Jul 31, 2019
On today's podcast, we welcome Joe Skorupa, editorial director and feature blogger for RIS News and Ensemble IQ Media Portfolio. Recently RIS News released a targeted research study and article on streamlining the store to simplify shopping. Today, we discuss this research and some of the main challenges retailers are dealing with in their shopping journey's.
RIS News Targeted Research: Streamlining the Store to Simplify Shopping
Jerry Langfitt: Hello, I'm Jerry Langfitt and I'm your host for this episode of COMMERCE NOW. On today's podcast, we'll welcome Joe Skorupa, editorial director and featured blogger for RIS News and Ensemble IQ Media Portfolio. Joe is frequently named as one of the top influencers in retail and technology and is also frequent speaker at conferences such as NRF, Big Show, amongst others. Welcome to COMMERCE NOW, Joe.
Joe Skorupa: Hey there, Jerry. Glad to be here and I'm looking forward to our discussion.
Jerry Langfitt: I am too. Joe, you recently did a [00:00:30] study and article on streamlining the store to simplify shopping. We're excited to listen about this research, but let's start at a higher level and talk about the trends affecting the industry right now. What are the main challenges retailers are dealing with?
Joe Skorupa: Yeah, Jerry, the study touched upon the fact that shopping is really a journey for consumers and honestly any friction they feel, anything that doesn't smooth things along and speed things up and make things more convenient for them [00:01:00] is not going to provide high customer satisfaction levels, and we know that retailers are searching for that. So from a macro level, this study, I believe, resonated with two big challenges that retailers are facing today. And the first is fast moving consumers and rapid fire changes in shopping behavior. And by that what I mean is that shoppers move onto the next viral trend or the next influencer or tech innovation before retailers can catch up. And essentially the pace of change is accelerating. [00:01:30] And this has significant consequences, especially for slow moving retailers who are dealing with falling foot traffic in stores, empty malls, and of course they're dealing with Amazon and Walmart growing ever larger.
Joe Skorupa: I mean these are giants to begin with and they're not catching up to the giants. In fact, the giants are growing bigger. And I have nothing against Amazon or Walmart. I think they are outstanding retailers and exemplaries of what to do and how to change. But it is effecting [00:02:00] all the rest of the retail industry.
Joe Skorupa: Now the second big challenge for retailers, I believe, is that they must recognize that they have to continually make investments in their businesses to keep up with consumers. Just because you have a brand and it's working, and it worked for a long time. The challenge is that you have to continually reinvest in your business. And if a retailer can't implement new innovations and new technologies and do them profitably [00:02:30] ... See that's the key. It's not investing, it's investing efficiently and profitably. And if retailers can't do it efficiently and profitably, then they're just increasing their debt, increasing their risk and squandering precious resources.
Joe Skorupa: So to sum up, my two main points are, it's a fast moving, accelerating consumer marketplace. And secondly, the challenge is finding the right way to do investment to reimagine your business.
Jerry Langfitt: It's interesting that you that, because this kind of [00:03:00] leads right into one of the first questions I had where one of your first figures, key findings in the study is that retailers are split on the topic of self-service technologies. The ratings of the question gave everybody a five out of 10 then it would almost make you think that self-service technologies is not very important, but underneath the data, that kind of, it kind of told a different story, didn't it?
Joe Skorupa: Yeah, it did. And Jerry, I do data analysis all of the time. And I also [00:03:30] believe that the RIS news readership represents the entire retail industry. So when I pull data points together, I look at it as a retail industry. And you're right, the average score came out kind of a middle of the road score on the level of importance. But then I looked into it and there are patterns that you can find when you dive into the data and filter it. And when I filtered this data point by [00:04:00] revenue size, I've found that there were two large camps, two blocks of retailers. And retailers with less than a billion dollars in revenue were more likely to rate self-service in stores lower than tier one retailers, the bigger retailers. And so the question then becomes why. And because every net new technology requires net new investment, well that represents a challenge in itself, especially to slower moving and conservative retailers who [00:04:30] are established in their ways.
Joe Skorupa: Now, larger retailers have to support the vast size of their enterprise in a different way. They need constant reinvestment and innovation and and just moving forward. Because if they lose their momentum and lose their relevancy with a large part of the population, which is their shopper base, they're going to fade in the shopper's mind and the shoppers will move elsewhere. So large retailers have to stay relevant on a broad national [00:05:00] level. So they're constantly testing, developing and researching new technologies.
