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May 29, 2019

Summary:

Listen in as Diebold Nixdorf's Jerry Langfitt and Carl von Sydow, discuss how retailers are empowering their customers to shop and check-out the way they want, faster and without friction.

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Transcription:

Jerry Langfitt:                    Hello, I'm Jerry Langfitt, and I'm your host for this episode of COMMERCE NOW. On today's podcast we welcome Diebold Nixdorf's Carl von Sydow, Director of Self-Service for Retail in the Americas. We will discuss how retailers are empowering their customers to shop and checkout the way they want. Faster, and without friction. Welcome, Carl, it's a pleasure to speak with you today.

Carl von Sydow:                Thank you Jerry, the same to you.

Jerry Langfitt:                    Before we get moving can you tell us a little bit about your background?

Carl von Sydow:                Yeah, well, my background is I've been working with retail for [00:00:30] 20, 25 years, and the last 15 has been very much focused around self-service. I've been working with retailers on self-service, from Australia all the way through Europe, Asia, and now I ended up in the Americas. I moved to Columbus, Ohio, last year. I'm from Europe, as you might hear on my accent, but I've been all over the world, talking serf-service. I'm really burning for that concept. I love the fact that the checkout process is something that everybody [00:01:00] is doing every day, but it's still something that evolves. It's a great challenge for the retailers to do this in a good way and meet the customer's expectations.

Jerry Langfitt:                    Okay. Well, let's dive in. I'd like to start off by talking about consumer behavior and how it impacts self-scanning. There seems to be a lot of journeys being done at grocery stores now. I can do curbside pickup, I can do delivery, I can do self-scanning. Why do I see an explosion of different ways to shop?

Carl von Sydow:                Well, [00:01:30] I always like to put myself in the shoes of the customer or the shopper and look at the customer journey. I'm really happy that we are starting at that point as well. We are not talking products the first thing we do, we're talking about customer journeys, and what makes a customer journey attractive for a customer. If a retailer can meet that then the customers will come to their stores. They will go where they can have their best shopping experience. For me, self-service in general is [00:02:00] of course a very attractive customer journey, and there are many different versions of self-service in customer journeys. Depending on which retail vertical you're in you have different pros and cons for different solutions, but the topic for today, hand scanning, for me, within grocery, it's the ideal customer journey. From a customer perspective, to start with, but also from a retailer's perspective.

Jerry Langfitt:                    Let's describe it real quick, just to make sure, since I've just experienced it recently [00:02:30] at a local grocery store. Let's just quickly, for the audience, what is hand scanning?

Carl von Sydow:                The concept is that the customer enters the store and at the point where you enter the store the customer will take a device in a bracket in the entrance, and there are two options there. You could have a loyalty-based solution, where you swipe your loyalty card or identify yourself somehow, and you will get a dedicated device with your name on it, basically. It says, "Hi Carl, [00:03:00] welcome to this store." Or you have a different solution where you can pick any device, and you're anonymous when you go through this customer journey. I prefer the first one, of course. There are many benefits with a loyalty-based solution. But you get this handheld device provided by the retailer. You typically could have a bracket on your cart where you can put this device, so you don't have to carry it around when you're shopping.

Carl von Sydow:                On that device you will have a big screen, [00:03:30] like on a smartphone, and on that screen you will have what we call a virtual receipt. On that virtual receipt you will see every product that you're shopping. You have an article description and a price and you have a summary and everything. What that means is that the customer will have full control of the transaction. The customer will always see and be aware of how much of my budget have I spent right now, with the products that I have in my cart or in my basket? As you go shopping you pick one item [00:04:00] from a shelf, you scan it with this device, and you put it in your bag. When you have done shopping you go to a pay station. That pay station could be a standalone pay station or you could also go to a normal checkout and pay, but what you do then, depending on the solution, you scan a barcode at the end, or just put this device that you have been carrying around, you put that device back in the bracket on the wall, and then the system [00:04:30] automatically will recognize you and your transaction, and you will pay at the pay station and leave.

Jerry Langfitt:                    Now, that seems pretty interesting, because I know that when I'm shopping I rarely keep track in my head what I've put into my cart. This really does provide the consumer information that directly affects their purchase. Do they buy more? Do they buy less? What do we see in the industry?

