Strategies for Retail Efficiency & Customer Experience

Convenience retailers have generally been slower than their fast-moving consumer goods peers to adopt self-checkout (SCO) technologies. The high volume of age-restricted items including tobacco, alcohol, and lottery has been the most significant deterrent.

However, issues and trends – such as the ongoing labor shortage, consumers’ growing desire for more contact-free checkout options, advancements in technology, and computer vision and AI – are driving convenience retailers to take a more strategic approach to the cash wrap and checkout process.

New SCO options are flooding the market.

At this year’s National Retail Federation (NRF) conference, as well as other trade shows, SCO was a key theme, and for good reason. According to a recent study from NRF and IBM, of all the digital touchpoints, consumers were most likely to have used, and plan to keep using, in-store SCO. As adoption increases, solution providers are introducing various SCO options designed to serve the needs of different retail channels and concepts.

Current SCO options, each with their own pros and cons, include:

• Traditional – Standard SCO systems based on bar code scanning. Customer does the scanning and completes the payment process. Incumbents in the traditional SCO space include Diebold, Gilbarco, NCR, Toshiba, and Verifone.
• Self-contained, vision-based systems – Scan-free systems that utilize vision to identify items being purchased. Customer places items on the unit, which are automatically identified, and customer completes the payment process. Systems in development or deployment include solutions from Mashgin, NCR, and RadiusAI.
• Bring Your Own Device – Systems that rely on customers’ mobile devices as a scanning and payment device. Customer uses their own device to scan items and complete the payment process. There are many solutions in deployment including offers from MishiPay and Skip, as well as internally developed solutions from the retailers themselves.
• Checkout-free – Complex systems that utilize cameras, scales, and other technology to identify items being purchased and automate the payment process. With necessary apps or technology in place, customer walks in, selects items, and walks out; scanning and payment are automatic. This experience has been popularized by Amazon’s Just Walk Out technology, but similar solutions are also offered by AiFi, Grabango, Standard.AI, and Zippin.

The good news is that the benefits of SCO keep growing and the technology itself continues to improve. Early adopters have already experienced increases in efficiency, better allocation of labor, and incremental margin opportunities among other upsides.

Choose the SCO system that’s right for you.

Of course, making the technology work in your environment takes careful consideration and significant investment. Making it pay off requires a solid plan. Whether you are working to expand SCO across your store base or just now taking a serious look at SCO and trying to formulate a strategy, there are some best practices that can help you make the right SCO choices for your company.

Start with strategy.
Before embarking on your SCO journey, you need to define success. What is the goal and desired outcome? Then, you need a plan. What is the strategy to get to the goal? The plan should include details on desired SCO option, functionality, allowance of age-restricted and fuel transactions, cash acceptance, store design, labor modeling, and communications.

The strategic decisions made will help determine what you should expect from self-service checkouts. Decisions on whether or not to allow age-restricted items in SCO solutions heavily influence adoption and usage as well. Though these solutions take more planning and configuration to get right, they can increase the number of transactions that happen at SCOs.

Align on expectations.
Depending on your product mix, a well-designed strategy can result in 25% to 60% of transactions ultimately occurring at SCOs. But it can take time to reach these numbers. The busier the site, the higher and faster the adoption rate will be. Either way, as SCO adoption increases, convenience retailers can expect non-fuel sales and basket sizes to increase. Impact 21 clients have experienced non-fuel sales increases of up to 10% in some of their SCO stores. For stores that track sales by hour, the increase is most prevalent in the peak hours of business.

Keep in mind that SCOs come with costs, too. Retailers have noted some increased monthly maintenance fees due to debris getting into the cash acceptors as well as liquid spills. Interestingly and encouragingly, however, convenience retailers are not seeing a rise in shrink with SCO even though retailers in other channels are. While overall shrink across all retail using SCO is up about 5.2%, the c-store industry reports very little or no significant increase in shrink with adoption of the technology.

Command a presence.
The number and placement of SCO units has a dramatic impact on customer adoption. First, the POS systems must be front and center with prominent signage so customers know they are there. Putting one unit on the current front counter is often a quick solution as the cashier can provide oversight and access age-restricted items. However, if not designed well, it can cause congestion at the cash wrap and upset customers.

Second, keep in mind that the biggest perceived benefit of SCO is speed of service and having another option to get in and out of the store quickly. On average, best-in-class operators opt for a minimum of two units per store. Busier locations may need at least four units to deliver on the speed promise and ultimately enhance the experience for the customer.

Generally, SCO units are placed in a space adjacent to the cash wrap. As c-stores develop new prototypes, SCO becomes a significant part of the design discussion. SCO needs to command a presence to drive utilization. This can result in more space allocated to fulfilling transactions, but also allows for merchandising opportunities. As you consider how many and where to place SCOs in your space, it is worth thinking through how the space can be optimized to support a better customer experience overall.

