Consumers, Retailers Gravitate to Self-Service
Retailers have done the math and it adds up.
Consumers doing more themselvesÂ
– Fewer workersÂ
= Bigger profits
Today, retailers and suppliers are operating self-service
checkouts as well as kiosks and vending units to get an ever expanding list
of products into the hands of consumers in a wide variety of locations.
“Consumers are more accepting of these automated technologies because
they just want the stuff at a good price and really do not care if they get
it from a piece of technology or a person,” Richard Feinberg, a retail
analyst, told The Indianapolis Star.
Here in the U.S., beyond soft drinks
and snacks, vending units offer DVDs, consumer electronics, wine, over-the
counter and prescription medicines, Bentley’s and more.
Around the globe, consumers
are buying products that might make Americans scratch their heads. Included
on a list compiled by NBC‘s Today Show are
vending units selling live crabs (China), bars of gold (Germany), pizza (Italy)
and fishing bait (Poland). The world capital of vending units, Japan, has machines
that dispense batteries, eggs, sneakers and toilet paper.
Now, a vending machine
company in Corona, CA has designed a gas station that will allow consumers
to fill their tanks and also buy bottled drinks, coffee and snacks without
the aid of an attendant. While the new stations will not have bathrooms, the
company, AVT, believes owners and customers will make the adjustment.
“It’s just like anything else that develops over time with retail,” Brentt
Arcement, vice president of investor relations for AVT, told the Los Angeles
Times. “It’s sort of that evolutionary process of what’s next.”
Discussion Questions
Discussion Questions: What product categories are most likely to migrate to vending units? Do you think large numbers of consumers prefer to handle transactions themselves in stores rather than dealing with a sales associate or cashier?
Consumers are gravitating to self service because it’s often easier and less of a hassle than having to wait in longer lines and dealing with human service. It’s actually viewed as a convenience.
The reason many consumers prefer to do it themselves is that customer service isn’t great. So, faced with the alternative of a known mediocre alternative (DIY) and an alternative that varies widely in what might happen (full service), many opt for DIY.
I think most people would choose full service if they had a fast, friendly, and efficient experience, but they aren’t sure what they are going to get. Meanwhile, where they are sure of a positive full service experience, e.g. Publix, Trader Joe’s, Nordstrom, Whole Foods, they are happier with that.
Bingo, “…they just want the stuff at a good price…” opines Mr. Feinburg. And there’s the rub. Make no mistake that all service is paid for either in payroll and related costs or margin. So what’s the big deal, they both are costs, right? And the nightmare of dealing with selection, training, and managing of people is worth the loss of margin. Well, that depends on what you’re selling and the long term effect of commoditization of your product that self-service brings. If low price and convenience are the drivers of your product sales, then self service makes sense. However, if personal service and selling is necessary to differentiate your product and bring the most value to your customer then I think you should think twice about the kiosk approach. Frankly, if I bought a hairy crab, I wouldn’t buy one in a vending machine.
There’s no question that is often easier for customers to do it themselves. As others have indicated, unfortunately it often results in a better experience than what they receive via the retailer’s staff. Some of this is “real” and some is perceived–who is going to say the clerk was ineffective when they are the clerk?
To be effectively sold via a vending process, the items have to be something relatively small. This is a requirement for holding capacity, etc., and not price. This is certainly less true for self checkout.
Al is right…and I have said for a long time that it is a bad idea to confuse “pain avoidance” with “embracing.”
The airline industry has pulled it off because people have no real alternative. It’s an oligarchy, bordering on cartel. Retail’s not like that. Consumers have a lot of options. Our data tells us that overperforming retailers (those who end up selling more stuff) actually are adding payroll back INTO the store. Continue reducing payroll at your own peril. Frankly, companies like Amazon will just cheer you on.
The key words for self-service checkout and kiosks is control and value-added. Such self-service options give control to the customer and make a great deal of sense if the store associate provides no added value. While customers believe self-service checkouts are faster the data does not support same. However, when in such an environment, save the technological breakdowns, the customer is in control and the store associate staffed checkout has little perceived value-added.
Self-service kiosks will benefit from the same two attributes. Today’s consumers come to the store armed with information on the best product, price, options, etc. Therefore, they can exercise control in these purchases and perceive the store associate as having less knowledge then the customers have, so little value is added by interacting with the store associate.
Going forward self-service options should be viewed in light of the control and value-added dimensions. If control and value-added opportunities do not present themselves to a particular product category, then self-service should be considered as a reasonable sales alternative.
Self-service has been growing since the dawn of retail. One additional aspect of the accelerated rise in self-service may actually have to do with the rise in social media. People are now physically interacting less, via face-to-face, via telephone, etc. That is, texting has replaced live, verbal conversation to a greater extent. Furthermore, there are more single people walking the streets and driving their cars than decades in the past. Far more family gatherings for meals, etc., occurred in the past. Therefore, we are alone in our cars more and we’d rather just grab our purchases on our own without the delay of having to interact with a real human being. Scary.
I am reminded of a recent trip to the bank. There were three traditional tellers behind the counter talking among themselves because the four people in the bank are doing their transactions using the ATM machine.
I choose self-service mainly because of my fellow shoppers, not because of the person behind the counter. I’ve repeatedly gotten stuck by relics that refuse to pay their bills via check or money order through snail mail and forget about them paying online–that’ll never happen. If it’s not someone trying to pay a bill in person, it’s someone with a problem with their bill and they can’t be bothered to either call customer service or go to a manned customer service counter. If it’s not one of the above–it’s some idiot that has a million stupid questions; some yuppie with a maxed out credit card; someone digging around forever in a gigantic, ridiculously overpriced handbag for a payment that should have already been in their hand 20 minutes prior….
