Checking out the future: Retailers bring tech to bear on checkout
Amazon has raised the bar on self-checkout with its fledgling Amazon Go chain of cashier-less stores, where customers literally grab and go, thanks to a network of sophisticated cameras and sensors.
But such so-called “smart checkout” systems — which reportedly cost $1 million or more per store to install — likely are not to be a viable solution for most retailers anytime soon.
Instead, more and more food and drug retailers are exploring alternate self-checkout technologies that leverage smartphones, often in tandem with self-scanning terminals. These systems hold the promise of helping reduce store labor costs, while at the same time adding convenience for consumers. They also have the potential to enhance the in-store experience through real-time retailer-customer connectivity and personalization.
Several food and drug retailers have had up-and-down relationships with stationary self-checkout terminals. For example, Woonsocket, R.I.-based CVS Health has eliminated self-checkout from several CVS Pharmacy stores, according to reports, but also has added them in others. Supermarket operators Albertsons, based in Boise, Idaho, and Big Y, based in Springfield, Mass., both announced cutbacks on their use several years ago. Issaquah, Wash.-based Costco in 2013 also eliminated self-checkout in favor of manned cashiers, although reports said the retailer has been testing a new iteration of self-checkout in some locations.
However, the development of mobile apps that allow customers to scan using their smartphone could breathe new life into the self-checkout POS terminal.
Grand Rapids, Mich.-based supercenter operator Meijer, for example, encourages the use of self-scan kiosks in conjunction with its Shop & Scan app, which it has been rolling out throughout this year. The retailer requires that customers pay for their order at the self-checkout kiosks after they have scanned their merchandise.
“Shop & Scan will make the Meijer experience dramatically faster and more convenient for our customers,” said Terry Ledbetter, Meijer’s chief information officer, in a statement. “This technology joins our curbside pickup and home delivery programs to provide yet another option for Meijer customers to personalize their shopping experience.”
More than 12,000 customers downloaded the self-scanning app in the first few months of testing at seven locations, Meijer said.
Advantages for retailers
James Moar, an analyst at Juniper Research, said mobile app-based self-scanning offers some advantages for retailers. A recent report from Juniper Research forecasted that retail spending at frictionless payment stores, such as Amazon Go, will grow from an estimated $253 million in 2018 to more than $45 billion by 2023. Juniper expects most of these transactions to be in convenience and general stores.
The report, “Future In-Store Retail Technologies: Adoption, Implementation & Strategy 2018-2023,” predicted that self-
scanning apps, meanwhile, will be used by more than 32 million shoppers by 2023, driving higher engagement.
“The advantage of these [self-scanning apps] is that they will require relatively little in the way of set-up costs and maintenance when compared with more fully-fledged smart checkout technologies, while providing a degree of the labor-saving and time-saving benefits for the retailer and consumer,” he said.
Cincinnati-based Kroger has reported some success with its mobile app-based Scan, Bag, Go self-checkout system, and said it is helping drive store performance. “Store productivity will improve with the scheduled launch of Scan, Bag, Go in 400 new locations this year,” said Mike Schlotman, executive vice president and CFO at Kroger, during the company’s fourth-quarter earnings call with analysts in early 2018.
Kroger’s mobile app-based system allows customers to either pay within the app or at a self-checkout kiosk, if they prefer.
Other food and drug retailers that have recently begun testing self-scanning apps include San Antonio-based H-E-B, which earlier this year launched a two-store test of a mobile app-based self-scanning system, called H-E-B Go. “H-E-B is continuously testing new and innovative ways to serve our customers, and H-E-B Go is one of many programs to enhance service,” a spokesperson for the chain told MySanAntonio.com.
In addition, New York’s Fairway supermarket chain this year began rolling out a mobile app-based self-scanning system in partnership with technology provider FutureProof Retail, also based in New York.
William Hogben, CEO of FutureProof Retail, pointed out that mobile phones will likely be at the heart of all future self-
checkout systems, even smart checkout systems such as those installed at Amazon Go. “The future of checkout starts with mobile, because the phone is what brings the strategic value,” he said. “It’s not about getting your customers out faster. It’s not about reducing staffing costs. Really, it’s a fight for retailers to create closer connections to their customers.”
Hogben said implementing app-based self-scanning can help retailers lay the groundwork for future iterations of the systems, which could eventually incorporate more vision-based technology akin to that used at Amazon Go.
“We’re doing mobile self-scanning because that gives you the training dataset to transition to a vision-based, or any other base approach in the future,” Hogben said. “But right now, it gives retailers that strategic asset of the install. Once the customer installs your app, they’ll just keep updating it, and as long as they’re happy with you, you’ve got basically a lifetime connection with them right in their pocket.”
Approaching checkout holistically
Donna Stevens, director of store-transformation solution management at POS terminal supplier NCR, said retailers are increasingly looking at making their checkout systems part of a holistic solution that focuses on enhancing customer connectivity and the in-store experience.
“We believe retailers will move away from investing in POS as an individual solution — if they haven’t done so already,” she said. “Retailers are seeing the value in taking a platform approach, not solving one business challenge at a time.”
Mobile app-based self-checkout lends itself to this multipronged approach, Stevens said. “That can grow into other value-add services, such as the ability to check what’s on sale, review loyalty status, place a to-go order, create a shopping list, post feedback — all in the same place,” she said.