Always keep in mind that customer preference is king. Years ago, it was all about the employee engaging the customer. But these days, many customers prefer to do it themselves without human interaction. One study by Raydiant showed that as many as 85% of customers believe SCO is faster than cashier checkout, with 59% saying they prefer SCO. As the technology becomes more ubiquitous, all generations are using SCO when it makes sense. It is key to ensure the experience is as intuitive and frictionless as possible to encourage brand loyalty and adoption. Having multiple options and more total checkout stations leads to greater efficiency and better experience overall, regardless of which options customers choose.

Communicate with the customer.
SCO units must be supported with the appropriate signage that a.) lets customers know they exist and b.) clearly tells the customer what to expect from the technology. A great example is when deploying a SCO with vision assist technology, the initial experiences typically take longer as consumers are not aware that they must have their payment method at the ready.

Signage at the pumps and windows as well as at the units themselves will promote awareness and adoption. Unit signage should share the specifics. For example, will these units be only for transactions that do not include age-restricted items in the basket? Customers need to know what can and cannot be purchased via SCO before they get into line.

You will also want to make it clear whether you are accepting cash or not. Stores with more than one unit usually have a mix of credit card only and cash acceptors, and the signage needs to identify this. A retailer must also take into consideration local and state requirements related to acceptance of cash.

Again, speed is the goal here. Generally, the SCO transaction itself is slower, but an open SCO is faster than waiting in line and the concept of control allows the customer to perceive the actual transaction time to be faster. Making sure customers have the right information to make the process seamless will help drive adoption and delight while avoiding potential sources of frustration at the SCO.

Embrace change management.
Signs are necessary and helpful. However, they can’t completely replace employee engagement. Especially early on, employees are vital to helping customers get familiar and comfortable with using your particular SCO system. Customers are getting used to using the machines, but the set up and process is slightly different from store to store.

It’s important to be aware that, at least in the short to intermediate term, few if any c-stores are expecting labor savings from SCO deployment. But they are benefiting from better allocation of labor. Many companies are redeploying people for value-added tasks in the store, including serving customers, merchandising, stocking, and cleaning, along with being ambassadors for the new SCO units. Depending on SCO usage, on average between 2 and 4.5 hours of an employee’s 8-hour shift can be reassigned for these other duties.

In the long run, many operators will try to use SCO to help reduce labor hours. As labor costs continue to increase, it makes sense to try to shave a few hours here and there. In the meantime, leveraging your people to help make SCO a success and enhance the overall customer experience is a great way to increase your return on labor costs.

Integrate SCO into the overall marketing plan.
Beyond promoting new SCO units through onsite signage, when there is enough concentration of self-service in a market, other broader messaging should occur. Some retailers have found success by providing an incentive for early adoption of the units, for example, offering $.05 to $.10 off per gallon on the next visit, awarding double points for the visit, or providing a bonus drink for a drink club.

While you will want to build awareness of your new SCO units, you can also use the units as powerful promotional tools. Customers need to look at the screen to complete transactions—this opens tremendous communications and incremental margin opportunities. Best practices include using the customer interface for messaging that drives home promotions and upsell opportunities. In many cases, these upsell messages are not perceived as sales tactics, so they are very effective and drive revenue for the store.

Finally, SCO units go hand-in-hand with loyalty programs. Use the screen for messaging that prompts customers to sign up and/or to provide updates to current loyalty members on their status with various clubs, discounts, or points.

Some Impact 21 clients are reporting notably higher loyalty usage at SCO versus full-service checkouts. This is largely driven by screen prompts for the customer versus relying on a cashier to make the request. Some of the current SCO solutions have self-contained functionality which means the integration into your systems may be more complex depending on the solution(s) you choose.

Look ahead to what’s next.
SCO is increasingly becoming the customer expectation. The trend toward contactless payment is also advancing, eliminating the need to insert or swipe credit cards and further speeding up transactions. But even as retailers work to roll out these technologies in their stores, newer options are emerging all the time.

For example, next-generation SCOs use computer vision to eliminate the need to scan barcodes. With the appropriate set up, they can handle age-restricted products and can be a great fit in many convenience locations.

Checkout-free stores and other fully automated store concepts, such as the ‘Just Walk Out’ stores Amazon has been testing in various markets, have gained traction in limited use cases but have yet to live up to the promise. High costs and age-restricted products remain a formidable barrier to adoption in the short to intermediate term but will become more mainstream in the right situations.

The bottom line? Advanced technology is becoming increasingly central to any retail checkout experience and c-stores need to stay on top of the trends to understand which solutions are best for their business and how to best plan their investments.

Self-checkout is an ever-growing component of the future of convenience retail. Now’s the time to get onboard.

The data and trends all point to a more automated checkout experience in the convenience retail industry. Assessing the options, the benefits, and the investment takes time and resources. But now is the right time to think about how it fits into your business and the customer experience you want to offer today and down the road.