[The Future Is Now] It’s shopping, but not as we know itFrom unmanned shops to connected cars and quantum computers, changes in technology are reshaping the way we interact with each other and the world around us. The Korea JoongAng Daily will spend the next two weeks exploring these changes and looking at what innovations are up next in this special anniversary series: “The future is now.”
But look a little closer, and there is one notable difference between the pho restaurant and the other small establishments surrounding it - an electronic kiosk sitting right next to the door.
Pho Chen House is an entirely self-served restaurant. Customers place their order at the electronic kiosk, help themselves to water and cutlery and pick up their meal when their number appears on an electronic panel on the wall. When they’ve finished eating they bus their own tables, returning their dirty dishes to the counter next to the kitchen.
Throughout this whole process, there is no human contact, although the food is prepared by a Vietnamese chef who places the cooked food on the counter for collection.
“It’s nice that I don’t have to encounter unexpected unpleasantness with the staff,” said 24-year-old student Ko Yeon-jung who came to eat at the restaurant.
“Sometimes I feel like the staff that receive orders respond unkindly because they’re tired or stressed. I also feel sorry for the people behind me in the queue when it’s my turn to order but I still haven’t made up my mind yet.”
Electronic kiosks are not the latest innovation in retail tech, but they have definitely become the most visible way that new technology has replaced human labor in the service sector.
Electronic kiosks first started appearing at major fast food chains in Korea. Lotteria, which started installing them in 2014, now has kiosks in more than half of its 1,350 branches nationwide. McDonald’s and Burger King soon followed suit, installing kiosks at more than half of their stores. KFC has also started introducing the unmanned devices.
The rate of automation is set to rapidly increase - Burger King and KFC plan to install machines at every branch that is directly controlled by the company’s headquarters before the end of this year.
The big change in recent months is that these kiosks have started appearing at much smaller restaurants, cafes and juice bars, often in out of the way places like small local streets rather than major shopping malls and department stores.
Korean juice franchise Juicy is one of the smaller food companies that have recently joined the trend. It started installing electronic kiosks at its stores at the request of franchisees late last year. Around 50 branches have already adopted the kiosks.
“We have around 100 more franchisees who have expressed interest in installing electronic kiosks,” said a Juicy spokesman.
The biggest incentive for smaller eateries to adopt electronic kiosks is rising labor costs. The hourly minimum wage in Korea shot up 16.4 percent to 7,530 won ($6.60) this year. An additional 10.9 percent increase is set to go into effect next year.
The minimum wage hike has an immediate impact on local restaurant owners who often pay part-timers the statutory minimum wage. Their source of revenue, food, often has a low price tag, making their business even more vulnerable to drastic cost increases.
Juicy estimates that one kiosk can save the labor cost of up to 1.5 people per month, based on the current minimum wage. According to simulations at Juicy’s five directly managed stores, electronic kiosks can reduce labor costs by around 3 million won per month.
“Kiosks fit well with our brand because most of the branches are takeout stores [without tables],” said a Juicy spokesman. “In each store, we need at least two people - one receiving orders and one making beverages. With kiosks receiving orders, franchisees might be able to run the store by themselves or with one or two members from the family during peak hours.”
Electronic kiosks are not the most convenient option for everybody. Kiosks that receive cash are more expensive than those that only accept cards, and are therefore much less common.
“I find kiosks generally easy to use but some machines don’t take cash and that can be frustrating,” said 20-year-old student Park Young-joo at a Juicy store in Dongdaemun District, eastern Seoul.
Some users feel that interacting with machines takes more effort and time than talking to human staff.
“With kiosks, there are multiple steps and buttons to go through, but with people, you just say what you want, hand over your card and it’s over,” said a 21-year-old university student at the Dongdaemun store.
Electronic kiosks can also prove a challenge for older people who take longer to learn how to use new technology and often rely on cash more than younger consumers.
A survey conducted by the public Institute for Information and Communications Technology Promotion (IITP) last year showed older customers had a higher tendency to use kiosks only when absolutely necessary, while younger customers tended to prefer kiosks to human staff. About 30 percent of all respondents said kiosks are inconvenient, with 70 percent of that group complaining about complicated interfaces.
But the same report also demonstrated that Koreans are rapidly adapting to the kiosks despite the fact that they have only been around for three to four years. Three out of every four respondents said that using kiosks was more convenient than interacting with human employees.
