Lori’s Gifts Launches Checkout-Free Hospital Retail Stores

Lori’s Gifts, one of the nation’s largest operators of hospital gift shops, rolled out fully automated, checkout-free stores as the next step of its expansion into the healthcare retail market.

Called GO Market by Lori’s, these gift shops will open in small hospitals where a staffed store is not financially feasible, according to the retailer, which operates more than 250 stores in 34 states.

“We really needed to find an untended retail solution,” Lori’s Gifts Chief Information Officer Mike Kriesman told PYMNTS in an interview. And “we needed to have a 24/7 solution for hospitals, patients and visitors.”

The format is as simple as it is futuristic.

“We call it scan, grab and go,” Kriesman said. “You walk up to a gate. There’s a credit card reader on the gate. You scan your credit card. Once approved, it opens up the gate. You can walk around, grab anything in the store … and then just go when you’re ready to leave.”

The stores range from 500 to about 700 square feet — about half the size of a staffed store — and stock everything from flowers and sundries to snacks and apparel. Half of its customers are hospital staff, so a store open 24/7 can accommodate the night crew.

The company just launched its first concept store in Medical City Decatur in Decatur, Texas, and plans to open a second one in Mount Carmel Hospital in Dublin, Ohio, by the end of May. A third location is also expected to go live by the end of the second quarter, most likely in the Dallas-Fort Worth area.

“It’s pretty revolutionary and innovative,” Kriesman said.

Lori’s Gifts looked into vending machines and other unstaffed models as part of its expansion plan into small hospitals and other venues. However, those models would deviate from the gift shop concept that is at the heart of Lori’s Gifts’ business.

“Our priority right now is to stay focused on our core, which is hospital gift shops, and do good at that,” Kriesman said.

Read also: Amazon’s ‘Just Walk Out’ Pivot: Reimagining Tech

AI Tech Instead of Registers

If the concept resembles Amazon Go stores, it’s not a coincidence. Lori’s Gifts first went to Amazon to use its Just Walk Out technology, but Kriesman said it was “very expensive” and the tech company was also less focused on scaling this business.

Amazon’s Just Walk Out tech is currently available in over 200 third-party locations across the U.S., UK, Australia and Canada, as well as dozens of Amazon-owned stores.

Instead, Lori’s Gifts partnered with AiFi, a spatial intelligence company that serves other industries beyond retail.

AiFi CEO Steve Carlin told PYMNTS that his company’s AI-first, camera-focused approach differentiates itself from competitors like Amazon Go.

“We don’t need weight sensors on the shelves,” he said. “We don’t need special-built cameras. We don’t need to affect the lighting of the store. We use off-the-shelf IP cameras … It’s the software behind it” that makes it smart.

Kriesman said the AI setup includes 40 cameras per store, although this varies by store size. There are a few hundred SKUs — food, drinks, chips, teddy bears, clothes and perfume.

“We track people and objects through space,” Carlin said. “We’re trying to understand your behavior. If we see [your hand] interact with something on the shelf … we call that a moment of interest.”

The system then determines whether the object has been picked up or put back, charging customers automatically upon exit.

“If you leave that space … we add it to your bill,” Carlin said. “We see you put it down, we take it off your bill.”

Other retailers have also deployed cashierless checkout systems. Last fall, Walmart opened a Sam’s Club in Grapevine, Texas, that has no registers. Instead, shoppers scan items through a mobile app to add them to their digital cart for payment. They can also access discounts and sales.

The PYMNTS Intelligence report “Unattended: The Payments Technology Shifting the Future of Commerce” found that unattended payments technologies are increasingly becoming indispensable in today’s fast-paced retail environment. These technologies enable more secure and seamless transactions at a time when consumers are increasingly demanding more self-service solutions.

Near-Zero Shrinkage

While the AI model has a 99% accuracy rate, Kriesman said there was still a learning curve during the first few weeks after launch.

“As you get a couple of weeks under your belt, it becomes very accurate,” he said.

The Lori’s Gifts team uses security footage for quick audits and to respond to any disputes about incorrect charges.

“We can look at videos within minutes after the transaction’s taken place and double-check,” Kriesman said.

Shoppers can scan a QR code to get their receipt, which has an email address in the case of returns or a disputed charge.

However, theft, or shrinkage in industry parlance, is already low at Lori’s Gifts shops. With checkout-free systems where shoppers must use their credit card to get inside, Kriesman said he expects theft to go to near zero. That compares to an average retail sales shrink rate of 1.6% in 2022, the last year reported by the National Retail Federation.

In the case of a power outage, the gates are shut so people can’t go into the store. Those already inside can push the gates open to get out. However, there’s no way to track what they take. That’s part of the risk, Kriesman said, adding that outages should be “extremely rare.”

The Non-Tech Hurdle

It turns out the biggest challenge for the AI-powered stores is an analog problem. People don’t understand how to shop at the store.

“They walk up to the gate, and they’re looking for the associate,” Kriesman said.

So, Lori’s Gifts started placing signs at the gated entry instructing people to just walk in, grab their items, then walk out. However, there was still a learning curve.

“They don’t even see the sign right next to it,” Kriesman said. “It’s a different experience, and people are not used to that.”

The company is adding video monitors showing how the store works to encourage shoppers that “it’s OK to actually pick up something and walk out the store,” he said. “You’re not going to get called by the police the next day.”

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