Alarm sounded over lost impulse sales at checkout
Through a special arrangement, presented here for discussion is a summary of a current article from the monthly e-zine, CPGmatters.
The front end of supermarkets has traditionally been a showcase for immediate consumption snacks and cold beverages that tempt shoppers while a cashier scans their groceries. But fewer products — if any — are merchandised in self-checkout lanes, which now account for about 40 percent of transactions in grocery stores. And shoppers are too busy scanning to pay attention to products on display.
"It’s a huge loss," said Frank Jimenez, senior director of insights driven performance at The Hershey Company in a recent presentation at the Food Marketing Institute’s annual conference in Chicago. "We’ve done a number of studies. It’s billions of dollars since self-checkout started in 1992."
While self-checkout reduces labor costs and benefits time-pressed shoppers with faster checkout, too many retailers have not considered the loss of impulse sales. As a result, shelf-checkout lanes have turned into "an operational solution and a merchandising challenge," he said. Front-end products account for about one percent of total store sales and four percent of gross profits.
Hershey is conducting tests with retailers to merchandise products in self-checkout lines. But Mr. Jimenez noted in his presentation that supermarket retailers like Kroger are testing high-speed scanners that are about three times faster than traditional scanners. Also underway around the country are tests of shoppers scanning products with their mobile phones and other devices while they shop, thus reducing time at the front end. In-store pickup of online orders also should present challenges to impulse-purchase opportunities.
"A lot of times new technology comes along and somebody makes a decision to put it in," he said. "It could be mobile, or a lot of different things. But they don’t think through the whole opportunity and determine the impact. So the merchandising side has to come back and chase this thing."
Discussion Questions
Does the price of fast checkout have to be impulse buys? Do you see opportunities for retailers to recapture impulse purchases?
This is a “surprising downside”? Not if you are a merchant studying consumer behavior.
If you are looking at one aspect of the experience—technology for quick checkout to save money—yet it costs you 4 percent of profits, I think you are missing the big picture.
Impulse buys happen when people wait. They have already said “yes” to purchasing something, so the final “yes” is easy when they are bored.
That’s why displays at the butcher’s counter are so effective; and the deli.
When customers have to, in effect, go to work and scan their products, they are already trying to group items for bags and decide how they’ll pay; doing those things are activating the brain to be anything but bored.
Technology can have adverse effects, as noted. Two shopping truths are universal: the longer the shopper is in the store the more she will buy; the quicker she is checked out the quicker she will return. So some of the margin loss could be recovered by greater shopper preference.
One simple technological, or even low-tech, option is to provide shopping lists that include/highlight traditional unplanned purchases. This form of suggestion selling works in food service and could be an effective response to self checkout.
I thought this was old news. In fact, I thought IHL reported on this years and years ago! So here’s the thing. One, I still see too many retailers who haven’t designed their self checkout (SCO) lanes to have lines. This is a pain both as a shopper trying to figure out if you’re in line for SCO, and as a shopper trying to get around the aisles near SCO. If retailers designed a line for SCO, they’d have plenty of room (and shoppers would have plenty of time) to be influenced by impulse items.
Two, even despite that kind of design improvement, impulse in the traditional sense is going to take a hit. That’s not going to change. Stinks if you’re Hershey, but this is not necessarily a bad thing for retailers. It just means that you have to market differently, and that a lot more conversation needs to occur online, rather than depending on the sight of the brand on a label on a shelf.
The thing is, as more shopping behavior shifts to self service, including that ultimate of self service, click and collect, it is a fallacy to believe that sales will drop off as a result. Yes, the average basket size shrinks, but the frequency of purchase increases, as does the willingness to try new items. Convenience (as consumers define the term) does win loyalty. Brands dependent on impulse need to be thinking not about how to preserve their front-of-store space, but how to engage with consumers beyond the context of the shelf.
“Retail researchers confirm extremely fast drivers don’t have time to enjoy the scenery.”
Some things just make you shake your head. Over 20 years ago retail came up with the innovative idea of getting people OUT of the store as fast as possible by inviting them to do their own scanning and bagging. And now they complain that people aren’t lingering to read the cover of Star Magazine and wonder if they need breath mints and a 5-Hour Energy shot. And, shockingly, it’s costing them billions! Now Kroger wants customers out 3 times as fast as before.
