleton analysis can handle increased number of people, identifying which skeleton belongs to which person, even when those skeletons cross together.
2. Eye Tracking
Eye tracking is the process of measuring either the point of gaze (where one is looking) or the motion of an eye relative to the head. Cameras track the movement of a person’s eyeballs to precisely judge where he is looking at any given moment. Tao Cafe uses eye tracking to identify: Which path through the store do customers prefer? Which shelves do customers remain at the longest? Where do they usually look?
This information allows the store to optimize the placement of products in the store. By recombining and analyzing the basic data, these technologies help stores optimize their supply chains. For example, during the weekend, weekdays and holidays, which product should be placed on the most conspicuous shelves? What products, if we place them in a remote place, can still be sold well? Find the answers, and make corresponding adjustments so customers can find the products they want more easily.
3. Bluetooth Beacons and Sensors
Amazon Go uses sensors to collect data on what products the consumer selects, then records and delivers that information to the computer. Those items are saved into the customer’s virtual cart. After getting what they want, consumers can leave the shop without any stop, because the automatic check out area charges the fee for those items automatically to the customer’s Amazon account; it scans the QR-code based mobile application on their phone when consumers walk through the exit. Amazon Go’s pilot project proved that “Just walk out” shopping can be realized.
As the figure below shows, two questions Amazon must address for Amazon Go are: “Who has taken an item?” and “What item was taken?”. Amazon Go uses Bluetooth beacons to track mobile devices to identify which customers are standing front of the shelf and picking up the item, then delivers that information to the computer to run deep learning algorithms, determining which customers should be charged for which items. Also, the shelf cameras or the shelf weight sensors can detect what item has been moved or added and how may items have been picked up, to calculate how much money customers should be charged.
Similar Business Applications
The Application of Virtual Grocery Store Inside Subway Station in South Korea 
One South Korean supermarket chain is using new technology to completely change the way people buy groceries. The company called Home Plus installs supermarkets inside subway stations. It posts accurate pictures of its products in these “virtual grocery stores” so that people waiting for their subway train can browse and make a purchase. The customers use a smartphone app to scan QR codes of the products and have them delivered to their doorstep by the time they arrive at home. According to research, these virtual grocery stores in the subway stations have attracted more than 10,000 new customers. More importantly, they boosted Home Plus’s online sales by 130 percent. Home Plus is now number one in online sales and almost has reached number two in physical grocery sales in South Korea.
Micro Markets: The Self-Service Supermarket in the Lobby 
Research shows that most consumers are currently trying to eat more healthfully. Many progressive businesses have noticed and are developing “onsite micro markets” with self-service kiosks. These vending areas look just like small grocery stores placed with a variety of fresh and nutritious meal options. Workers from the area can gather their selections and pay for them using these self-service kiosks. Because these small markets can offer more healthy food options, more customers are willing to use them, so the market is expanding quickly. Research also shows that these small markets generate about 300 percent more sales than recent vending machines. So, many creative-thinking business managers are trying to grab this great opportunity in this new technology.
Even though these examples are different from the self-check-out technology, it might only be a matter of time before these similar new technologies completely change people’s buying habits.
Key Barriers to Success
Although the check-out-free shopping looks very useful for retailers, the technology is both expensive and immature. It also faces security challenges.
The first barrier relates to the technology challenges. Due to technology problems, this system is not 100% accurate. One article said, “Amazon’s sensors are only able to track approximately 20 people in Amazon Go marketplaces at a time”. Once more customers enter the store, the system accuracy can be adversely influenced. This is an important barrier for this new technology, if the sensor delivers the wrong information or if it misses charging for some purchases. Until this technology improves, this barrier will hinder its deployment.
A second barrier relates to security. According to a study by Pwnie Express, many respondents experienced attacks on their Internet of Things (IoT) devices. Hackers and fraudsters are quick to exploit weak links in new technology; retailers will need to take steps to address those security vulnerabilities when using this new technology. Customers’ shopping experiences should be not only convenient, but also safe.
Our technology overview offers our conjectures based on experience and research. Even though this vision of a check-out free future may seem a distant reality, the change from “no cash” to “no cashier” seems inevitable as society works to make life more convenient for consumers. As we move to the future, we should keep a close eye on this growing technology.
: Sino Dutch Bridge, “Alibaba launched the self-service supermarket in China.” July 10, 2017. https://www.youtube.com/watch?v=iIJrH1HP470
: “Alibaba Ventures Offline With Unstaffed ‘Smart Store.” Coco Feng. July 11, 2017. https://www.caixinglobal.com/2017-07-11/101113967.html
: Matt Lake. “How It Works; The Self-Checkout: Lots of Swiping, No Stealing.” June 6, 2002. http://www.nytimes.com/2002/06/06/technology/how-it-works-the-self-checkout-lots-of-swiping-no-stealing.html
: “Are Groceries the Next Big Driver of Global eCommerce?”, Research, Jan 22, 2016 http://www.morganstanley.com/ideas/online-groceries-could-be-next-big-ecommerce-driver#
: “How ‘Amazon Go’ works: The technology behind the online retailer’s groundbreaking new grocery store”. January 13, 2017. https://www.geekwire.com/2016/amazon-go-works-technology-behind-online-retailers-groundbreaking-new-grocery-store/.
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: Monique Serbu. “The Pros and Cons of Using Self-Checkouts.” August 7, 2013. http://www.business.org/software/point-of-sale/the-pros-and-cons-of-using-self-checkouts/
: Brian Penny. “Self Checkout: Should You Implement It?”Brian Penny. “Self Checkout: Should You Implement It?” https://www.cardfellow.com/self-checkout-should-you-implement-it/
: Jeffrey Van Camp. “South Korean Supermarket Chain Opens Virtual Grocery Stores In Subways.” July 7, 2011. https://www.digitaltrends.com/cool-tech/south-korean-supermarket-chain-opens-virtual-grocery-stores-in-subways/
: Olea, Frank. “Micro markets: the self-service supermarket in the lobby.” January 27, 2017. https://www.kioskmarketplace.com/blogs/micromarkets-the-self-service-supermarket-in-the-lobby/
: “Amazon’s Cashier-Free Store Might Be Easy to Break.” November 15, 2017. http://fortune.com/2017/03/28/amazon-go-cashier-free-store/.
: “The Internet of Evil Things: 2017”, Pwnie Express, February 2017. https://www.pwnieexpress.com/2017-internet-of-evil-things-report