In 1932, a group of students at Harvard Business School proposed a system in which customers choose products from a catalog by taking out the associated punch cards. The punch cards would be fed to a reader, which would trigger the system to automatically pull the product from inventory and deliver it to the checkout. A receipt will be produced and inventory records updated. This was the beginning of the modern barcode .
Nowadays, barcodes are not only used by stores to complete sale and monitor inventory, but we are seeing an increasing trend consumers directly interacting with barcodes to identify products. Traditionally, specific hardware was required for barcode scanning, but now any smartphone with a camera has capability to function as a scanner. This has led to a wave of apps that that utilize the scanning function, with applications ranging from placing QR codes on advertisements to quickly link a consumer to the advertiser’s webpage and creating a fast way for people to add each other as friends on social media platforms such as Snapchat and Wechat.
Exhibit 1: Projected number of smartphones in the United States in next few years 
In 2011, Amazon introduced the Amazon Price Check app, which enabled consumers to scan the barcode of any product and the app will pull up the product’s listing on Amazon with the price. Although Amazon Price Check does not exist anymore as a standalone app, the core functionality has been integrated into the overall Amazon app. The use of this price check functionality has created the phenomenon of showrooming – where consumers will go to a brick and mortar store, see and experience a selection of products, identify the product they like, scan the barcode using the Amazon app, and complete the purchase through Amazon. This trend has been so prevalent across the US that people are referring to the Saturday between Black Friday and Cyber Monday as “Spying Saturday” – the day to check out electronic goods in stores like Best Buy before committing to a purchase online on Cyber Monday .
From the traditional retailers’ perspective, the use of the price check functionality is extremely detrimental to their business. Large retailers such as Best Buy, Target, Walmart, Staples, and Toys R Us are heavily impacted because many of their products are available from Amazon, often for a lower price . The business model of these retailers is to purchase products from suppliers, hold inventory of products in warehouses and in store displays, allow consumers to see and interact with products, and complete sales of products in store. A significant portion of their cost is the cost of holding inventory and rent of physical stores for displaying products. With consumers using the Amazon app, traditional retailers are stuck having to pay the same costs while Amazon generates more sales revenue without incurring those costs.
In addition, Amazon benefits from the vast amount of data collected on consumer behavior and competitor’s inventory. Every time a consumer scans a product, Amazon creates one additional data point linking the consumer’s preferences and purchasing behavior. This can be used for targeted ads when the consumer later logs into Amazon.com. Based on the consumer’s location while scanning the product, Amazon also creates one data point on what products are available at competitor’s store and can calculate which products are in demand based on frequency of scans .
One of the primary barriers for online shopping is that consumers cannot physical see, touch, or experience the product prior to purchase. However, the showroom phenomenon, enabled by the Amazon app, has broken that barrier by allowing consumers to experience the product at the expense of traditional retailers . Some retailers, such as Best Buy, made operating model adjustments such as instituting price match policies. However, this is still a losing game for traditional retailers because they continue to carry the store costs and cut deeper into their margins. Other retailers such as Walmart have been heavily investing in their online platforms, like Walmart.com and ShippingPass, a subscription similar to Amazon Prime .
Despite traditional retailers making genuine effort to adapt to the digital age, the future may not look so bright for them. With the introduction of Amazon Dash, consumers can now scan any Amazon Fresh product in their home, and the item will be automatically purchased and delivered (or at the push of a button with product-specific Dash buttons) . Amazon is allowing consumers to cut out an entire chunk of the traditional shopping process and in turn, making the services of traditional retailers obsolete.