Do you think store managers trusted the new cash registers being rolled out 25-50 years ago? Do you think those concerns are any different than the ones they have about new in-store technology today?
Two terms, ‘innovation’ and ‘checkout,’ have become more and more synonymous with one another. In 2011 we saw the introduction of the innovative Google Wallet, and on Monday Home Depot announced that it would implement Paypal’s new payment solutions at its checkout counters.
It is interesting to see how the checkout has evolved to see what is in store for us in the future. What has worked? What has become obsolete, and what will not be around for much longer?
This will be the first of three posts outlining the “Evolution of the Checkout.” The third will break down the innovative new mobile and tech solutions that I think will break through in the next 2 years, the second will delve into new services designed to boost customer experience and satisfaction, and this one will discuss innovations and great ideas in-store
The very first store likely pre-dated any form of nationalized currency. People were probably still wrapping their minds around the potential uses of the wheel!
Since then, retail stores have tested, and eventually incorporated, more technologically advanced solutions into their operations. The calculator and cash box system evolved into the revolutionary cash register, which allowed the teller to manually enter product prices and see the exact change required. The touch screen POS system with a built in barcode scanner made it even easier for retailers to manage their inventory and reduce costs resulting from human error.
Understandably, people have the conception that improved technology and more automated systems reduce jobs. However, the tech advancements in the staffed checkout station did just the opposite. The advancement made it even easier for retailers to offer jobs to personable, hard working people that may have had difficulty landing jobs elsewhere.
Take Trader Joe’s as a great example of a retailer who will be very slow to incorporate an automated checkout system into its stores. Their tag line, “Always Fun, Always Delicious,” and their consistent in-store experience should reinforce their corporate strategy to keep customers happy through their entire visit. Trader Joe’s strategy, like Disney’s, is to engage customers at checkout by entertaining them. The concept of an impersonal self-checkout and mobile checkout solution does agree with their commitment to portray their stores as destination over proximity outlets.
Just ask yourself one question, would you rather call a company and speak to a computer or a person? It’s no contest.
While most independent and chain retailers alike still feature typical staffed checkout counters & express checkout lanes, the concept of a self-checkout was the next innovative technology adopted in retailers’ front-ends. The first self-checkout, which exclusively scanned barcodes, began making its way into chain retailers’ stores in the mid 1990s. For example, Walmart’s first “self-service checkout,” as it was originally called by its manufacturer (Optimal Robotics, Corp), was trialed in early 1996. In the UK in 2002, Marks & Spencer became the first major player to test a self-checkout system branded Self Checkout Tills (SCOT) by its manufacturer, NCR.
Today, 40% of shoppers age 18-40 are using self-checkout. With the consistent release of new devices, consumers are becoming increasingly more tech savvy. Society as a whole has become more knowledgeable about user interfaces found in automated devices like ATM’s, gas pumps, and kiosks. The societal advancements, inside and outside the retail sector, are helping consumers become even more likely to choose the efficient self-checkout station over the long lines associated with a staffed checkout station.
Big Y Supermarkets and Albertsons (among others) for example, decided to remove the self-checkout stations from its stores in 2011. Subsequently, we can see that self-checkouts must not work everywhere. The automated stations work best in professional areas or transient areas, they work well in bi-lingual areas, but not so well in retirement communities or liberal college towns.
Reports by Forbes & MSNBC surfaced in 2011 about a handful of US retailers removing self-checkout counters from their stores. The articles, coupled with high media coverage, brought people to the idea that self-checkouts could become obsolete. However, data collected by the IHL Group, assures us that this notion is false. In fact, shipments were up 6% in 2011, and the installed base of self-checkouts grew 17% from ’09-’10 and continues to grow at a 15% CAGR from ’10-’16 as new retailers continue to implement the machines.
The fact that both checkout options are still thriving tells us one thing, consumers like choices. Also, just as the price of early generation technology has dropped over time, the cost per high tech self-checkout unit will drop. We should expect to see B level retailers implement the automated systems more frequently in coming years.
Hybrids & Extremes
Once self-checkouts, express checkout lanes, and staffed checkout stations became the norm, the industry began transforming itself again into a range of extremes and hybrids.
Fresh & Easy unveiled its new Fresh & Easy Express format (Left) which features a 100% self-checkout front-end. In May 2010 Kroger became the first to test an automated tunnel scanning technology in a sales environment. Kroger’s Advantage Checkout system (Right) uses scanners to read barcodes, and uses optical character recognition (OCR) technology to read numbers, letters, and pictures on product packaging. While the system is predominantly an automated system, the tunnel only registers 98.5% of the items entered. When an item is detected but not registered, a store employee is notified to intervene from a display at the exit from the tunnel.