Carl von Sydow:                Well, across Europe, hand scanning is very a known concept. It's difficult almost [00:05:00] to find a retailer in Europe that do not have hand scanning as an option. There have been a lot of different studies made in Europe about hand scanning. There are a couple of significant messages in these reports, one of them being that the average value of a transaction in hand scanning is between 10 and 15% higher than a normal basket in a normal, manned checkout lane. We see the same [00:05:30] trend in hospitality, where we have kiosks nowadays where you can go and order your hamburger. Also in hospitality, with self-service and kiosks, where you have also full control of your transaction, you can do all the different up-sale ... modify your burger to whatever you want. We see a higher increase in hospitality, between 15 and 20%, actually, on the average transaction value. [00:06:00] Empower the customer with the transaction to feel in control, that will increase the transaction.

Jerry Langfitt:                    It really seems like it, because I know if I'm shopping with my wife and we're putting stuff in the basket we're usually surprised at the end, going, "Oh my god it costs this much," but if we had a running tally I'd be more apt to go just over. It does give myself, just knowing the information, I think I would probably [00:06:30] buy more as well, because now I'm fully aware as I'm going through this. It can affect my journey probably to the betterment of myself, and the retailer.

Carl von Sydow:                That's one of the great benefits with hand scanning is that you're in full control of your spending. You know exactly ... if you have a budget, you can follow it. With hand scanning I can go on forever talking about this, this is one of my favorite solutions for self-service. There are two other main benefits, one very important one being that [00:07:00] you only touch ... whatever you buy, you only touch the item once. That's when you take it down from the shelf and scan it and put it in your bag. If you go through the store in a normal way, to a manned checkout, if you count the number of times anyone, someone, touch your items, it'll be anything from three to four times. You will put it in your bag and you will put it on the lead-in belt at the checkout, then the cashier will scan it, and then you will have to bag it or someone will have to bag it. At least four times, [00:07:30] compared to one time when you do hand scanning.

Carl von Sydow:                The other benefit of that is of course ... and if you are a trained user in hand scanning you know all this ... so if you do, as you pack your bag, so you can have the heavy items first, like the milk packages or whatever, and then you put the produce at the end on the top of your bags. You can plan your bagging process yourself, instead of feeling very rushed at the end at the checkout, or have someone else [00:08:00] bag your stuff for you and the eggs are broken when you get home. It's another benefit.

Carl von Sydow:                The second big one is that the whole payment phase of a shopping journey is eliminated to like a minute, because the only thing you do when you checkout in hand scanning is that you pay for your transaction. You don't scan any items, or you don't do anything really, you just go to a pay station and you pay with cash or with card. That [00:08:30] typically is less than a minute. Overall, hand scanning is by far the fastest customer journey through a store, independent of number of articles, I would say. If you buy five or 50 it's still the fastest.

Jerry Langfitt:                    Now, doesn't this give us an opportunity for either promotion or personalization if I'm using a device and a loyalty program?

Carl von Sydow:                If you have a loyalty-based hand scanning solution all options are [00:09:00] available for you. To push advertising to the individual user based on shopping behavior, or previous shopping behavior, or if you scan a particular item and then you have a sale, buy two pay for one, you can push that immediately to this device. You have immediate possibility to push for up-sale, or you can have offers based on shopping experience or previous shopping [00:09:30] behavior.

Jerry Langfitt:                    I did see that one, and my experience was it was if you buy four of a particular item or a brand of item, and it showed on the device and said, "Okay, you have one of four, if you buy three more," and when I hit those next three the discount automatically engaged and I was able to get that. That just seems like it's pretty powerful from the grocery store, and the consumer products goods, to be able to push things.

Carl von Sydow:                That's a good point, Jerry, because ... I shop with hand scanning. That's my preferred solution. I don't keep [00:10:00] track on all the offers in the store. I'm not that kind of person. When I scan something, I just take a quick look at the display and see if the price was okay. Then, as you said, if they have an offer for the product it will come up on the display. You have bought one, if you buy a second one you will have this discount. Then, yeah, well, I'll buy another one. Without even thinking about it I just bought an item extra because I have this opportunity you told me [00:10:30] on the display. If I would go shopping in a normal way I would never done that. I would never know it.