I’ll do it myself thank you. My patience for the rest of you is almost non-existent at this point.
A gas station without a bathroom? Well I guess that isn’t too much of a loss. Thankfully there are plenty of Wendy’s and McDonald’s nearby. I’ll get my soft drink or coffee there and use their facilities. As a consumer I disdain self checkouts as most are now designed. If a retailer cannot hire someone to take my money, I guess I’ll go elsewhere. But the way it sounds, there may be no elsewhere to go.
Consumers decide what products can and will be purchased from vending machines. This discussion is related to the self-scan or self-checkout approach some retailers are pushing. Further, in the future the cell phone will become the payment vehicle not plastic cards or cash. Consumers around the world are in two groups. Consumers that are technology challenged and those that work well with technology. Older consumers have more members in the technology challenged group. Additionally, some general and higher income consumers tend to want customer service. So products targeted for the technology challenged and those wanted real customer service may not do well in vending. Otherwise the sky is the limit.
There are a few factors that make it worth the while of service providers to add their categories to kiosks. To add to Steve’s comment about size, these characteristics include:
*High margin (this began with cigarettes and soft drinks)
*Impulse (not just immediate purchase — the Internet can do that — immediate gratification, too)
*Additive to store sales (such as Zoom Systems’ electronics accessories in department stores, not snack machines in drug stores)
*Shelf stable (crabs notwithstanding)
These categories will have natural lifespans. DVD machines have proven to be channel killers, at least until they themselves are killed by streaming. Newspaper boxes, an early concept, are similarly challenged by mobile and Internet news. To combat this, versatility is important, such as DVD machines that burn disks on demand, coin-counters that are free when shoppers accept gift cards, and product kiosks that can distribute coupons.
Expect to see more experimentation, such as discount luxury brands (www.chirpchic.com), and co-branding to grow retail footprint and draw traffic (Blockbuster Express by NCR and Best Buy Express by Zoom).
Vending machines work because they don’t have an attitude and they aren’t disingenuous. Consumers are tired of soiled clothing, a lack of gratitude, poor grammar, incompetent service and/or poor selling skills; they expect to be served quickly and efficiently. From a management perspective, vending machines work long hours, don’t bring personal drama to work and they satisfy customers quickly.
You needn’t travel to Europe for an interesting vending experience. A hotel in Miami Beach has a vending machine that sells diamonds, apparel, jewelry, handbags, etc. The point is that many retailers can leverage, differentiate and have fun with vending.
Retailers should consider vending as another opportunity to sell product more efficiently. Along with the internet, future revenue will be driven through a multitude of mechanisms.
Technology innovation has continued to push the needle toward increased self service options in many product categories and retail segments. This evolution is a well worn model and will continue. High touch department stores consolidated and shrunk as a segment and in offerings (and in labor models), while the exact opposite happened in the mass channel. This doesn’t mean that higher touch (associates in the store) models are going to disappear, just that they will continue to represent less of the total retail pie. No doubt this change will be bemoaned by many baby boomers and older (“remember when….”).
Studies continue to show that even customers who don’t use self-checkout expect them to be there. It is a myth that they are faster. It is a myth that they are easier. It is pure perception of these factors perpetuated by those who use them. Why? Because they are interactive with the process in which they would normally be waiting.
Smart retailers utilize these systems to actually enhance service bandwidth at all times, remove business level spikes, and improve the customer experience. The key word here is ‘Smart’. Many, if not most, utilize them as a labor reduction tool. They are that–no question. However, these types of tools as they grow become another in the list of missed opportunities.
Failure to utilize ‘self-checkout’ as an enhancement to experience is one of the biggest misses by many retailers and it continues to proliferate in that direction.
If all you’re trying to do is compete on unit price, well, squeeze those pennies. And for the major retailers of increasingly undifferentiated, commodity products, they’ve been all about pinching pennies for decades. When all is said and done, the unit sales will be impressive, but the gross margin per unit will be nothing but pennies. So be it, that’s how economics works.
But for so many other categories, and for driving add-on sales, and for marketing value denominated in something other than pennies, humans are an inconvenient, unfortunate necessity.
So I’ll continue to purchase toothpaste and mouthwash, laundry detergent and toilet paper, and a lot of other things through the self-checkout aisle. It’s easier than waiting in line for the next cashier, who’s invariably chatting away with the bagger. But for those things I truly value, those things that truly excite me, I won’t be found at a vending machine, I’ll be in the store whose salespeople share my passion.
Self-service and vending is the logical next step in the commodization of products and stores. This will create an even sweeter spot for those retailers who ensure that their people part of the experience adds value.
For 3 years I was a full time self checkout attendant. There are a few misconceptions about self checkouts.
First, it does not take jobs away at the store level. There is no way that the store was ever going to schedule three additional cashiers. No self checkouts would mean longer lines, not more jobs.
Second, some customers prefer to scan their own groceries, check the prices, and bag their groceries in a way that saves them time putting groceries away at home.
Also, using the self checkout is often a lot faster than putting the groceries on a belt then standing and watching while someone else scans and bags for you.
Recently on the Jon Stewart show, he poked fun at Dole’s individually-wrapped bananas. “Two wrappers? A plastic wrapper AND the banana peel?” Of course, in his elitist world, a vending machine application never occurred to him. Not to mention the gases that are encapsulated inside the plastic wrapper to slow ripening. But that’s bananas in a vending machine, the harbinger of a lot more stuff, Jon. (Although, I’m puzzled by “Bentley’s” from a vending machine. What’s that? Bentley’s tea, perhaps? Inquiring minds want to know.)
When the self-check stations were installed in two of my local supermarkets a couple of years ago, they were generally shunned. Now there’s often a short line to use them. Hardly any type of self service would surprise me any more.