Self-Service Need Not Be Self-Delusional

Opinion: Retail self-checkout is a great way to use the technology, but retailers are giving false reasons for why they support it.

When youre a retail executive in todays razor-thin-margin environment, you do what you can barely afford and then pray it supports your strategy.

Pricing is no longer something most retailers can determine, as a strict competitor reality often dictates whether your per-item profit is one or two cents. Wal-Mart is the paraphrase of that very old joke: What does a 500-pound gorilla retailer pay its suppliers? Whatever it wants.

That is the background for the industrys huge investment in self-service and self-checkout, as details in a new Special Report on Self-Checkout.

Those wiggle-room-less margins dictate cashier pay rates, which in turn make recruitment difficult and turnover high. Thats ultimately what is fueling self-checkout. One retailer seriously argued to me that customers really want self-checkout because, among other reasons, they dont want to deal with surly checkout clerks.

So, a reason for self-checkout is to give customers the chance to avoid the nasty cashier that you hired to serve them? The cashier who wishes she didnt have to accept this job?

As an IBM executive said in an interview, retailers who paint self-service initiatives as existing only because customers want it are being "politically correct." Most retailers avoid saying the truth—which is that they want to need fewer checkout cashiers—because it frightens the cashiers and their union reps into fearing layoffs. The reality is that a layoff is the farthest thing from these retailers minds.

As one industry official—who has negotiated with the unions on this point—said, if the unions could deliver enough cashiers to keep the lanes filled, the retailer wouldnt be interested in self-checkout.

/zimages/3/28571.gifClick here to read about capabilities that could be coming someday to intelligent carts in your grocery store.

The true reason for self-checkout and self-service is actually much more strategic, and it brings us back to our friendly, 500-pound gorilla retailer. Retailers want to—and need to—get the cashiers away from their registers so that they can be sent to areas of the business that cannot be automated, such as helping customers bag, carrying products to their car and doing anything that makes their shopping easier and more fun.

Easier and more fun? Suddenly, we have a battle that gets retailers away from a price war and into a "better services for a little bit more money" game.

But first, self-service has got to be made to work. Customers have to be talked into using it, which means that store managers and employees must be talked into wanting to get customers to use it. That means that employees must feel secure that these machines not only do not threaten their jobs, but they will likely give them better job opportunities. It may be true, but that doesnt make it any easier of a sell.

Next Page: Popping balloons of self-delusion.