Article

How does the future line up for self-service checkouts?

Summit Research Associates president Francie Mendelsohn, NCR and Optimal Robotics address the future of self-checkout kiosks.

December 8, 2002

For some, glancing over at the long lines at traditional checkout lanes while quickly scanning items at a grocery's self-service checkout kiosk is one of life's little victories.

Since the introduction of self-checkout lanes in the 1990s, retailers have been adding self-service lanes as a way to improve customer service. It's not only groceries that are installing the devices, but a variety of retailers including big-box stores and even convenience stores.

Home Depot, the Atlanta-based hardware giant, recently announced that it is installing 800 NCR FastLanes stations in 800 of its 1,487 stores by 2008.

K-Mart, UK-based Marks & Spencers and Netherlands-based Hema are other non-grocery retailers using NCR FastLane.

"It's human nature, you find the items you want and then you want to go, not stand in line," said Home Depot spokesman Don Harrison. "Customers have been asking from time to time, `When are you guys going to get this?' Sixty to 70 percent of our customers are already do-it-yourselfers."

Each Home Depot station includes four self-service lanes and an attendant's booth. Stations cost about $100,000, said Mike Webster, vice president general manager for NCR FastLane. Training on the system is included in the price.

NCR FastLane self-checkout

NCR has more than 40 self-checkout customers worldwide, including retailers in the United Kingdom, Italy, the Netherlands, Canada, Turkey, Puerto Rico and the United States, Webster said.

Optimal Robotics of Montreal, Canada helped pioneer self-checkout technology with its U-Scan system. More than 40 retailers have installed U-Scans, which made their debut in Kroger grocery stores in Louisville, Ky., in 1995.

Today, the company has more than 900 U-scan systems in Kroger stores. The systems are used in Meijer, Wal-Mart, Ahold and Harris Teeter stores. Robin Yaffe, Optimal's director of marketing, said 85 to 90 percent of its clients are grocery stores. Drug chains, convenience stores and mass merchandisers comprise the other 10 to 15 percent.

Although self-service checkouts are becoming a familiar sight in retail businesses, no one seems sure how quickly the concept will grow.

"Between last year and this year there really was some impressive growth," said Francie Mendelsohn, president of Summit Research Associates, a kiosk testing and consulting company. "I'd be comfortable saying it grew about 25 percent. It is one of the brightest spots in the industry and not just in grocery stores."

"Five years ago we were still pushing the concept to retailers and now self-checkout has become a necessity to retailers," said Yaffe. "The way technology advances these days it's hard to predict where we'll be in five years, let alone 10."

According to Mendelsohn, there is one major factor impeding the growth of self-checkout kiosk sales.

"Cost is holding it back right now," said Mendelsohn. "They (store owners) have got to be able to justify putting it in the store."

Mendelsohn said retailers are more likely to add the kiosks when building a new store rather than paying to have their current store retrofitted, which is more expensive.

Webster agreed that cost is a factor for some, but said most retailers see a return on their investment within 12 to 18 months.

"Most of it (ROI) comes through labor savings," Webster said.

Cost has been a negative factor for Optimal as well, Yaffe said.

"As with many companies the economy affected our sales over the past year or so," Yaffe said. "At the same time our sales efforts strengthened and many new retail markets are showing interest in self-checkout."

Beyond the Grocery

"We didn't do this arbitrarily because grocery stores have done it," said Harrison. "At Home Depot our customer service has always been in the aisles - answering questions and helping you find things. This is a way to extend customer service to the front of the store."

Harrison said the kiosks have advantages other than whisking customers through lines. For example, if a customer tries to scan an item and finds the bar code tag is missing, the station attendant can select a picture of the item using the system's onscreen inventory and add the correct price to the bill. Before, Harrison said, a cashier would call for a price check over the intercom system and it took an average of four minutes for the correct price to be found.

Home Depot has many items that are too big, heavy or awkward to scan.

"You're not about to drag a 90-pound bag of concrete across a scanner," said Harrison. "An associate will be watching all of the terminals and has a cordless scan gun for big items. And for those items we sell outside, the customer can just punch a picture of it on the screen and it will ring up."

The kiosks can be switched from English to Spanish commands with a press of an onscreen button, Harrison said.

NCR and Optimal Robotics keep tabs on retailers' rationale for kiosk purchases.

"Depending on the retailer, they may have several different reasons for incorporating self-checkout in their front end," said Yaffe. "The primary reason we tend to hear is the difficulty finding labor to staff front-end (cash registers)."

Webster agreed that employee issues are frequently cited to justify buying decisions.

"By using the self-checkouts, retailers can redeploy their employees to help customers, stock items or attend to other tasks," he said.

Customer Resistance

Mendelsohn's company, based in Rockville, Md., markets its kiosk research and consulting services to a wide range of companies, including retailers and manufacturers.

"I test these things myself," said Mendelsohn, known for her no-nonsense assessments of kiosk projects. "Not only do we test them, but we watch people using them."

Mendelsohn said she's watchedcustomers walk away from small, deli-ordering kiosks because the kiosk's voice commands were too loud. Worse, she said, were machines that announced what items they were buying.

The addition of loyalty programs, like savings cards customers scan before checking out, in connection with the kiosks make some shoppers wary.

"One of the stores I frequent said the number of customers who refuse to use it (a savings card) is high, as high as one-third," Mendelsohn said. "They feel it's an invasion of privacy. Some people just feel big brother knows too much already."

Still, she said, the more people use the services the more comfortable they'll be with them.

The crystal ball

Mendelsohn believes the future of self-checkout lanes depends on consumers. If shoppers demand self-service, they'll get it, but what exactly will they want?

Kiosk designs have evolved to include small units with one or two bag capacity, mid-size units with enough scales to handle three or four bags, carousel units, which allow customers to fill several bags stored on a rotating holder, and designs featuring conveyor belts to move items either toward or away from the scanner.

"I don't think there is that much difference between the types of systems out there," said Mendelsohn.

Other technologies can be added, includingbiometric devices, which scan a customer's iris, fingerprint or face for identification purposes.

"We are continuing to monitor emerging technologies like RFID (Radio Frequency Identification) and Biometrics," said Webster. "We want to provide a product that's easier to use, more modular with better flexibility for placement."

RFID was introduced in the 1980s and uses memory chips in product cartons that emit streams of information to readers in such places as point-of-sale terminals and kiosks to track the location of the product. Tracking items ensures accurate billing, reduces theft and tells the store when shelf inventory is low. The chips also can be placed in credit cards for identification purposes.

Yaffe said Optimal Robotics is experimenting with biometrics, and has incorporated it into some of its units.

The self-checkout phenomenon is not going away.

"It's a way to streamline the whole process, but you can't get rid of the humans," Mendelsohn said.