Jerry Langfitt:                    I would see the discount maybe at some point, but the instant gratification you do get going oh, I'll get that, and then suddenly I have four tubes of toothpaste.

Carl von Sydow:                And everybody has been at the point of checkout and then the cashier tells you that, well, if you buy another of these you will get a discount. Well, at that point, the shopping journey is ended. I don't want to break that and go and fetch another bottle of [00:11:00] Coke or whatever it is. Then it's too late. It has to happen during the shopping journey. Not at the end.

Jerry Langfitt:                    And the coupons they give you afterwards I rarely use, because I don't remember to bring them, but the fact that I have it instantly I am more apt to, well, if I get this then I'll get four more. Let's talk about implementation for a second. Europe is doing it way better, or at least it's implemented more. What is a retailer have to consider when they're doing it here?

Carl von Sydow:                Yeah, and longer. [00:11:30] As with everything it's a learning experience. Hand scanning, the first installations, I'm sure it's like 10 years ago or something. The first versions were not as good as they are today, of course. There were some learnings over the first few years that the retailers and the solution providers in Europe have taken into consideration and implemented now in the solutions that are available today. It has taken a few years to come [00:12:00] to the point where we are today, and today the solution is very mature. It works, it has been on the market for 10 years, thousands of stores in Europe are using hand scanning, and they know how to implement it. It's very important ... human beings in general are a little bit reluctant to change behavior, so if you add a new shopping journey as an alternative you have to hold the customer's hand through the [00:12:30] first few times. Otherwise, the customers will not try it. You'll always go with what you are comfortable with.

Jerry Langfitt:                    Right, what you know.

Carl von Sydow:                What you know. That's very-

Jerry Langfitt:                    It's certainly not about just installing tech, you really need to think this through.

Carl von Sydow:                ... You have to think this through, and explain to the customer why it's so good, also, for the customer. The customer is not ... like self-service always often hear that you're doing the [00:13:00] job of the cashier and you don't get anything back for it. That's very wrong. As I said, if you use hand scanning, there are a lot of benefits for you as a customer or a shopper by using this system. You have to understand them and someone has to hold your hand through the first journeys, so educating the customer how to work through the first times is very important.

Carl von Sydow:                One challenge with self-scanning, or self-checkouts in general, but [00:13:30] particularly for self-scanning, is how you manage produce, where you price the item based on weight. In a traditional self-checkout you have this weighing scale at the point of the checkout, and you pick your bananas from the icon on the screen and then you pay for it. With hand scanning, you have to move that part of that process to the produce area. You have to have a weighing scale somewhere in the produce area so the customer can do that at the produce area. Scan [00:14:00] the item, get the barcode, and then get the right price on the barcode.

Carl von Sydow:                I have seen several different attempts here in the US to solve this. Funnily enough, I don't know if they have ever seen how it works elsewhere, because some of the solutions here are very complicated. They are not intuitive, more contra-intuitive some, even. If you have an obstacle like that the customer next time will avoid to go [00:14:30] shopping with hand scanning. If it's too difficult to understand or too difficult to use I won't use it.

Jerry Langfitt:                    Yeah, first couple times, and someone's just going to wave off and never do it again.

Carl von Sydow:                Then you're done. So it's critical that you implement this from a point where you see ... you have to take away all the pain points during the customer journey and make it as easy as possible for the customer to do these things.

Jerry Langfitt:                    Now, doesn't staff really come into it? Making sure that when you're going to do a new technology, [00:15:00] again, you don't just drop a box into a store, you really have to, one, pilot it with the staff because they're going to be the bridge for the consumer. The consumer's going to go to them first. We should train them quite a bit, should we not?

