The Digital Signage Insider

Self-checkout systems may reduce impulse purchases

Published on: 2006-08-02

When The Home Depot started deploying self checkout systems in 12 stores toward the end of 2002, there was an air of uncertainty about the whole project. NCR's FastLane self-checkout technology was relatively untested at the time, the retailer had already begun a massive upgrade to its in-store technology infrastructure, and no one was quite sure how customers would respond to having to do more work at the checkout counter. After a while, though, it became evident that any technical glitches that came up were more than offset by shorter lines, decreased waiting times and improved customer satisfaction. The Home Depot went on to deploy 777 stores starting in 2003, and today has over 1,200 locations outfitted with self checkout lanes.

What's more, the firm's upper management has also looked at the devices as a way to improve performance on the sales floor, since employees previously working at the registers can now be reassigned to functions like assisting customers on the salesfloor. Baseline Magazine did the math last year:
Four self-checkout systems take the space of three traditional checkout aisles and eliminate the need for two cashiers (one stays to help customers with the automated checkout terminals). If one of those cashiers goes to the floor and sells just one customer on a home installation in every Home Depot store, that equates to $1 billion in additional revenue a year, according to calculations that executive vice president Tom Taylor gave at a Raymond James investment conference on March 7 [2005].
The Home Depot may be the poster child for self-checkout among large retailers, but for many, the rise of these self-service devices in supermarkets may be more relevant. After all, as much as you might like wandering the aisles of your favorite home improvement center, you still have to eat, right? So it's not surprising that an increasing number of supermarkets are deploying self-checkout lanes to further speed up the checkout process for the usual express-lane crowd. Only in some cases, the process seems to be working a little too well, at least according to the latest research on the subject from IHL Consulting (and nicely summarized in this Storefront Backtalk article).It seems that in the process of rushing folks through the checkout lines, some stores have noticed that customers aren't making as many impulse purchases at the end of their shopping trips. It makes perfect sense: given a ten minute wait behind somebody checking out with a full cart load of items, most shoppers' attention will naturally drift to the surrounding area, where in this case (conveniently enough), everything is for sale. Take away or dramatically reduce that wait, and there's less time to get engrossed in that latest copy of The Enquirer or read the nutrition information on the back of a Snickers (seriously - read it once and the candy bar experience will be ruined for life). There's also the question of what impact self-checkout might have on checkout TV channels, but those are probably too new to even draw a baseline on right now.

The thing that strikes me as odd is that the people who are likely to use a self-checkout system are ostensibly the same people who would likely use an express checkout aisle. With more than 10-15 items, self checkout quickly gets to be tedious, and with more items comes more potential for errors. So either the self checkout systems are decreasing wait times enough to impact impulse decisions, or else shoppers' behavioral patterns are actually different in the self checkout lines. I'm more inclined to think it's the latter, and Greg Buzek, president of the IHL (the firm that first noticed the correlation), seems to agree:
The core of the problem is simply the way consumers interact with self-checkout systems. Typically, they have to pay much more attention to choosing a lane and to watching their products and scanning them, thereby leaving almost no time for browsing magazines or otherwise being tempted.

"Things like chewing gum and breath mints, chocolate candy, chips and salty snacks, soda and water. We're seeing a tremendous change there, drops of 40 percent overall from people who say they buy it in a standard lane but do not buy it in a self-checkout lane," Buzek said. "Retailers have to factor those impulse items in when they do an ROI (return on investment) calculation for self-checkout. They are typically using labor savings or moving labor around in the store as a primary reason for justifying self-checkout but also need to factor in the merchandising sales. There's a fundamental change happening in the frontend of the checkout line when self-checkout is implemented."
Although we should keep in mind that this study is based on shoppers' anecdotal reports of their behavior, rather than a true comparison of POS data from self-checkout versus traditional lanes, it seems inevitable that self-checkout will at least raise new challenges in merchandising impulse items. Supermarkets and other retailers will likely find ways to counter the (admittedly small) negative effect on sales, but the "law" of unintended consequences may rear its ugly head as we deploy other new and innovative solutions into the retail landscape. We've all seen stores that have gotten increasingly loaded up with static POP display pieces. Well, between large-format digital signs, shelf-mounted displays and of course numerous self-service kiosks, the same thing could happen with digital merchandising equipment too. That's not to say that it has to be that way, or that the impact of unexpected consequences will be negative, of course. For example, among grocers who planned to deploy the self-service lanes, the projected decline in impulse sales still didn't offset the positive time-saving, labor saving and employee satisfaction effects of the initiative.

What other kinds of tradeoffs might we see in future digital merchandising projects? There could be any number of them. The Publix grocery store where I shop recently installed a DVD rental kiosk, right next to their DVD sales rack (yes, my grocery store apparently sells DVDs too). Upside potential: Publix cashes in on the new craze of no-late-fees rentals, at about $1 apiece. Downside potential: they could cannibalize their own DVD sales by allowing patrons to rent movies that they might otherwise have purchased on an impulse. I've also seen an increasing number of trials of shelf-edge miniature digital signage, which can certainly add some eye catching "pop" to an otherwise unremarkable aisle of coffee, household cleaners or cereal. But what if a low-margin brand advertising on the system cannibalizes a huge percentage of sales from an incumbent, higher-margin one, or from the store's house brand? Will the grocery chain be willing to accept a possibly higher unit volume at lower margins?

Each of these unintended effects will likely be examined on a case-by-case basis, and the results may vary from one retailer to the next. Further, it will never be possible to anticipate every possible effect of a new in-store promotion or marketing experiment. That, after all, is why they're called experiments. What's important to remember, though, is that consumers' tastes and habits are continually on the move, and stagnation is the arch-enemy of any retailer (please see Kmart for details). It seems to me like the real takeaway here (and I have to admit, I hadn't really done much research on them before starting this blog post), is that even with solid goals in mind, it may be necessary to try out a few different business models (or tweak the ones you have), before you've maximized your network's ROI. Don't be reckless, of course, and plan, plan, plan! But likewise, don't get sidetracked by a few short-term failures, and don't be afraid to try things that haven't been done before. Who knows, we might even start to see retailers create new impulse purchase opportunities by displaying promotions and offers on the self checkout screens themselves. It might not be long before you'll scan your ten items and then be asked, "Would you like a 1 month trial subscription to the New York Times Online and 10 free iTunes with your purchase?"

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