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Man vs. Machine

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The rumors of self-checkout’s demise are greatly exaggerated.

Despite announcements that a few retailers were removing self-service kiosks, IHL Consulting Group is predicting an 8 to 10 percent increase in the number of self-checkout units deployed throughout North America over the next several years, with particularly high growth expected in convenience, hardware and drug stores, says Greg Buzek, IHL founder and president.

“I’m still bullish on self-service checkout despite some highly publicized announcements that a few grocers were pulling systems out,” Buzek says. “While self-service may not work for every retailer, stores need to decide what kind of a strategy makes sense for them and plan accordingly.”

Urban stores are particularly ripe for self-checkout. They benefit from the ability to reduce checkout space and use the freed-up property to offer more merchandise, according to Rick Chavie, vice president of marketing for NCR Corp., a major developer of self-service systems.

But most stores are finding that freeing up staff to work more closely with customers makes more sense. Kroger, for example, “has a successful plan,” Buzek says. “It worked out an agreement with its union that there would be no job loss associated with self-service deployment. The chain then moved personnel to offer better customer service and to concentrate on increasing the profitability of each customer purchase.”

This ability to reassign staff is particularly important during the holidays or other promotional periods because stores can fit the special needs of the occasion, says Chavie. “In grocery stores, there are a lot of service areas, such as the deli, meat department and bakery, where customers want more assistance,” Buzek says. “In other stores, it is helpful to have more associates that can explain products, such as electronics or apparel, so that customers are more comfortable with making a purchase.”

Store benefits
Research indicates that customers are coming around to the idea of self-service. A recent survey conducted for NCR by the NPD Group found that a majority of U.S. consumers believe the technology improves their store experience. About two-thirds of respondents want self-service options when shopping – and that figure is even higher for younger customers: Nearly half of shoppers under 45 want self-service.

Other NCR research shows that the systems are being utilized: Self-service sales accounted for about 35 percent of all transactions in supermarkets that offer the systems. Retailers are benefiting, as well: Checkout times were reduced 40 percent and the number of customers who move through checkout lanes increased 20 percent, according to NCR.

Still, significant sales volume is required to justify the cost of self-service devices. “You usually need at least $300,000 a week in turnover for the ROI to be there,” Buzek says.

Fresh & Easy, a chain of 184 grocery stores throughout California, Nevada and Arizona, has benefited from self-checkout. Since November 2007, all of the chain’s checkout lanes, typically eight per store, offer self-checkout with assistance available from two or more employees when requested.

“This gives us a lot of flexibility to allocate our resources where they are needed,” says Brendan Wonnacott, corporate affairs director for El Segundo, Calif.-based Fresh & Easy. “This is not about reassigning employees. It is about empowering them and giving greater customer service because the employees are available where they are needed most.”

Mobile’s role
Retailers and technology companies are also looking at how mobile technology might fit with self-service checkout. A system developed by AisleBuyer allows customers to use their smartphone cameras to scan an item’s barcode; additional product information (like customer reviews) is sent to the customer. If she chooses to purchase the item, she can use her phone to scan a credit card and have the transaction approved. A receipt is e-mailed to the customer and a purchase record is sent to a desk near the front door so the purchase can be verified and bagged.

Magic Beans, a Boston-area toy store chain, has tested the system at its five stores since August 2010. Although customer use of the system was minimal at first, there has been significant growth in use over the past year, says co-owner Sheri Gurock.

“This year, during Black Friday in particular, we saw a much greater interest,” she says. “I think once the bigger chains start to offer it, customers will be even more willing to try it.

“We have to remember we are attempting to break a shopping pattern that goes back more than 100 years,” Gurock says.

Most customers who try mobile checkout tend to like it, she says. “People are impressed with the end result. They are surprised at how easy and quick it is and how smooth checkout can be.”

Indeed, a study of Magic Beans customer use in January 2011 found that more than 15 percent of store customers who had a smartphone chose the mobile checkout; 60 percent of customers who used the application made a purchase; and the ticket size of customers using the system was 8 percent greater than those of other customers.

Andrew Paradise, CEO of AisleBuyer, argues that mobile sales have a lot of advantages over traditional checkout — manned or self-service. “Smartphones today have more processing capacity and are more powerful than what you can get at your typical kiosk or self-checkout stand,” he says.

While early applications involve smaller chains, Paradise believes the system has appeal to big box retailers that may want to combine in-the-aisle purchases with self- and manned checkout to accommodate different customer preferences.

Chavie emphasizes there are a number of different self-service models.

“For some retailers, 100 percent self-service works,” he says, “where [for] others there is a mix of assisted and self-checkout. Retailers have to adopt what works best for their business model and for their customer base.”

Either way, retailers need to listen to their customers. “It’s not about marketing and promotions,” Chavie says, “but letting your customers tell you what they want in checkout. There are a lot of customers who have mobile phones or iPads and they are pushing retailers to come up with ways in which customers can get greater use from their devices. This is pushing retailers to invest wisely in new technology.”