retail news in context, analysis with attitude

by Kevin Coupe

Bloomberg has a story about how some retailers, looking for a way to compete with the checkout-free technology pioneered by Amazon in its Go stores, are turning to an age-old approach.

The honor system.

According to the story, "From Russia to Japan to the U.S., retailers are betting on the good side of human nature. In exchange for being able to grab an item and walk out, shoppers are relied on to be honest and pay - much like an unmanned roadside produce stand. So far, theft rates are low, which means these companies have hit on a way to offer a cashier-less experience similar to Amazon.com Inc.’s Go technology, but without the big expense of cameras, sensors and software."

An example: "In downtown New York, beverage-maker Iris Nova sells $10 bottles of brands like Dirty Lemon in a small store in the bottom of a building that doesn’t have employees or a cash register. Customers are trusted to use their phones to pay for drinks via text message. The space has visible security cameras, as well as mirrors that may subconsciously push visitors to pay because they don’t want to see themselves stealing—although the company says the mirrors are purely for aesthetics … The Iris Nova location has a theft rate below 5%, according to founder and CEO Zak Normandin. Many retailers have rates of stealing, or what the industry calls shrink, of about 2%, but they also pay for deterrents like security systems and employees."

Another example: "In Japan, Ezaki Glico Co. has also made a business out of selling on the honor system. The company places snacks such as Pocky and Pretz biscuit sticks in drawers, shelves, and sometimes the office fridge. Those who want to indulge simply drop a coin in a container … That may not come as a huge surprise in Japan, where social harmony is prized and crime rates are low, but the same phenomenon is playing out elsewhere.

"In Moscow, Vkusvill’s micro markets are similar, but customers pay using a credit-card machine after selecting snacks, ready-to-eat meals and from fridges and shelves on the office floor."

It is an interesting and Eye-Opening approach, albeit one that I suspect won't get that much traction; I just don't think there is that much faith out there in the goodness of human nature. (I'm also not sure that much more faith would be justified these days.)

I also think that there are different factors to consider. In Russia, for example, violating the honor system probably results in a long trip to the gulag.
KC's View: