Sep 24, 2019
Retailers and grocers want to streamline the in-store checkout experience and increase conversions. Diebold Nixdorf’s Carl von Sydow tells Karen Webster from Pymnts.com transaction data can help firms find the optimal checkout footprint that fits, on a case by case basis.
Previous Carl Von Sydow Podcast:
Karen Webster: 00:12 Hey Carl, thanks for joining me today. I'm looking forward to having a conversation about data, in-store point of sale, and the insights that retailers can glean from that data. So thanks for making the time.
Carl von Sydow: 00:29 You're welcome, no problem. I'm happy to be here.
Karen Webster: 00:31 So, there's been so much written and discussed about improving the checkout experience in the physical store, and of course we're all familiar with the efforts that a number of players, obviously Amazon at the top of that list, have pioneered to really improve that experience. I'm curious to get your take on, first of all, the the landscape around, then the appetite for, using the point of sale experience, reinventing it and making it a more streamlined experience for the customer.
Carl von Sydow: 01:10 Yeah. Well first of all, retail and grocery retail and all the other verticals, are going through big changes now in in the checkout process. As you just mentioned, Amazon is one example and we have click and collect, we have all different kinds of self-service solutions or other solutions. Customers has options when they go shopping. But we have a great number of stores and retailers that are still working with traditional retail, and the Amazon idea is good for some locations, but there are a lot of retailers they're still expecting, or looking, for solutions that are, perhaps, not reinventing everything but using what they already have and improving the shopping experience for the customer, with not investing in a lot of technology like the Amazon solution.
Karen Webster: 02:03 Yeah, yeah. That is clearly, as you said, for a different kind of a store; smaller format, limited selection and so forth. But your point is a good one, which is stores want to make the experience better. No one wants to see long lines and there are lots of efficiencies that can be delivered within the existing store format today. What are some of the innovations that are helping drive that forward?
Carl von Sydow: 02:31 Well, first of all, when we usually try to help a retailer improve their shopping experience in the checkout area and the efficiency and throughput and all that, we start with looking at the store data, what they already have within retail. One store location can be very different from another one. The customer demographies is different from one side of the town to the other. So by looking at the actual store data for a particular store, you can learn quite a lot about how and where you can improve the shopping experience in that particular store. And the T-log data, the transaction data, that will help us to analyze the customer work, or customer shopping journey, the customer journey.
And through the store data that we can extract information, like for instance, the average basket sizes, the different payments options that they are using, cash or card payments, coupons, et cetera. How many transactions are used with age restricted items? That will have an impact on the different solutions for self-service that you can implement, of course. But looking at the data, the actual store data, you can get a long way of analyzing and simulating how you can improve that store without spending too much money.
Karen Webster: 03:52 So what are some of the the insights? I was listening to you talk, I was reminded of an experience a couple of weeks back in a grocery store on a Saturday, and they didn't have that many items so I decided to do self-checkout. And the lines were actually, in the self-checkout lanes, deeper than I had seen them. So a lot of people are opting in. I happened to get into the line where a woman had a pile of coupons. That was painful because scanning those coupons and putting them in the little holder, I was like, is she ever going to finish? But you mentioned that as an example of a behavior that helps stores make decisions about throughput. What kind of insights, and therefore actions, does that one example provide a retailer in how to think about throughput and efficiencies at checkout?
Carl von Sydow: 04:42 By analyzing their own transaction log data, their own facts in a good way. The retailer can optimize the different checkout options for that particular location, for that particular customer demography that they have. Or, like options ... You mentioned coupons, if we look 10, 15 years back in time, we have seen more or less only one type of self-checkout, which is the traditional basket-to-bag self-checkout, as we call it. With a large bagging area, with or without cash, pretty big units. And they accept cash, they accept coupons, et cetera, et cetera. If you look at the T-log data, just as you mentioned, customers with small baskets, typically self-service is very attractive for small baskets, obviously. But today what you can see in stores is that the self-checkouts are for all customers. You can go there and have a customer with 50 items and they are building mountains on the bagging area. And do you just want to go through with three items.
So our idea is to look at the T-log data, analyze the different groups of customers that they have in that particular store, and then identify what different self-service solutions, or options, can you add to this checkout area to meet the different customer demands? So the customers with small baskets that just want to go through fast, they pay with credit card, they don't want to wait for someone paying with cash, et cetera. So you should have like a mix of different self-service solutions to meet your customer demands, and that's what the store data can help you to analyze and simulate.