Carl von Sydow:                The staff has to be like super-users. They have to know this in and out. They have to recognize and know where the usual pain points are for hand scanning. When they see someone struggling [00:15:30] at their weighing scale at the produce area they have to be very quick in helping that customer to find her way. Or, if you have ... when you scan your item you can easily do a mistake and scan the same item twice. Then you have to take one of them away from the virtual receipt. That has to be easy as well. Or, if you scan an item and then realize, "I wanted to buy that one instead," so it has to be easy for [00:16:00] the customer. For a cashier this is normal operations, to take items away from a receipt, but here we ask the customer to do this. That has to be really easy, so the system and the staff has to help the customer understand how do I do this? Because these are common things that will happen when you go shopping with hand scanning. You will scan the same barcode twice by mistake. You will scan an item and you want to buy another one instead. You will [00:16:30] do that. You have to know how to manage to do that yourself, without feeling awkward or having no one to ask.

Jerry Langfitt:                    Right. Internally, you probably need to do a frequently asked questions and make sure all the staff really understands, and be engaging and enthusiastic about it. It really needs to be that kind of implementation instead of just ... it's not just about integration and installation, it's about adoption.

Carl von Sydow:                It's about adoption, and then at the end, also a very critical part for the staff is ... we haven't talked about shrink, [00:17:00] but that always comes up when we talk about hand scanning. A lot of retailers are scared about shrink, and if you implement hand scanning it's like the customers would just walk out through the door with the trolleys or the carts full with products and not paying for them. First of all, that is a rumor, it's not fact. The studies that has been made, that I referred to earlier, shows exactly the same risk for shrinkage with hand scanning as with any self-checkout or self-service [00:17:30] solution. So you don't have a higher risk of shrinkage if you have traditional basket-to-bag self-checkout with a security scale, or if you have hand scanning.

Carl von Sydow:                If you implement it in the right way, train your staff, have random checks, et cetera, in the system, that monitors what's going on. There are, like in our platform that we have, we have self-learning algorithms that are continuously analyzing the behavior, in the background, of course. How the shopping [00:18:00] process pans out. How many items do you scan after one another? How many items do you take out from a receipt, or put back on the receipt? There are patterns there that could send an alarm that something is not really going as it usually does, or that the shopping journey takes too long or something like that. There are a lot of well-established mechanisms for managing the shrink also for hand scanning. The critical here is the staff. The staff [00:18:30] has to know how to operate and how to use this, and how to explain to the customer why they sometimes have to check if something looks wrong.

Jerry Langfitt:                    You almost have to consider, along with a consumer's journey, a staff journey.

Carl von Sydow:                Absolutely.

Jerry Langfitt:                    Like the staff also is going along with the consumer to help them adapt and help them from a customer-service standpoint.

Carl von Sydow:                Yeah, absolutely. In some of the stores where you have a very high usage rate ... and I'm talking like 50% of the customers using [00:19:00] hand scanning ... you can easily see that most of the people that you see that usually were sitting behind a manned lane, a cashier, they are walking around in the store, helping customers with the hand-scanning devices. Helping them when they have done a mistake or stuff like that. They have moved the staff from sitting down in a checkout to walking around helping customers. It's very interesting. If you have a high usage rate that's what you have to do, and that's increase or improve the customer journey as well, because [00:19:30] you have staff available wherever you are if you have a question or a problem.

Jerry Langfitt:                    I do like these new journeys that they're doing. I just recently tried it and I found the same thing. Suddenly I'm not in line waiting for my items to be scanned, and I was just interacting at the store level and that's it. Walk in, I grabbed a device, and then I started scanning everything. I loved the tally and I loved getting the discounts. I thought that was really, really cool. I think this is going to really take [00:20:00] over in America. How does a retailer who wants to implement this ... adoption is one of the hardest things to get people to do. What are some of the techniques or items or methodologies a retailer could implement to help with adoption?

Carl von Sydow:                Well, first of all, when you introduce something new, of course you have to promote it somehow. There are a lot of different ways to do that. One way is to do it visually. Again, some of the installations, the pilots that I've seen with hand [00:20:30] scanning here in the US, have been not so visual. In my local store it took me a while to even notice that they had a small rack with brackets for hand-scanning devices at the entrance. It was like nine or 12 hand-scanning devices. They were right in the middle of all the other advertising at the entrance that they had. What you can see if you go to a store that has done this in a proper way, [00:21:00] you have like a wall of devices. It's visual, you cannot fail to recognize that, all right, in this store they have introduced a new solution. It's right there at the entrance, you can see all these devices on this wall.

