Washington Insider - Wednesday

Amazon and Food Retail Technology

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

Trump Administration Announces Tariffs on Washing Machines, Solar Panels

New tariff duties will be put in place on imports of solar panels and washing machines, an action aimed primarily at China, and marks a start of what administration officials pledged would be a year of tougher trade actions against countries like China. "The president’s action makes clear again that the Trump administration will always defend American workers, farmers, ranchers, and businesses," U.S. Trade Representative Robert Lighthizer said in a statement. The actions would put import duties on washing machines of up to 50%, with the rates phasing out over three years, with the duties combined with quotas. Solar module imports would have duties up to 30% that would be phased out over four years.

Ag interests already fretting over the U.S. duties, awaiting a response from China and whether they may target imports of U.S. soybeans or other ag products as it responds to the duties. But their reactions thus far have not signaled where they might respond. "The U.S. side once again abused its trade remedy measures," China's Commerce Ministry said in a statement. "China expresses its strong dissatisfaction with this." The agency further said it hoped the U.S. would "exercise restraint in using trade restrictions and compliance with multilateral trade rules and will play a positive role in promoting the world economy." While not detailing how it will respond, the ministry said China will "resolutely defend its legitimate interests."

NFU Calls for Farm Bill Spending Boost to Make Program Changes

The next farm bill needs to "strengthen the safety net so that farmers and ranchers can manage risk, stay in business and continue to feed our country," according to a resolution approved by the National Farmers Union (NFU). The group noted farmers are "not only suffering from price pressure that has reduced net farm income by half over the last four years, but devastating wildfires, hurricanes, and other natural disasters continue to punish agricultural communities," NFU stated. "Trade policies continue to promote the sale of farm products at prices below the cost of production."

Among efforts NFU wants to see in the next farm bill are to increase reference prices under the Price Loss Coverage (PLC) program to account for the cost of production, keep a strong crop insurance program, make cotton a covered commodity under the commodity title of the bill and an supply management program for dairy. While calling for more funding, odds are low that will be the case and the group also does not signal what the cost to their 14-point wish list would be.

Washington Insider: Amazon and Food Retail Technology

Amazon has been giving the media peeks into its Amazon Go set up in Seattle, and the New York Times has provided a somewhat breathless view of a rather odd shop. It looks like a subway station, the Times says. Only people with the store’s smartphone app are allowed inside.

In fact, the current store is an 1,800-square foot mini-market packed with shelves of food that you can find in a lot of other convenience stores — soda, potato chips, ketchup. It also has some food usually found at Whole Foods, the supermarket chain that Amazon owns.

Clearly, the Times is well-impressed by this technology that is “mostly tucked away out of sight, and enables a shopping experience “like no other.” There are no cashiers or registers anywhere. Shoppers leave the store through the entry gates, without pausing even to pull out a credit card. Their Amazon account automatically gets charged for what they take out the door.

There’s more, the Times says. Products can go straight into a shopping bag without shopping carts or baskets. Instead, customers put items directly into the shopping bag they’ll walk out with.

Every time customers grab an item off a shelf, Amazon says the product is automatically entered in the electronics shopping cart of their online account. If customers put the item back on the shelf, Amazon removes it from their virtual basket.

The only sign of the technology used floats above the store shelves — arrays of small cameras, hundreds of them throughout the store. Amazon won’t say much about how the system works, other than that it involves sophisticated “computer vision and machine learning” software. Translation: Amazon’s technology can see and identify every item in the store “without attaching a special chip to every can of soup and bag of trail mix.”

What about jobs under this technology? There were a little over 3.5 million cashiers in the United States in 2016 — and some of their jobs may be in jeopardy if the technology behind Amazon Go eventually spreads, the Times concedes. For now, Amazon argues that its technology simply changes the role of employees — the same way it describes the impact of automation on its warehouse workers.

Those tasks include restocking shelves and helping customers troubleshoot technical problems. Store employees “mill about” ready to help customers find items, and there is a kitchen next door with chefs preparing meals for sale in the store. Because there are no cashiers, an employee sits in the wine and beer section of the store, checking IDs before customers can take alcohol off the shelves.

Most people who spend any time in a supermarket understand how vexing the checkout process can be, with clogged lines for cashiers and customers who fumble with self-checkout kiosks, the Times lectures.

Overall, the Times admiringly reports that the Amazon Go, check out process feels rather like “shoplifting”—although it doesn’t say how it knows what shoplifting feels like. It is fast, that’s true, finishing up only a few minutes later with an electronic receipt for purchases. The store even has safeguards against shoplifting, or spoofing the in-store system, the Times says.

A big unanswered question is where Amazon plans to take the technology. It won’t say whether it plans to open more Amazon Go stores, or leave this as a one-of-a-kind novelty. A more intriguing possibility is that it could use the technology inside Whole Foods stores, though Amazon says it has “no plans” to do so.

There’s even speculation that Amazon could sell the system to other retailers, much as it sells its cloud computing services to other companies. For now, visitors to Amazon Go may want to watch their purchases: Without a register staring them in the face at checkout, it’s easy to overspend, the Times counsels.

Well, maybe. The Times may wish it had sent a housewife or someone who is responsible for actually preparing food rather than a tech guy—perhaps someone who could question the practicality—or, usefulness—of buying one bag of food per trip. It might have noticed that actual family food buying is really not much at all like shoplifting.

Certainly, we know Amazon is good at moving stuff and has a lot of experience in actually delivering things to consumers. But, we also know that the food business is brutally competitive and the Go technology will need to compete on price and cost and timeliness and product appearance and many other things before it can look forward to laying off some part of the 3.5 million cashiers. Also, the Times may need to examine the retail process more broadly, maybe even consulting someone who has shopped on a budget—and, carried in the groceries. Lots of things to think about as we look to the future of retailing, Washington Insider believes.

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