News

The battle for self-checkout supremacy

April 25, 2005

Q. T. Johnson from New York City, N.Y. writes: "Recently I've been following the self-checkout technology with great interest. Can you tell me who the leading provider of self-checkout technology is?

A. Well, that is a great question with no definitive answer. We've poked around a bit, though, and here's what we've got:

Last November, IBM, the retail POS behemoth, announced that it had acquired Productivity Solutions, Inc. (PSI), a leader in the fast-growing market of automated self-checkout kiosk solutions that are commonplace in retail and grocery stores. Then, earlier last month, NCR entered into an agreement to acquire the self-checkout business from one time self-checkout leader Optimal Robotics Corp. When you look at the big picture of self-checkout, this is a two-horse race and NCR is ahead by six lengths.

Previously, Optimal Robotics, NCR, and PSI dominated the production of self-checkout technology in market share respectively. In 2002 Optimal and NCR were in competition at 40 percent market share each, with PSI taking up the slack. The year 2003 however was a tough year for Optimal and allowed NCR is move up to approximately 60 percent market share. With the NCR-Optimal agreement last month, NCR now has an estimated 80 percent of market share, which leaves a very interesting situation.

When IBM acquired PSI in late 2003 an interesting paradigm was added to the self-checkout space. First, prior to that IBM had a barrier to entry into the market because of intellectual property issues such as patents and was only co-marketing the PSI self-checkout. With the acquisition of PSI that all changed overnight. Second, to PSI and now IBM's credit, they have been able to nearly maintain a, albeit small, market share. Third, IBM is well poised to grow on market share because they can leverage their existing POS customer base, companies like Kroger and Wal-Mart, to expand on their market share in the long-term.

However, an interesting conundrum pops up now. IBM is the leader in POS terminals in thousands of retail and grocery locations, yet NCR has most of the self-checkout terminals out there (including Kroger and Wal-Mart). How this battle will be played out will only be determined by the success of either NCR or IBM to prove operational efficiencies, prove cost reductions for the retailers and grocers, and expand upon the technology and capability of the self-checkout terminal. At present NCR has a noticeable lead. Whether or not that can be sustained against the push of IBM is YTBD.

It is worth noting here that there are a couple of other vendors in this space to watch for. PSC Inc., who has reemerged from a Chapter 11 filing in 2002, had confirmed itself through press releases as a provider of self-checkout. We contacted Ken Phillips at PSC but he refrained from comment. Later we discovered that ECR Software Corporation (ECRS) has obtained PSC's self-checkout business. ECRS has stayed under the radar, but their vice-president of self-checkout sales, Dave Kiefer, comes from a background that includes four years of exclusive self-checkout experience at Optimal Robotics and NCR. With the recently PSC self-checkout acquisition, ECRS may be one to watch. Finally are those companies providing alternative self-checkout, such as Symbol and Wincor-Nixdorf, with handheld and shopping cart mounted self-checkout technologies.

IHL Consulting has estimated that the business of self-checkout will surpass $1 billion by 2005. We spoke with Greg Buzek at IHL and he confirmed that he plans to issue a new report on the self-checkout by late April. For now though, he shared with us the most recent numbers on the self-checkout vendors by installed base (by lanes): Optimal Robotics U-Scan (self-checkout acquired by NCR) 44.5 percent, NCR Fastlane 36.7 percent, PSI (self-checkout acquired by IBM) 18.0 percent, Symbol 0.4 percent, PSC (acquired by ECRS) 0.2 percent, and other 0.15 percent.

Research
www.ibm.com
www.ncr.com
www.optimal-robtics.com
www.pscnet.com
www.ecrsoft.com
www.ihlservices.com

Originally published in the Mar/Apr 2004 issue ofKiosk magazine.