Reports Differ on Self-Checkout Value

A report due out Oct. 17 from the IHL Consulting Group sees grocers aggressively moving to upgrade to self-checkout systems, even before they replace or upgrade the aging point-of-sale systems they are based on. But another retail technology report—released Oct. 16 by the Aberdeen Group—has a very different self-checkout take, calling retail self-checkout "an absolute failure."

The reports on their own do not directly contradict each other, in that the IHL report simply says a lot of retailers will move to self-checkout, and the Aberdeen report doesnt dispute the intended purchases but merely the wisdom of them.

The Aberdeen report author, retail research analyst Sahir Anand, wrote that self-checkout systems have frustrated and angered customers and not helped retailers.

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"Self-checkout systems have not significantly improved the customer experience. These systems have met several operational and store navigation roadblocks such as lack of a strong customer interface, inflexible store formats and frustrating self-scan and bag procedures," the report said. "Customers have never found self check-out convenient or time-saving. As the customers share of wallet has diverted towards easier and more intuitive web channels, the lackluster performance of self-check out has created further POS challenges for retailers."

Although Anand said that the systems might be made workable if additional investments were made, he wasnt hopeful. "I think its futile. At the end of the day, its a failed system," he said.

The report also criticized other efforts to shorten lines, such as having store employees manually scan customers purchases—with an infrared PDA device—while the customers are waiting in line. The scans are saved onto a value payment card, which the customer eventually gives to the cashier at the front of the line. Anand says such efforts ultimately do not shorten the customers wait.

First, Anand said, the devices scanning and transmitting and saving is far too slow. "Its not the technology itself. Its the upload from the server to the device. Its too slow," he said. Secondly, its difficult, Anand said, for employees to know where to start scanning. If the customer gets to the head of the line while still being scanned, its a big problem.

Greg Buzek, president of IHL and one of the authors of the IHL report, disagreed that self-checkout has failed. "If you dont believe me, talk to Home Depot," he said. He said that based on the isolated problems he has witnessed, it "comes down to the way retailers deploy it."

For example, Buzek said, Wal-Mart has removed some of the security functions of self-checkout in some locations, which sharply accelerated scanning and checkout speed. "Its not the equipment. Its the way the equipment is deployed," he said.

The IHL report projected that grocers overall will spend $9.8 billion on IT purchases this year, which is about 5.8 percent more than last year, Buzek said. "Key areas of software spending will include store systems (21 percent), infrastructure (32 percent) and supply-chain management (18 percent)," the report said. "Fifty-four percent are planning new workforce management purchases in the next year and more than 60 percent are planning new kiosk implementations at the store level by June 2007."

Although the Aberdeen report was pessimistic about self-checkout, it was quite enthusiastic about contactless credit card payments, pointing to efforts by CVS, McDonalds, 7-Eleven, AMC Entertainment, Duane Reade, Walgreens, Arbys, Carls Jr., Cold Stone Creamery, KFC, Regal Entertainment Group and Sheetz convenience stores.

"Frustrating lane formations during the lunch hour would also get shorter and so would the lanes at a general merchandise store or coffee shop. Depending upon the quantity of purchase, the transaction time can be reduced from an average of one to four minutes to little more than a minute or less," the report said.

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