“Retailers will look at their entire store infrastructure, and look for ways to make it more flexible and more agile to enable new apps, new terminals and new features to be added to what they have today,” Stevens said. “So, POS will be considered more of a platform of service versus a point of sale — inclusive of the ability to offer personalized service and promotions, inclusive of cross-channel purchases, inclusive of flexible payment options, etc.”
Drug Stores are a prime format
Some analysts said drug stores’ status as quick-trip, small-basket destinations could make them prime candidates for the use of app-based checkout technologies.
“Over the last few years, there has been a seismic shift in shoppers’ ability to get the goods they want in an extremely convenient and quick way,” said Stewart Samuel, program director at IGD Services Canada. “Retailers must look at all aspects of the shopping trip from the customer perspective to create a frictionless shopping experience. This is particularly important for drug stores that cater to many of those convenience-based missions.”
It is important for retailers to test a variety of systems, he said, noting that for many retailers this will include a mix of self-checkouts, smart-shopping apps and — for the most advanced retailers — “just walk out” technology similar to Amazon Go.
Amid an environment in which delivery-on-demand is growing rapidly, “the speed of the in-store experience becomes an increasingly important advantage for physical stores,” Samuel said.
A long road ahead
Some analysts said self-checkout might work for some customers and in certain types of stores, but it is still a long way from becoming the norm in food and drug retailing. “I think we will still be having this same conversation in 10 or 15 years,” said Sucharita Kodali, an analyst at Forrester Research.
Retailers have become more adept at managing their checkout lines to prevent long waits, and have leveraged self-checkout kiosks to handle those customers who want to avoid manned checkout stations. “Really, those automated-checkout solutions are a solution looking for a problem,” Kodali said.
Juniper Research’s Moar seems to concur. He said that reducing lines “may not be enough to make shoppers adopt the technology who are likely to expect the friction of scanning and payment to be removed almost entirely,” he added.
Moar also said that with self-checkout apps, retailers are shifting the labor required in scanning from the cashier to the customer. Indeed, retailers are likely to continue to pursue self-checkout technology not only as a service to the customer but as a potential tool to cut labor costs.
Mitch Goldkorn, vice president of engineering and quality assurance at Fujitsu Frontech North America, a supplier of self-checkout terminals, said demand for its self-scan POS systems has increased in the wake of the recent minimum-wage hike in Canada. Fujitsu supplies self-checkout terminals to such Canadian retailers as London Drugs, Loblaw and Canadian Tire.
“It’s really been taking off in Canada over the past year because of the increase of the hourly wage,” Goldkorn said.
Similarly, he said he expects demand to increase in areas of the United States, where minimum wages are rising, such as California and New York.
Goldkorn argues that consumers are driving the transition to mobile app-based self-checkout, as millennials have grown accustomed to shopping electronically. “In [parts of] Asia, they’ve been doing it for quite a while,” he said. “It’s finally arrived here, and that seems to be the direction a lot of retailers are going.”
Forrester’s Kodali said that stationary self-checkout terminals at some retail locations can capture 20% to 50% of sales volume. “Those have had fairly high adoption,” she said. “I don’t see them going away. Insofar as large format stores continue to be opened, we will see more of those.”
Mobile app- and device-based self-scanning, however, remain a question mark. Walmart abandoned its test of mobile self-scanning earlier this year, although it remains in place at the company’s Sam’s Club warehouse stores, where it has been highly successful, said Raymond Pucci, director of merchant services at Mercator Advisory Group.
One of the keys for retailers will be the ability to incorporate multiple features into the app, including loyalty program membership and personalized marketing. “That is why if you walk into a Starbucks or a Dunkin’ Donuts, you see a lot of people paying with their mobile phone,” said Pucci, who said he expects mobile scanning and payment to expand in some retail channels, especially where baskets tend to be small.
One of the challenges to more widespread use by consumers, Kodali said, is the fact that there are so many disparate types of self-checkout systems in use in different retail settings.
“The fact that there’s not one checkout experience everywhere kind of inhibits some adoption, because it’s not like there is becoming a standard way of checking out,” she said.
Kodali said in the near term, at least, app-based self-scanning technologies appear best positioned to serve as an emergency backup for consumers in case checkout lines are unexpectedly long. “I think it’s great as a backup, and I think that’s ultimately how it will serve,” she said. “Maybe in 25 years time, retailers will realize they can migrate everybody to mobile-activated self-checkout, but at the same time have it run concurrently with employee-assisted self-checkout kiosks.”
Increasing consumer familiarity with self-checkout technologies is one of the keys to success, Moar said.
“Food and drug retailers looking to invest in future self-checkout need to think about ways of raising awareness among consumers to use these technologies,” Moar said, citing lack of consumer awareness as contributing to the failure of some pilot tests. “Retailers need to think about ways to get consumers to engage with the technology. This can be through ad campaigns, or as part of the usage process.”
Accessing a store’s Wi-Fi connection could prompt promotions for the self-checkout app, for example. Moar said retailers also need to consider what technologies would be best suited for their individual businesses, and “whether increases in consumer efficiency will drive up revenues or simply add to operating expenses.”
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