eWEEK content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.
A recent study by IHL Consulting Group indicates that self-checkout and other self-service systems generated almost $128 billion in sales last year, up about 80 percent over a year before. Projections are that these sales figures will continue to grow exponentially–up 73 percent this year and then a projected 88 percent next year.
Although the numbers are clearly rising quickly, self-checkout programs are by no means universally successful. Some retailers are enjoying huge success while others question whether it will ever work for them.
From a retail business perspective, the most complicated issue is ROI (return on investment). The initial move into self-service is not particularly low-cost. Not only must stores purchase the unit, they must also pay for integration into their existing POS and payment systems. IHL estimates that it can cost about $92,000 upfront and about $15,000 more per year.
But what is the return, and what form will it take? In todays retail environment, thats a very sensitive and delicate question.
Vendors of self-service software and devices, analysts and even some of the retailers who have made it work for them agree that self-service programs have been sold to retailers as being a lot more plug-and-play-like than reality would support. Technology hiccups aside, what seems to have derailed a lot of the self-checkout programs is a lack of commitment—at all levels—for the program, including marketing and staffing support.
Norman McLeod is an associate director in the market research department at InfoTrends Cap Venture, a job that has him overseeing retail technology research trends. He remembers speaking at a kiosk conference in Las Vegas two years ago where a fellow speaker said that 90 percent of self-service kiosks were typically removed within three years.
Although McLeod pointed out that the speaker was talking about all kinds of kiosks, he added that the self-service success rate is not nearly as rosy as many advocates claim.
“On the positive side, I think there have been several technical developments that have improved the reliability, but I do anecdotally note that I see lots of stores putting these [self-service] things in. But a year later, I notice they are no longer there. In some cases, I think that a lot of these kiosks are being put in without a clear goal in mind.”
Greg Buzek is president of the IHL Consulting Group. “Some retailers are definitely putting it in unwisely. They just put it in, and its going to fail if you just do that,” he said. “Self-checkout has a number of intricacies that pay-at-the-pump and a [bank] ATM do not.”
What most agree on is that the true ROI is reducing the number of people needed to handle the cashier lanes, but some retailers are hesitant to tout that ROI as it falsely suggests layoff or attrition intent. As a practical matter, those workers have nothing to fear.
Supermarkets are competing with fast-food and other jobs that are paying better, said Frank Riso, director of retail vertical marketing for Symbol Technologies, a major self-service technology vendor. Riso said that labor unions—fearful of the loss of jobs from self-checkout—have been resistant, which is ironic because the retailers would actually prefer to hire more union labor if they could.
“The unions would be beating us up and wed say to them, Look, if you just bring me 30 or 40 more cashiers,” we wont implement self-service. But the unions cant find enough members willing to do cashier duty either, Riso said.
Next Page: A dwindling number of workers willing to work as cashiers.
Dwindling Number of Cashiers
Partly, then, self-service is about merely allowing retailers to survive with a dwindling number of workers willing to work as cashiers for the salaries that retailers can afford to pay.
One key way to overcome cashier resistance is to offer various employee incentives. There is typically insufficient margin to offer either employees or customers cash to push or use the system. “When youre only making a penny on the dollar, theres not much you can offer” to the consumer, analyst Buzek said.
But employees can be incentivised in other ways. Buzek cited Krogers as a good example. When they began self-service, Buzek said, company officials “realized that there would probably be a backlash from cashiers” so they offered to move people around in the store, offering the most attractive hours and preferred holiday selections to those who worked in self-service.
Some retailers have tried to avoid the sensitive phrasing and simply declare self-service to be solely a customer benefit, pointing to advantages such as shorter lines, additional privacy and a greater feeling of control.
Are retailers giving false reasons for why they use self-service technologies? Click here to find out.
Doug Miller is the director of store systems for the 1,200-store Food Lion chain and is one of those who argues that customer service is the only reason his chain likes self-service. Shoppers “can control the speed and check the total as they go,” he said, as well as buy some items that the shopper may not want to share with cashiers. There are some customers, Miller said, who would rather not deal with store associates.