Carl von Sydow:                The other thing, bags. As I said earlier, the whole idea with hand scanning is that you ... opposite to what you do normally ... you put your item directly in the bag. You have to have bags at the start of the customer journey. [00:21:30] In a normal journey you have it at the end, right, at the checkout. You have to not only have the brackets there with all the devices, you have to have some shelves and stuff with all the different bag options that you might have in your store. Paper bags, or plastic bags, or bring your own bag of course, that's easy, but if you have bags you have to have them at the entrance. It has to be visual as well, so the customer realize, well, I don't only take the device, I will take the bag and bag my stuff as I [00:22:00] start my customer journey. That's very important.

Carl von Sydow:                I've also seen some other initial promotions where customers have been offered discount for the first 10 journeys, or for a period of time, a week or two, then you will have a discount. Or, if you try this, you will have a free of this product when you leave, or something like that. You have to make it fun, you have to make some marketing activities around it to get customers interested [00:22:30] to take the step to actually try a new solution.

Jerry Langfitt:                    One more thing on shrink. You had mentioned that there's two ways you can implement this system, with a loyalty program where I have a card and I have to sign in and then get the device, and with anonymous where I can just grab any device. Wouldn't one be better over the other from a shrink perspective?

Carl von Sydow:                Definitely, very much so. If you use this anonymous system it's exactly that. It's anonymous. The retailer have no idea if you're a good-behaving [00:23:00] customer or a bad-behaving customer. You will be exposed to the same random checks every time, independent who you are or how you behave. If you have a loyalty-based system ... when you log on at the entrance, as I mentioned before, typically it will say on the screen, "Hello, Carl, welcome to this store." I will know that the retailer knows I'm here. I will be inclined to behave, just by the fact that they know I'm here. I am an honest person, I want to do [00:23:30] everything right. If I do that, the systems that are available on the market, definitely ours, is built like ... if you are behaving you will not be exposed to random checks as often as someone that misbehaves. If you're a good customer you will go through that store more often than not without any random checks or anything.

Jerry Langfitt:                    Okay, so let's just do a quick comparison. Typical checkout, I'm in line, basket-to-bag, compared to [00:24:00] this hand scanning. What are some of the benefits that a consumer is getting by taking the hand-scanning journey over just filling a basket and going to a manned till?

Carl von Sydow:                It's a good question, Jerry, because I don't see traditional self-checkouts, the basket-to-bag with a security scale, or hand scanning, as being in competition with each other. They coexist, because they have different purposes. [00:24:30] Let me explain. First of all, a basket-to-bag, traditional self-checkout, you have a security scale. The size of that security scale can be different, of course. You have a small or a big scale. Typically, basket-to-bag is exactly that. It's supposed to be a basket of items, and then you bag it. It's a limited number of items, perhaps 10, 15 items, ideally, for a basket-to-bag. You can have a larger [00:25:00] basket, or several baskets, or a cart, and go to a basket-to-bag self-checkout, but that process is quite cumbersome, especially on the weighing scale, the security scale. It's very easy to have unintentional blocks because the security system will tell you to put the item on the weighing scale and you have already done that. The more items the higher the mountain that you build on the weighing scale, the more items you put there, it will just be more complex. Typically, the basket-to-bag system [00:25:30] is for smaller carts or baskets.

Carl von Sydow:                Hand scanning, on the other hand, is independent. You can have 150 items. You bag them as you shop, and then you don't touch the product anymore. You can have as many or as few, it doesn't matter. At the point of checkout, when you go paying, you can have two items or 200. The paying process is exactly the same, you just pay and leave. From a customer perspective hand scanning is the only self-service solution that offers [00:26:00] a self-service solution for large carts, large number of items. That's one thing. Conveniently so.

Carl von Sydow:                The other thing is that you have this built-in security in the basket-to-bag, with a security scale, because at the point ... that's open for anybody. A self-checkout, basket-to-bag, anybody can go there and go shopping. You have to have this security feature with the weighing scale to control the shrink and to control that process. If you have a loyalty-based hand-scanning [00:26:30] program you don't need that, because the security is sort of integrated in the platform already. You are a known customer, you're a loyal customer, we trust you. You can go shop here, and you can leave.