Analysts agree that unmanned stores are the future of brick-and-mortar retail. In a report last month, analyst Lee Sang-heon of Hi Investment & Securities said that the tendency of Generation Z, born between the mid-1990s and mid-2000s, to be familiar with non-face-to-face contact will accelerate the advent of unmanned retail outlets.
“Unlike previous generations, Generation Z have zero experience in analogue interfaces - they have grown up surrounded by digital devices like smartphones,” he said. “In other words, they learn how to use digital [devices] without anybody teaching them and it comes naturally for them. In a society where everybody is connected, people will naturally prefer to avoid unnecessary human contact.”
Lee added that the acceptance of unmanned stores will pick up speed as Generation Z graduate from schools and enter society as major consumers. Their demographic rise is already evident in the United States, where they make up 25.9 percent of the population. By 2020, they are expected to account for one-third of the country’s population.
Equipping unmanned stores
In the last two years, local retailers have been rolling out new technology in their unmanned stores, developing solutions that go a step further than electronic kiosks. Convenience stores have led the way, with their focus on the development of unmanned payment systems.
In May 2017, 7-Eleven launched the “7-Eleven Signature” store inside Lotte World Tower in Songpa District, southern Seoul. The main feature of the store is HandPay, a system that identifies customers by the palm of their hands, or the pulses read on their palm, to be exact. Once a consumer registers their palm and credit card information, he or she can freely pass the entrance gates and pay via the palm scanner.
But the store isn’t completely unmanned yet; it still has about two staff on site every day to restock shelves and help customers in case they can’t find the product they want or struggle with the payment process.
Emart24 has the largest number of cashier-less stores, a total of nine in Seoul. Customers gain access by scanning their credit card and can pay for goods by themselves at self-checkout machines. Like 7-Eleven Signature, Emart24 stores have staff available to assist if anything goes wrong, and some only open during a limited time in the afternoon. CU also has three stores that use self-checkout machines.
GS25 has also recently started introducing unmanned stores. The Smart GS25 store that opened last month uses facial recognition to open doors and make payments.
Unlike the other two convenience stores where customers have to scan the barcodes on the product they want to purchase, Smart GS25 uses a camera above the checkout counter and a scale beneath it to automatically identify products by packaging and weight in a second. The customer simply has to place items on the machine so that the camera can easily identify them.
“Merchandisers at headquarters register photos of an item from multiple angles so that the camera can identify them regardless of how they’re placed,” a GS25 spokesman said.
Another interesting technology being tested here is an infrared light camera that measures the distance from the lens to each product so that it can notify staff when a shelf is nearly empty. Despite such functions, sources at different companies admit that they are still in the early testing stages for all of this technology and it will still be some time before they are rolled out across all stores.
In fact, the stores where these devices are currently being tested are either directly run by the company’s headquarters, rather than franchisees, or are located in highly controlled environments. All three 7-Eleven Signatures are inside buildings owned by Lotte Group affiliates. Smart GS25 is located inside the LG CNS R&D center that only company staff can access.
“The technology inside unmanned stores has to be complete for the model to be offered to franchisees, but we’re far from that point at the moment, not to mention the initial cost for the devices are too high, another task that has to be overcome,” said an Emart24 spokesman. “The biggest question is security. Even now, we have CCTV at stores, but owners are reluctant to leave the floor unmanned. For franchisees, every theft is immediately a loss.”
Supermarkets are venturing into the realm of self-checkouts. Consumers at Emart Everyday’s branch in Samseong-dong, southern Seoul, can use an app to scan products as they pick them up and pay for them at once like they’re shopping on an ecommerce site. Once the payment is finalized, the app will provide an exit code which opens the gates to leave the store.
“The expansion of unmanned payment can lead to companies relocating human labor behind the cashier desk to other tasks like stock management and assisting with [consumer-targeted] events,” said a report by Korea Investment & Securities Analysts Heo Na-rae and Yang Jong-in published in early September.
It mentioned security as a core task in the realization of unmanned stores.
“CCTV at convenience stores today serves as a form of surveillance (…) but it doesn’t have the function to recognize a theft by sensing consumer movements or product locations,” the report said. “For now, there’s a small number of unmanned stores so the loss isn’t big, but if this number expands, it will grow.”
The global pioneer of unmanned stores is Amazon GO. The store, which launched earlier this year in Seattle, uses cameras and sensors to detect customer movement. A sensor on the shelf will detect which product is picked up and items are automatically paid for when customers exit the shop. These functions offer a better security solution than local companies, although even Amazon GO has some vulnerability to shoplifting.