While not disputing that self-checkout can certainly provide some advantages to customers, CapVentures McLeod said those benefits are not the reason any retailer—in his opinion—is deploying self-checkout.
“The stores fully know that very, very few of its customers have any desire to use self-checkout,” McLeod said. “The only reason stores are putting them in is to reduce the number of human checkers.”
Next Page: Customers are willing to try self-checkout as an alternative.
Trying an Alternative
How much consumers want to use self-checkout is an open question. When presented with long lines at the cashier-managed checkout lanes, many customers are willing to try self-checkout as an alternative. But do those customers want self-checkout, or are they willing to try it as an alternative to long lines?
Even that question—which is in that gray area between existentialism and “which-came-first: the chicken or the egg?”—gets more blurry the closer its examined. Some retailers admit to deliberately allowing the regular lines to get very long so that shoppers will have an incentive to try the self-checkout. Is that a customer-friendly approach or merely a retailers version of tough love? (Parent to young child: “I know youre really going to like the spinach once youve tried it several times.”)
Leading self-service vendor NCR even advises retail customers to avoid self-checkout on a handful of the highest-traffic days—dubbed “Exception Days” in NCR parlance—including Dec. 23, Dec. 24, Dec. 31 and the day before Easter.
One industry veteran—Caroline McNally, chief marketing officer at Pay By Touch, a firm that makes biometric authentication devices that work with self-checkout systems—says self-checkout may be more of what consumers want than they realize.
“Consumers are looking for convenience and speed,” and the most-disliked part of a grocery visit is the checkout lane, she said. Its up to retailers to take those dislikes and preferences and try to address them with services and technology. “Its beyond a consumers scope to think about what technologies will deliver what they want.”
Regardless of the original business reason for the move, getting store management and cashier buy-in is crucial. The ROI goal for self-checkout truly is cashier redeployment, invariably to service-oriented parts of the store that cannot be so easily automated. That might start with having cashiers bag customers groceries and walk them to the customers car.
Ultimately, this speaks to a pair of business issues that trump plain ROI: differentiation and competitive advantage.
Greg Buzek is president of the IHL Consulting Group and one of the most frequently quoted experts on retail self-service. He sees self-service as a way for grocery retailers to compete with Wal-Mart, which has a roughly 20 percent price advantage.
Ironically, a big resistance point about self-service is that its another step toward depersonalizing the shopping experience, right next to automated voicemail systems and gas stations that havent washed a window or checked oil for years. But the self-service systems—when fully deployed—are designed to increase personalized service.
Buzek speaks of one chain that is preparing to redeploy cashiers to prepared-foods sections, full-service delis, high-end bakeries and floral areas. “Theyre taking people and having [former cashiers] bag the groceries and take them out to the car for me and hold the cart for me while its raining,” he said, adding that this is delivering service that Wal-Mart cannot and that it makes it worth the extra price.
“There are a group of consumers that are willing to pay extra for extra service,” he said.
There are many ways of processing customers out the door—including some positively futuristic shopping carts. Indeed, most retail experts suggest that the smart-cart approach will be the sole checkout approach in as little as five and probably no more than 15 years from now. Until then, though, retailers must make lane-based self-checkout work.
For nongrocery retail outlets—such as Home Depot, one of the most aggressive and most intelligent users of self-checkout—self-checkout can be used extensively. For most grocery retailers, though, its limited to only the customers with the smallest baskets.
Some Pathmark stores with self-checkout, for example, allow only customers with 15 or fewer items to use it. Still, those smaller purchases represent more than half of all grocery purchases today, according to an IHL Consulting survey.
The rationale for the limit is that customers are much slower at scanning items than professional cashiers. If a customer has eight items, its not a big issue, but if the customer has 50 items, it is something the store would rather move to the traditional cashier. At the same time, removing lots of smaller baskets from the cashier lanes reduces the stops and starts required every time a cashier must tender—extract payment from—a customer.
But Symbols Riso said self-checkout should be expanded to try to fix a major retail customer-flow problem. He speaks of the tradition that the stores largest customers (with the largest baskets) wait in the longest and slowest lines, while someone purchasing one can of peas gets whisked through an express lane. “The worst customer gets speeded through and the best waits on line. How stupid is that?”