Carl von Sydow:                Those two systems can coexist, so in some stores where you have a high adoption rate of hand scanning you still find a few basket-to-bag self-checkouts, because there are customers visiting, perhaps, from abroad, or from another state. [00:27:00] They don't want to have the loyalty card. They don't have that loyalty card. But your bulk of customers, your loyal customers, they can use hand scanning.

Jerry Langfitt:                    It seems like, again, the way we started multiple journeys, you really [inaudible 00:27:13] journeys for different people and different types of journeys. I have one item I need to grab real quick, I have five to 10 items, I have 50 to 75 items. You really want to look at all the ones and find the purpose-built device or solution [00:27:30] that helps the consumer in their journey that they want. Again, empowering them to make their own decisions.

Carl von Sydow:                Starting with the customer journey, what different customers do you have in your store? Find different self-service options for your customers. It's not one-system-fits-all, you have to have the ... the customers are more or less expecting options. Another option that we haven't talked about is when you bring your own device, your own smartphone. That's also an option of course. [00:28:00] You don't need to have a store-provided device. You can use an app, the same application that you have on the hand-scanning device basically, but with your own phone.

Carl von Sydow:                There are some pros and cons between these two. If you just go and do an app, shop as you go, that's pretty easy. It's ideal for other verticals, perhaps outside grocery where you go shop specialty goods or stuff like that. That could work, you don't have [00:28:30] that many items. In a grocery store, as I said before, if you have a loyalty-based program with integrated security algorithms, self-learning algorithms and stuff like that, you don't really have that in an app, as you go. You just scan and go. There are limited functionalities in the standard shop-and-go app.

Carl von Sydow:                What you also can have is, like we have in our platform, you could have the full hand scanning application running on your [00:29:00] mobile phone as well, with all the security features. There's this option as well, but from a hardware perspective there are also pros and cons. The handheld device provided by the retailer is purpose-built for hand scanning. It's easy to hold, like a pistol grip. You have brackets for a holder on the cart, you can just put it there, you don't have to carry it around. The reader is a high-performing scanner [00:29:30] reader on the handheld device. The camera on your smartphone is not as good, it's not reading as fast. The ergonomy of holding your smartphone, scanning, it's not as easy as just holding this purpose-built device.

Carl von Sydow:                Another thing, of course, everybody knows, I do, I call my wife for recipes, or, "Should I buy this or that?" I always use my phone when I go shopping, I can't take all the decisions myself. That's just [00:30:00] how I am. So I'm calling home, and if I'm using my phone at the same time, I'm calling someone or doing something else, it just makes no sense to me. It makes it cumbersome, and then if the battery runs out or if I drop my phone because I have to scan all these items, I don't want to risk it. But for a short customer journey, a few items, then use your phone, it's easy. Fast in and a fast out. But if I would go shop a proper basket [00:30:30] or a cart full of items I always opt for the store-provided device. It's much easier.

Jerry Langfitt:                    I agree with you, because I know I will either FaceTime my wife or take pictures of the items and say, "Was this what you wanted?" I am constantly in communication with her so I don't get it wrong. I need my phone.

Carl von Sydow:                What we have seen also in the countries where hand scanning has been established for quite a while, of course they have added this option of bring-your-own-device to those stores as well. That has been in place [00:31:00] for several years, and the adoption rate for bring-your-own-device is very, very, very low. Just for the reasons I just explained. They are less than 3%. It seems that customers used to using hand scanning, they still opt for the provided device by the retailer, they don't use their own phone for this.

Jerry Langfitt:                    There's a benefit to having a phone that does it all, but I still contend there's a benefit [00:31:30] to having a purpose-built design device. It usually gives a better experience and a more reliable experience.

Carl von Sydow:                Yes, I agree. 100%.

Jerry Langfitt:                    I think this is a great place to wrap up. Thanks again, Carl, for joining us today. To learn more about retail topics like these log on to dieboldnixdorf.com, or click on the link in the podcast show notes.

Speaker 3:                           Until next time, please keep checking back on iTunes, or however you listen to podcasts, for new topics on COMMERCE NOW.