Karen Webster: 06:25 Is that, Carl, something that retailers are starting to wrap their heads around? I mean, this particular store, I won't name the brand, but it's pretty pretty big chain and it was interesting that all of the checkout lanes, self-checkout lanes, were identical. You could use cash in addition to cards, as you described. Any number of items could be moved down the conveyor belt, and of course those coupon things, which I found very annoying because she had a lot of them. So are retailers starting to adopt these new ways of thinking about narrowing the options for self-service in some lanes?
Carl von Sydow: 07:09 Yeah, I would say more and more retailers are doing that. For quite a while the retailers have been working through the thinking about averages, and one-size-fits-all kind of mentality, and that's what we see on the markets today. And now they're slowly realizing that that is not necessarily what the customers want. There is no one-size-fits-all in self-service anymore. And the customers, they are learning and they are developing and they're doing ... They're fast. They are expecting retailers to offer continuous improvements also in in the checkout area. We have seen quite ... Hasn't been so many different developments for the traditional basket-to-bag self-checkout. It looks more or less the same today like 15 years ago.
And the customers, they're trying to ... They are expecting something different now and the retailers are realizing that, but they don't really know how and to which extent they would add like fast lanes or express lanes. And then especially in the United States to go card only. It's a pretty bold decision and a lot of retailers are afraid of that. But if you look at the store data, you can easily see that there is a market, if you like, internally, for that store to actually have card only self-service solutions to meet those customer's demands.
Karen Webster: 08:33 What are some of the more innovative options that retailers are embracing who are looking at this data, recognizing that averages don't cut it, and they really do need to be more thoughtful about about checkout options?
Carl von Sydow: 08:54 What different self-service alternatives there is, or what do you mean?
Karen Webster: 08:56 So, when you think about self-service alternatives, and just looking at checkout holistically, what are some of the more innovative retailers doing to try to make that experience better?
Carl von Sydow: 09:07 Yeah, well, what they are doing, they're mixing different checkout solutions in the same store. Some stores, already, still today, only have normal lanes. Then, a lot of stores, they have a mix of normal lanes and traditional basket-to-bag self-checkout. And now we have seen, like Giant Eagle, Kroger, Walmart did some tests, and now Sam's Club is doing, to also add personal self-scanning. Where you have this handheld device that you go shopping with through the store. We have retailers adding smaller kiosk-like fast lanes without cash, and very few items. So some of the more aggressive retailers, they are mixing different self-checkout, or self-service solutions, within the same store. And that is coming more and more, but it goes a little bit slow but I think we will see a big change coming, you know, two years. A lot of the interests that we see right now from retailers on almost any market in the world is particularly towards the smaller self-checkouts, the fast lane type of checkout.
Karen Webster: 10:21 Yep. Yeah. You know, it is also just a wholesale shift right? From from checkout being something that is in the lane, as you call it basket-to-bag, being handled by store personnel to, for the sake of efficiency and convenience, the consumer is willing to take that responsibility on themselves. I mean, and including order ahead and pick up curbside where everything now is being driven by convenience and efficiency. So I can see mixing the format. But you know, most people when they're in the store, they want to get in and they want to get out. And they look for the lines that have the fewest people in it. Sometimes regardless of whether that's self-checkout or not.
Carl von Sydow: 11:08 Yeah, I mean we, when we talk about conversion rates for instance, which means the customers that are buying stuff versus customers leaving the store empty handed due to long waiting lines. So the conversion rates, the retailer wants a high conversion rate, which means that all customers that go into the store should buy something. But if the lines are long, then they will leave the store without buying anything. And to add the opportunity of different checkout options, you will have a higher throughput per hour, or per time. And you will increase your conversion rate. Definitely. I think we have some interesting examples from projects that we have done. One, for instance, we had a project where we implemented a self-checkout, these fast lanes self-checkout, and we had a terrible estimation of 30% adoption rate in the project. After just a couple of weeks we were up to 37%, and now a couple of months in, we are up at 44%.
Karen Webster: 12:21 Wow.
Carl von Sydow: 12:22 So the adoption rate is high. What we have seen at the same time, in that store, is that the conversion rate has gone up, of course, but the average basket size went down. And that, for a retailer, is like a red alarm bell because they want the average basket size, of course, to increase, not decrease. But when we looked at the store data, we saw that, well since the conversion rates increased, but we saw that the customers with few items had increased dramatically because of the faster throughput through the checkout area. So since this store then had more customers with fewer items, the average basket size went down. So actually it was a good sign, but it was an alarm bell that no one really expected.
Karen Webster: 13:08 Well, I would imagine that, you know, one of the explanations, who's to know for sure, is that people are shopping more frequently. So going to the store a couple of times a week rather than once a week with smaller basket sizes to get in and out. So I mean that could be one explanation. But I mean, I'm curious about, in that example, adoption rates going up; what does that say about the inefficiencies of the store overall? I mean, if I'm that particular retailer, I'm thinking, wow, more people are using self-service, that must mean that the traditional checkout it's pretty friction laden for consumers.
