The company is addressing one specific problem that consumers have been complaining about since the beginning.
In February 2020, the tech giant Amazon (AMZN 2.82%) tried a bold new idea. I opened a grocery store with no cashiers. The company's technology allows shoppers to simply walk in and out without paying. However, sensors and cameras monitored shoppers and then charged their Amazon accounts.
Amazon called their innovation “Just Walk Out,” and many thought it had the potential to completely disrupt retail shopping forever. However, on April 3, a technology-focused publication information, reported that Amazon is now moving in a different direction. Here are three things investors should know about this news.
1. Technology still works
When I first heard this news, I immediately thought that Amazon's Just Walk Out technology must not work. But that's not the case. I'll explain more later.
This is good news for companies that already partner with Amazon on this system. For example, in January, the company announced “Badge Pay” based on Just Walk Out, allowing hospital workers to simply scan their badge to pick up food and walk out. Hospitals that have already signed up, such as St. Joseph/Candler Hospital in Savannah, should still be able to use it.
fintech attire shift 4 payment You should be able to continue using it. In September, the high-growth company adopted Amazon's cashierless technology to speed up retail transactions for customers at stadiums and large venues.
To further prove its effectiveness, Amazon plans to keep the technology in its Amazon Go chain and Amazon Fresh stores in the UK. Amazon is reportedly just removing Just Walk Out from its Amazon Fresh chain.
2. Amazon plans to try a more consumer-friendly version
Rather than saying Amazon is discontinuing Just Walk Out, I think it would be better to say that Amazon has discontinued Just Walk Out. repacking We turned it into a more consumer-friendly version.
An Amazon spokesperson said consumers didn't want to shop without seeing their bill in real time. This was actually an issue that became apparent at launch. In a 2020 article, shoppers interviewed said that Just Walk Out makes spending money “easier than pulling out your card and checking your total.”
So Amazon turns to smart shopping carts from here. Shoppers can still go through the checkout. However, Smart Cart displays the latest invoice when you add an item, addressing a major consumer complaint.
3. We still have a long way to go to move the needle.
In 2023, Amazon had net sales of $575 billion and operating income of $37 billion. For comparison, Amazon Fresh and Amazon Go have less than 100 stores combined. In theory, cashierless stores could attract more customers who appreciate the convenience. But no matter how you slice it, technological innovation in grocery stores doesn't do much for Amazon stock. Because the company is already a huge company.
Far more important to Amazon investors today are things like digital advertising. In 2023, the company generated an impressive $47 billion in advertising revenue, which grew at a rate of 26% in the fourth quarter. In fact, advertising revenue growth is accelerating and there is still room for growth.
Even more important to Amazon investors is the cloud computing platform Amazon Web Services (AWS). The company owes him a staggering $156 billion in contract performance obligations, primarily related to his AWS, and these contracts span an average of four years. Given its size, this is clearly an important business segment. But AWS is also important, as it provides about two-thirds of our total operating income.
don't worry about the details
Those hoping to see Amazon revolutionize the retail checkout experience may need to be patient. The company is still evaluating what will be most effective. There are still many possibilities for this to play out. But it's possible that Amazon will find something that works well and eventually gets mass adoption.
Still, Just Walk Out technology is a minor detail in Amazon's behemoth business, and shareholders should be focusing on more important things. But the good news is that more important areas of the business are experiencing solid growth, which bodes well for Amazon stock in 2024 and beyond.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool's board of directors. Jon Quast works at Shift4 Payments. The Motley Fool owns a position in and recommends Amazon. The Motley Fool recommends his Shift4 Payments. The Motley Fool has a disclosure policy.
