By Keith Jelinek and Chris Ventry, BRG
Speed or customer service? Most shoppers face that choice when visiting a typical grocery store and head to checkout. Do they opt for the self-check lane instead of waiting in the full-service checkout line? What do consumers give up or gain with each choice? What do retailers gain or lose?
Taking Self-Checkout To A New Level
Self-checkout is not a new concept; it has been around for over two decades. What is new is the “self-check on steroids” introduced by Amazon in its Amazon Go store. As a Prime customer at one of Amazon’s coveted pilot locations, shoppers can select items, bag them, and simply walk out the door while the transaction is charged to their credit/debit card, with an electronic receipt emailed after the shopping trip. If speed is what matters most to a shopper, this is the ultimate solution in the marketplace right now.
How does Amazon make this work? A key enabler for the success of Amazon Go is the use of RFID (radio-frequency identification) chips. Adhered to each item, these chips work with a transponder in the store to track the movement of each item and identify when it is removed from the shelf and exits the store. RFID has become more widely embraced, and the cost per chip is relatively low, but the cost of capital for the retailer is high, and the ROI payback can be longer term.
Will other retailers embrace this concept? Would consumers make the trade-off of speed versus service? What do retailers and consumers each have to gain or lose? These are a few of the questions circulating in many retail board rooms on the future of cashier-less checkout.
Where Will It Work?
Traditional retail self-check does not work in all retail channels or communities. Certainly, there are gains for retailers when deploying self-checkout. Store managers have at their disposal four to six lanes for customers to self-scan and bag their own items. The store can get by with one employee to troubleshoot, provide customer assistance, check ID for alcoholic beverage purchases, etc. Conceptually, the retailer gets leverage of about 6:1 compared to traditional labor model staffing.
However, there is a non-monetary cost to self-check for retailers. They lose the opportunity to provide positive customer service at the last shopper “touchpoint.” Store employees can interact with customers in a traditional checkout lane. Good cashiers will interact with customers, make sure they have found what they need, upsell in certain situations, and send the shopper on their way with a smile and a “thank you” for shopping.
And lest we forget, remember that checkout lanes are prime selling real estate and are typically stocked with some of the highest-margin and fastest-selling items in the store. Vendors pay dearly for this space by way of slotting allowances that ensure placement of their items. Full-service checkout lanes can be extremely profitable.
Many retailers have found ways to speed up the traditional checkout process by using the data at their disposal to leverage POS sales history to identify optimal labor scheduling by time of day, down to 15-minute intervals. They proactively identify optimal scheduling patterns to ensure efficient and fast checkout in their stores. Stores also integrate this data with traffic counters that monitor the flow of customers coming to shop, and even their patterns while moving through the store, in order to monitor and predict when to open more cash lanes up front and staff peripheral departments.
A number of retailers have opted not to embrace self-checkout, and some have eliminated it. For instance, Costco eliminated its self-check lanes and made the move to return and build manned cash register lanes instead. Other retailers, like traditional drug stores, have dipped their toes in the water with self-check. It would be surprising to see self-check of any kind appear in department stores, electronics, jewelry, shoes, and apparel. The process of conducting a transaction for this type of retailer is more complex due to hand tags, security anti-theft devices, and the plethora of discount coupons, loyalty programs, and the like.
Will we see more retailers explore the Amazon Go concept? We are waiting to see, but frankly we do not see widespread experimentation in the near term. Retailers face a number of challenges in creating a strong omni-channel experience for their shoppers. We don’t think cashier-less checkout is at the top of the list of strategic priorities for most retailers right now. But stay tuned—the dynamic retail environment may shift and cause everyone to revisit the topic.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions, position, or policy of Berkeley Research Group, LLC or its other employees and affiliates.
About The Authors
Keith Jelinek has held management positions and led and advised Fortune 100 retail companies to drive transformational improvements for more than 30 years. He also has held numerous interim management roles, working collaboratively with executives and boards to effectuate key strategic initiatives.
Chris Ventry is an experienced retail executive with a record of driving growth and creative execution. His 15+ years in retail and consumer goods have been spent as a results-oriented management consultant and as a hands-on operating executive for some of today’s iconic retail and digital media companies.