Carl von Sydow: 13:47 Yeah, but I think, again, if you look at the customers in any store, they have different customer journeys. A customer with a large basket, with coupons, paying with checks, paying with cash, they look for [inaudible 00:14:01]. Interaction with people, they like to go through the normal lane. But then you have the efficient customer that just wants to go in and out as fast as possible, pay with credit card, no coupons, and they do like the social interaction with people, but the speed through the store is more important for them. And when they go, when they come to the checkout, that's also important to remember, when the customer comes to the checkout, basically the customer journey is over.
The only thing they want to do is to pay us as fast as possible and get out of there and go home or wherever they are going. So the whole shopping experience ends at the checkout area. And by offering different options for that, you will make more customers happy. And if you have coupons, if you have checks, if you have cash, then you can go to the manned lanes and go through that part of the checkout area. But if you don't, you want to be able to find a way to leave the store without waiting for people with tons of coupons in their bag.
Karen Webster: 15:07 Carl, I'm curious to get your thoughts on how self-checkout and the opportunity to further, I guess, curate that experience ties to loyalty programs that stores may have. I mean, one of the things that's interesting about the Amazon Go stores is that you have to be a member of Amazon Prime in order to do that. I mean, that's just sort of the Amazon model. But but grocery stores have loyalty programs that most people participate in, and I'm curious to know whether that's been ever considered, or even appropriate, to think about. Certain lanes are available for loyalty club members, or certain experiences are, et cetera.
Carl von Sydow: 15:54 That's a very good question. One of the reasons why we have been stuck with the traditional basket-to-bag self-checkout is that it has built-in security. You have the weighing scale bagging area where the self-checkout will always verify the weight of the item with the weight database that you have. And you can trick everything, of course, but there is a security feature in this traditional self-checkout. However, it makes the whole checkout experience a little bit annoying, especially if you have these unintentional blocks, the weight it doesn't always fit, and you have waiting times for this and that. So the throughput is definitely affected by that.
If you leave the security features outside, then typically a lot of the retailers, they want to have some means to identify the customer, and the loyalty program is an ideal way of doing that. So a lot of the retailers that take away security features from the self-checkout, like these fast lane self-checkouts without weight security, they want to add the loyalty program to that so they at least can identify the customer. And the customer will feel, well, the retailer knows who I am, I have scanned my card and then I can use this VIP lane for self-service. Especially handheld, the personal self scanning solutions, are very much focused around loyalty programs for security.
Karen Webster: 17:24 Yep. Yep. Interesting. Well there's certainly a lot of opportunity to innovate. It is something that consumers, in particular the grocery shopping experience, is something people do in the physical store and making that more efficient in any possible way is a welcome experience., Particularly since people do it on Saturdays and they don't really want to be doing it ... spending their Saturday mornings going to the grocery store. So it's a, and maybe I'm speaking from personal experience, Carl, I don't know. It's not my favorite thing to do on Saturday morning.
Carl von Sydow: 17:58 Yeah we will, I think we will see a big increase in self-service solutions in retail, and not only in grocery, we will see it in DIY stores, convenience stores, pharmacists because it is a very convenient and fast way to go through the checkout area. And the customers have said before, the customers are learning, they are expecting self-service nowadays. The adoption rates are really high from the get-go nowadays. 10 15 years ago, it took much longer to reach a good level of adoption with self-checkout. Now it goes, as I said before, really, really fast because customers are used to self-service in so many instances right now. But you have to, it's not one-size-fits-all. That's the main thing.
And to do the best implementation of self-service, you should look at the store data, to look at what different types of customer groups, what's the demography in this store? And then simulate different scenarios and build a paper pilot with actual store data. How would it look like if I do this? If I implement this solution in this store? And that's typically what the project looks like today for us. A lot of analysis of data and different alternatives, and then we have a discussion with the retailer. How bold do you want to be with self-checkout, or self-service? How many different alternatives you want to offer your customers? And we are going definitely in that direction. That's my impression.
Karen Webster: 19:30 Well Carl, thanks so much for your time and for the insights about the future of self-service and retail. Obviously grocery being just one, obvious an important use case, but certainly others as you pointed out as well. Thanks again for your time.
Carl von Sydow: 19:45 You're welcome, happy to join.
Amy Lombardo: 19:46 Thanks to our listeners for tuning into this episode of COMMERCE NOW. To find out more about the future of retail, go to dieboldnixdorf.com or click on the link in the podcast show notes. Until next time, keep checking back on iTunes for new topics from COMMERCE NOW.