Reportedly, Microsoft (MSFT - Free Report) is working on an automated checkout technology that is likely to make cashiers and long winding checkout queues a thing of the past. With this technology, the software giant can challenge Amazon.com's (AMZN - Free Report) automated grocery shop, Amazon Go. As revealed by Reuters, a potential collaboration with Walmart (WMT - Free Report) is likely in the offing. However, the companies refrained from making any comment.
Similar technology was introduced to the public in January this year by Amazon Go store at Seattle. This was a first-of-a-kind retail outlet without cashiers and check-out counters. It enabled the customers to shop in a hassle-free environment by using the app.
Shares of Microsoft have returned 47.1% in the past year, substantially outperforming industry’s rally of 38.9%.
New Technology to Aid Microsoft
Microsoft is reportedly working on systems that track what shoppers add to their carts. The company has demonstrated the sample technology to select retailers. Microsoft's check-out free technology can aid retailers to retain pace with Amazon Go.
The technology, if deployed in the market, holds promise. Touted to drive innovation in customer friendly shopping, it will be embraced whole-heartedly by Amazon’s competitors who are striving to retain their foothold in the retail space. This can bode well for Microsoft.
Putting the Tech Know-How in Place
Microsoft already develops retail technologies that support its clientele. Furthermore, the company exhibits the fundamentals for automated checkout at its Redmond-based Retail Experience Center.
The company’s cloud services only trail Amazon Web Services, per a Synergy Research article.
Additionally, the company has around six retail partners, including Redmond-based AVA Retail. Notably, the partners are developing their own checkout-free or other related services leveraging Microsoft's cloud. Sales of partners' services generate cloud revenues for the company. As a result, the company gains insights into the market which aids it in developing new retail technologies.
Market Opportunities for Microsoft
Per a Transparency market research report, the global market for self-checkout systems was valued at $2.28 billion in 2016 and is envisioned to grow at a CAGR of 10.80% from 2017 to 2025. It is anticipated to reach $5.85 billion by the end of 2025.
The above research report reinforces our view on the alluring prospects of the new technology.
Microsoft is well poised to benefit from developing this emerging technology, where Amazon enjoys a first-mover advantage. This will eventually aid the company improve its competitive position against cloud computing players. Moreover, the retailers leveraging the technology will also gain an edge over Amazon Go stores, which are set to open in San Francisco and Chicago.
However, the software giant faces a challenge as the automated checkout technology should be priced keeping in mind the low margins grocers’ obtain.
Zacks Rank & Key Pick
Microsoft carries a Zacks Rank #3 (Hold).
Western Digital (WDC - Free Report) is a better-ranked stock in the broader technology sector, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The projected long-term earnings growth rate for Western Digital is pegged at 19%.
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