Well guess what; when you force customers into a binary choice they’re going to make one. So stop your whining!
Frank Jimenez is sort of on to it by suggesting people look at the entire system instead of its pieces, i.e., treat the shopping experience as ONE flowing thing. Perhaps we could think about making the “checkout” (a negative label in itself) phase a truly positive and sales-generating experience. Can someone invent a “Check-IN?” Why aren’t there sample tables near checkouts? Why are checkouts all lined up in one spot? Or why aren’t the cashiers and baggers taught to engage more effectively? Some of the folks at our local Safeway are superb at it. Bananas were 39 cents a pound the other day and of course I got some. The cash lady noted what an exceptional buy they were and said “Are you sure you don’t want to get more while they’re this price?” Well of course I did, and the teen bagger ran over to get some for me.
The first thing to understand is that self-checkout is not about cost savings. With 40 percent (YIKES) of the shoppers using it, it is about preference. So, please, don’t go backwards. Self-checkout is obviously here to stay, and will continue to grow.
And there may be more to that preference than just speed. As I have written before; in my local Home Depot, I have seen shoppers waiting to use self-checkout, while three manned aisles had no one in line. As I watch my 30/40-something kids shop in a supermarket, they always go to self-checkout. The manned check seems not to be an option.
Frankly, I don’t understand the issue, other than the retailer not making those impulse items available at self-checkout. It strikes me that self-checkout actually would encourage impulse buying, if the products were available. I could buy the candy bar and no one would notice. Or, that tabloid. Don’t we all indulge a little more when no one is looking?
IHL Services definitely deserves props for pointing this out at least five years ago, maybe more. Of course, given the stuff that gets sold at those impulse stations, it’s hard to be sad about it, but it’s real high margin revenue.
I wish they’d listened to Greg sooner!
The findings of the Hershey research are consistent with previous studies we have done at the checkout. Retailers can lose a significant proportion of their impulse sales when they implement new technology.
Impulse sales won’t go away, they simply change form. Did you plan to “super-size” those french fries or was it an impulse? Did you want cheese with that? Even online purchases have substantial opportunity for impulse additions to the basket.
As the checkout technology evolves, it is necessary for retailers and manufacturers to develop new approaches to generating impulse sales. For example, the merchandise may need to be displayed earlier in the checkout process or it may need a different assortment.
Clearly, the key to maintaining (or even growing) impulse sales at the checkout is the recognition that new methods are required. In essence, checkout merchandising has moved from an age of simple availability to an age of shopper marketing.
Yes, we have been seeing that the front end sales are down. I would like to quote Kit Yarrow, PhD., psychologist and regular columnist for Psychology Today.
She writes: “Shoppers are making fewer impulse purchases at the cash register. Single sale copies of magazines, largely purchased while waiting in line at the grocery store, are down 8.2% from last year. Sales of gum have taken a hit too, they declined 5.5% last year. Evidently instead of amusing ourselves examining new gum flavors or keeping tabs on Jennifer Aniston, we’re checking our emails or playing Angry Birds.”
That’s an interesting side-effect of mobile devices. If we want a shopper’s attention—it’s on the screen!
This absolutely must be part of testing the economics of self-checkout systems. Maybe this loss is worth it. Maybe you can mitigate through new types of register merchandising/upsell. But the only way to know is a rigorous, statistically valid, measurable test that not only looks at “throughput” as a measure, but also looks at sales/GP by product type and placement, labor rates, customer satisfaction, bag costs, and every other metrics of interest. In such a test, the impact on impulse item merchandise can clearly be measured, as can different mitigation strategies (tested in different stores and/or time windows).
Yes, I too read Greg’s piece years ago and am wondering, why are others just picking up on it now? That said, with our “always in a hurry consumer,” something had to be done about wait times or risk losing the customer’s loyalty. Seems to me like impulse buys stood to lose any way you put it.
However, the customer’s loyalty should be worth it. I don’t know the figures on return frequency and overall purchases from loyal customers, but agree with others here that retailers need to be looking at other ways to engage the customer.
That’s my 2 cents!
