The Perspective 
Sunday, 15 November 2009

Supermarket giant Tesco recently created a buzz in the industry by opening a concept store (in Kingsley, Northampton) with just self-checkout lanes and no cashiers. Understandably, the reaction to this initiative from various quarters has been mixed. While Tesco claims that customers have reacted positively to the idea, workers’ unions have predictably expressed serious concerns over the implications of completely eliminating cashiers at the checkout point.

This move shouldn’t come as a surprise to anyone tracking the evolution of self-service in the retail sector. In fact, it was entirely along expected lines. Despite the sizeable initial investment, there has been a clear shift towards self-checkout since the turn of this century, especially by big-box chains. Retailers are studying ways to attract new customers (in addition to retaining existing ones) and in this context, self-checkout has been positioned as a technology solution that can drive up customer satisfaction levels, leading to a more lasting relationship. Not to mention the cost savings.

And therein lies the rub.

Studies reveal that 20 percent to 30 percent of the payroll in retail is typically directed toward cashiers. With self-checkout, this figure can be brought down considerably. The key is to get a commitment to the cause at all levels, from top management to store managers and cashiers. While it’s true that self-service lanes would create some redundancies, the primary aim is to redeploy resources to service-oriented areas in the store. The redistribution of cost savings to other productive areas needs to be clearly articulated to store-level staff for this to work.

And there are the operational realities, of course. Retailers often tend to understaff self-checkout lanes, which can cause considerable delays if inexperienced users create a bottleneck. More often than not, consumers who become confused or embarrassed about their inability to complete a transaction tend to avoid self-checkout in the future. This makes the initial few transactions crucial from the retailer’s perspective. Studies also indicate that self-checkout systems lead to a marked decrease in impulse purchases — low-priced products such as candy, mints, chocolates, soda, water, chips and gum are placed around the cash counters. This can be attributed to the fact that customers have to focus on the checkout process completely. Inevitably, there are nagging security issues that need to be addressed as well.

None of this detracts from the obvious value proposition of self-checkout — when designed and implemented correctly, it can enhance the customer experience at the store and drive top-line growth. Most importantly, it leads to an increase in labor productivity and resource utilization. Labor productivity essentially refers to two aspects: The first is to remove the labor element itself, as an obvious cost-cutting measure. The second is to redirect the labor or resource into other departments where it can be better utilized, such as restocking shelves, bagging groceries or helping customers as they make purchases. Counter-intuitively, self-checkout can end up enhancing personalized service at the store, although it might appear to be leading to impersonalization. The consumer experience, always driven by speed, is made more efficient as customers can get out of the store faster. The privacy and convenience provided by these systems doesn’t hurt either.

The bottom line

Customers like choice. Studies show they are growing increasingly comfortable with self-service systems, such as ATMs and kiosks at airport terminals. Self-checkout, if offered alongside an optimal number of staff cashiers, is a definite positive. With time, the number of cashiers needed to supervise checkout lanes will decrease. In fact, the future might be even more radically different once RFID/mobile-POS/smartphone-enabled checkouts gain prevalence. Although the industry is not ready for a widespread rollout of self-service-only stores, this is the right time to experiment. Besides, the marginal cost-savings offered by self-checkout might be too good to pass up on during these tough economic times.

Aravindh Vanchesan is a program manager with the Frost & Sullivan North American ICT practice. He focuses on monitoring and analyzing emerging trends, technologies and dynamics in retail markets worldwide.

Posted by: Aravindh Vanchesan AT 01:35 pm   |  Permalink   |  0 Comments  |  
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