Investing in AI
One technology that brick-and-mortar retailers have started to explore this year is robots and AI.
In August, 7-Eleven replaced unmanned checkouts at two Signature branches with a robot polar bear named Veny. Its core function wasn’t that different from the technology that was already there: a self-cashier desk with a palm identification system.
What differentiated the bear was its charm. Veny turns its head to a consumer entering the store to say hi. It can remember people who have visited before and send a cheerful message, “You’re back!” A small screen on its face is reserved for facial expressions, which switch between seven options according to the situation. Palm identification payment systems already existed, but Veny adds a personal touch - customers have to gently place their hand on his paw to pay.
Discount chain Emart has been experimenting with SoftBank Robotics’ humanoid robot Pepper. The company sent Pepper out on trial runs at its Seongsu branch in eastern Seoul in May and August this year. Emart is developing software for Pepper, looking for ways it can assist with jobs at the discount chain in the future.
After three months, Pepper was able to move on its own after it spotted customers. It was also able to engage in longer conversations than it could handle back in May, providing a wider range of product information and recipes.
Although not a retail company, delivery app Baedal Minjok is also developing delivery robots. The Dilly Plate, which was made by Bear Robotics, acquired by Baemin earlier this year, went on its first domestic test run at a Pizza Hut branch in Mok-dong, western Seoul, in August for two weeks. Its job was to deliver pizza from the kitchen to the tables while avoiding customers and staff.
“We heard the employees had fun working with it, and the response from customers was positive - although both parties seemed to have gotten used to Dilly moving around the store quite quickly,” said a Baemin spokesman.
Some experts point out that Korea’s technology in the field falls behind that of the United States, China and Japan, where many start-ups are developing technology for non-industrial robotics. Companies like Emart may be able to bring in ready-made robots from overseas, but installing them in Korea is a big task because of the language barrier.
“Robots respond to people. They have to understand verbal requests and react to them, so linguistic skills are important,” said IT columnist Ryu Han-seok. “If we want [foreign] robots to work with the Korean language, we need more domestic companies developing source technology for robots of our own.”
The looming threat of AI
The idea of robots and unmanned stores is intriguing, but also fuels fears of technology stealing human jobs.
There have been industrial revolutions in the past that caused disruption to the labor market, but artificial intelligence may pose a threat on an entirely different level in that machines, for the first time, will be able to understand circumstances and consequently make decisions on their own.
The extent of the impact artificial intelligence will have on the labor market is up for debate, but the general consensus is that repetitive tasks that can be completed by following a set of fixed rules are likely to be replaced by robots in the future.
But how big will that impact be on the retail sector?
An analysis from the McKinsey Global Institute in May predicted “the share of predictable manual jobs, such as drivers, packers and shelf stockers, will decline by more than 25 percent” by 2030. On the contrary, customer service, management and technology deployment and maintenance are fields that the institute predicted will still offer work for humans.
“[…] Growth will be very strong in skills required to help customers find goods and make sales: Creativity and interpersonal skills and empathy will grow by close to 50 percent,” the report said. “Advanced IT skills and programming alongside complex information processing skills will also see a surge in demand, as retailers harness the potential of data analytics and AI.”
According to the LG Economic Research Institute, which studied AI’s potential impact on 423 job sectors this year, positions that face the highest threat are those that engage in sales activities. In the first half of 2017, 3 million Koreans had sales jobs. Among them, 78 percent were doing tasks that could easily be replaced by AI such as salespersons at brick-and-mortar retailers or door-to-door salespeople.
The report mentioned “retail and wholesale” and “accommodation and restaurants” as sectors in which many jobs will be replaced by automation, which it said was a “notable reveal” considering the fact that these areas were initially thought to face little threat from technology development as they mainly offer services based on person-to-person interaction.
“The diffusion of artificial intelligence is becoming more and more visible. In such a situation, it’s necessary that individuals develop vocational capacity in AI as a supplementary tool to their main tasks,” said Kim Kun-woo, a researcher at the institute. “Nonetheless, abilities indigenous to human beings like creativity and human interaction skills will remain a great asset in the future, which combined with personal capacities in AI technology will help one preserve their value in the future.”
Kim also added that the government has to play a role in reducing AI’s sudden impact on the job market by enforcing social safety nets like re-education, support for changing jobs and unemployment insurance.
BY SONG KYOUNG-SON [email@example.com]