Seems like there may be a convergence of circumstances that affect impulse buys. Mobile device distractions may definitely be one of them. Our first lady’s ongoing campaign to eat healthily and skip the candy bars is having an impact. Younger people are moving towards healthier eating. The type of people who choose self-checkout are probably less likely to be impulse buyers or choose self-checkout so they won’t be tempted.
I would be interested in knowing if purchases of single candy bars has shifted to bags of minis or fun size bags. Has the overall sales of candy dipped or just the impulse buys of singles?
There’s more to this story than the affects of self-checkout on impulse buys.
Yes, I agree this seems like one of those “we discovered water is wet” studies. My thought: if they think things are bad now, what will they be like when, or if, more and more groceries move online and people aren’t even in the store? Or is the hope that pop-ups and banner ads will be their own type of impulse sale?
The point of this story is NOT that the issue is NEW. The point is that Hershey is stepping up, sounding an industry-wide alarm, and working on solutions with retailers. IHL may have written about it a half century ago, but (1) IHL is not Hershey, and (2) IHL has not been testing solutions with retailers (of course, that ‘s not their job).
Look, out-of-stocks is not a new issue. It has been around for as long as stores have been around. Does that mean that companies cannot study the issue TODAY and look for solutions? When major companies do so, the trade press reports on it. Especially when a major presentation is given on this topic at the FMI show. Or is FMI in the business of staging shows with thread-bare presentations masking as important issues?
The role of the checkout is changing, and retailers have to adapt, or perish. Clinging to old standards, in an era where new standards are being created and embraced, will only create dissonance, lost profits, and companies that embrace “buggy whip” types of thinking….
Is it worth it to frustrate the customer to get the extra $1.20 sale of a candy bar by making them wait a few minutes, when you risk losing their entire basket to a store that has faster checkout and would rather see the $50 basket and get them out the door fast than waste their time and sell them a $1.20 impulse candy at checkout?
I never thought waiting a minute or two at checkout was important, but I am starting to notice now when I go into a retailer or fast food place that makes me wait in line more than a minute or two because so many have gotten control of their lines as such that waits are minimal to under one minute. Or they offer alternative self checkouts that you can walk right up to typically with no wait at all.
I think another reason impulse sales at checkout are falling is because consumers are not buying as many of those products anymore. Consumers are buying more flavored water or tea, and less carbonated soda or plain bottled water typically on display at checkout. People also seem to be buying less candy since the quality of the candy bars sold at impulse at checkout is lower than it used to be, and the cost seems high for what it is.
People seem to be buying fewer batteries because they have more devices that charge. People seem to be buying fewer cigarette lighters because fewer people smoke. People seem to be buying fewer magazines favoring digital versions of these items.
I think it is less about fast checkout killing impulse sales and more that consumers have moved away from the impulse items typically merchandised at checkout and retail and CPGs have not yet figured out how to replace those items with things that are more relevant to today’s consumer.
It’s not fast checkout that is hurting impulse sales but self-checkout. You can have a sense of a fast checkout as a consumer even if your a second in line, and fill that time browsing what is on display, whether it’s candy or the latest gel pen. On the self-checkout side there isn’t a line, and in most stores no items to browse.
Yes, impulse buys are an easy way to bump baskets up a few extra dollars. However, in the specific case of faster checkouts, let’s consider the advantages in attracting more loyalty and prospective customers to a store that ensures a faster experience, which would quite likely make up in volume what is lost in margin on impulse sales.
The benefits of increased efficiency, quality service, targeted shopper promotions and ultimately a better customer experience outweigh the impact of impulse purchases. It is more viable for a store to focus on how to keep customers coming back on a consistent basis than focus on the one-off purchases at the check-out counter.
It’s key to know your customer. Offering targeted promotions is a benefit to the shopper and offers upsell opportunity to the store. For example, if a customer is purchase a bottle of wine, they will likely appreciate a store promotion offering a coupon on a complementary cheese.
Convenience and ease of getting in and out of the door is key. Stores that simplify the customer and associate interaction, which can be employed through intuitive technology, know that operational efficiency drives customer satisfaction and sales. This long-term solution to create a better and quicker customer experience will dramatically compensate for the short-term sales of impulse purchases.