Store-based retailers (SBR) are looking for any and every strategy to will help them gain ground on e-commerce players like Amazon who is projected to grow at a 23.5% CAGR from ‘11-’15 (According to the RetailNet Group Analyst Forecasts). It will be interesting to see if these test systems provide the added convenience and speed necessary to make visiting a physical store worth the trip.
Store-Provided Handheld Devices
In 2004 Modiv Media introduced the first handheld scanning device in Ahold’s Stop & Shop stores. Shoppers simply walk up to the scanner docks, swipe their loyalty card, take the ‘ScanIt’ handheld scanner (Left), and scan items’ barcodes before dropping them in their cart. For example, if there is a promotion running on Skippy peanut butter and the shopper scans a jar of Welch’s jelly, the device will alert them. When the shopper scans the Skippy peanut butter the discount is automatically reflected in the ‘basket total’ displayed on the handheld’s screen. As of 2011, consumers can find similar handheld scanners in Coop Megastores in Switzerland (Center), and in Kroger stores in the US (Right).
Once the shopper has scanned all their items, they simply walk up to the express checkout counter and place the device in a receiver. The counter loads all the items scanned with the ‘ScanIt’ device, and the shopper just pays, bags, and goes.
These handheld devices are very helpful for both the brand, the retailer, and the consumer. For retailers the scanning devices help establish beneficial relationships with suppliers/brands. Brands are able to advertise at most critical point in the path to purchase – the decision point immediately before the POS. (40-70% of all shopping decisions are made in the store.) Consumers receive personalized promotions and discounts on items they need.
These benefits can also be leveraged in new mobile apps. However, the fact that smartphone penetration has not reached the 100% mark, or even the 55% mark in any country, these store-provided handheld devices will continue to land in new retail stores.
Evolving Front-End Queuing Strategies
Beyond just improving their Point-of-Sale technology, retailers are innovating the way their customers wait in line at the checkout.
The image above shows some of the different strategies being used by some large retailers. There is certainly no single “correct” strategy. A low-cost based retailer like Target will have a very different strategy than a retailer selling higher ticket items like JC Penney. Target’s checkout counters are lined with low cost items in an attempt to drive impulse sales in the last few seconds before purchase. JC Penney however, helps its customers feel less harassed by taking a more minimalistic approach to the front-end. During high traffic times, JCPenney customers find themselves standing in a clean, open, uncluttered, and stress-free area.
Shoppers were recently timed in line with a stopwatch to determine how real wait times compared with how long shoppers felt they had waited. The study by Envirosell found that the average customer’s perception was very accurate up to two to three minutes. After three minutes though, the perceived wait time multiplied with each passing minute. “So if the person was actually waiting four minutes, the person said ‘I’ve been waiting five or six minutes.’ If they got to five minutes, they would say ‘I’ve been waiting 10 minutes,’” says Paco Underhill – Envirosell’s founding president.
We all know that standing in line at the checkout can be extremely frustrating. Many Best Buy stores feature a less visually confusing, single file line which allows customers to better gauge how long their wait will be. By setting expectations early, Best Buy is able to avoid surprising its customers with longer wait times. Duane Read & Marks & Spencer’s corrals increase customer facing fixtures in an action alley. By having customers stand next to low ticket items for a long period of time they are more likely to place one in their baskets. Kaufland has re-arrangable checkout counters for high-low traffic periods. During peak shopping seasons, the counters are all active and staffed. However, during low traffic times the counters can be moved aside for more merchandising space. All of these strategies are effective in different ways.
What Should We Expect?
The staffed checkout station is here for the long haul. They reduce theft, and they also provide a better customer service if the lines associated with them are bearable. On the other hand, some people have expressed doubts about the future of the self checkout. However, industry analysts have assured us that the future of the self-checkout is alive and well.
Many shoppers have common misconceptions about the time they spend in line. These misconceptions can become consumers’ lasting impressions. Retailers, conscious of this fact, are trying to find the best way to meet the needs of their shopper. The goal is to have customers leave their store happy and relaxed. IF the customer sees a conscious effort on the part of the retailer to make the experience enjoyable, they are more likely to be more loyal.
Check back later for Part II: “Evolution of the Checkout – New Services.” & Part III “Evolution of the Checkout: Mobile & New Technology.”