Joe Skorupa: And during this process they have learned about the value that self service technology offers to shoppers and to their stores financial performance. Now are those same things at the large retailers learned also true for smaller retailers? Yes, there are, there is value to self service technology and it does provide shoppers with a streamlined experience and it does help the store's financial performance. But the smaller retailers are not doing [00:05:30] all the due diligence that the larger retailers are doing.
Jerry Langfitt: That's really interesting. It would almost seem to think that the larger retailers would also drag the industry in a certain direction and-
Joe Skorupa: Absolutely true.
Jerry Langfitt: Almost force, or at least make it hard not to change, to go in that same direction. I mean we see that right now with with McDonald's, installing kiosks across their entire footprint. It's kind of a watershed moment where then other retailers, QSRs mainly would have to say, okay, if I want [00:06:00] to compete I have to do, not just a me too, but I have to do something. I can no longer sit on the fence or it's gonna affect my revenue stream.
Joe Skorupa: Absolutely. Yes. So talk about having it your way and maybe that's the theme of a different QSR, but nevertheless it fits our discussion here. Having the ability to do self service is the ultimate have it your way experience.
Jerry Langfitt: Now, so look forward. Let's split this into two groups then. The two groups you pretty much indicated. What are the benefits [00:06:30] they are getting from more self service?
Joe Skorupa: Well our study found that the primary benefits delivered to shoppers. And we asked about benefits to shoppers and benefits to retailers and they are different questions and they got different answers. So the primary benefits, I'll start with shoppers. There are three primary benefits and they are checkout, payment and price checking.
Joe Skorupa: Now each of these things makes a shopper experience quicker and easier and [00:07:00] also it has to be said that shoppers feel like they are in control of the experience and all of these things are very positive for the shopper in any sort of consumer experience in a store.
Joe Skorupa: Now the benefits are different for a retailer but possibly even more important. For a retailer, there is an improved level of customer service. Let's face it, this is something that a customer might need, might want, [00:07:30] and there it is. They're able to use it. That is customer service and also when that happens, customer satisfaction metrics are going to be increased for this store. All of these certainly stimulate return visits and that is a key to success for retailers.
Joe Skorupa: And speaking of metrics, by the way, I mentioned customer satisfaction metrics. Another big benefit that retailers get is the ability to gather in store customer data through these touch points. Now self service devices are interactive [00:08:00] touch points. The consumer is actually giving the retailer information by the behaviors that are occurring on the self service device. Now this behavior can be examined and tell a retailer about something about how the store operates, about how the shopper's responding to promotions. It tells retailers, you know, what the impact of technologies are in the stores and potentially all of this information can be delivered to headquarters [00:08:30] in a real time or near real time.
Joe Skorupa: And you know that's just the beginning. Many other data points can be gathered and just leave it to your imagination. You can add them to the self service process or not. But the choice is up to you. Really, it's an infinite horizon for retailers.
Jerry Langfitt: Now, I kind of see it as a couple different ways of why they're getting a benefit too and moving in this direction. One, technology advancement. To name the McDonald's story, again, everyone has iPads. Even my mother has an iPad, so it's a [00:09:00] much more approachable device at this point. And then cost points have come down that I can take it across 14,000 locations and it's no longer cost prohibitive.
Jerry Langfitt: And then the second is people are more used to this kind of technology as well. So cost of technology is coming down and everyone is a bit more adaptive to it. And a lot of people talk about the Amazon effect, and I don't want to talk about Amazon Go, but it's more about going on Amazon or going online and being able to [00:09:30] do what I want and do what I need when I want it. And it seems like self-service and ... a colleague of mine said the psychology of self service is, it just empowers you.
Jerry Langfitt: And if I'm standing in line and I can just do it myself, it's better than standing in a line. So that again I think ties back to the customer satisfaction as well. It's like if you're giving me a path to take care of myself, I'm going to be more apt to come because I want control of my life more than I normally have [00:10:00] it. Are those two points something you could agree with and think the data kind of points in that direction?
Joe Skorupa: You know, empowering the consumer is definitely a sure way to increasing their return visits. And that is clearly what is happening with this technology. And the other point you made is that the general population is tech savvy at this point. And I think that's absolutely true. I mean, I think we probably won't even have this discussion much anymore. [00:10:30] And honestly, if a retailer even brings up that point in a board meeting or in any interdepartmental meeting and saying, well, you know, my customers, they won't, they don't even know how to use technology. Well, I think pretty soon that retailer is going to get laughed out of the room because we've just crossed that line. We are tech savvy. Tech is embedded into everything part of our lives, homes, and work. So I don't think that's going to be a much of an issue.
Jerry Langfitt: Well, [00:11:00] and I always use my mother as a great example because when she can text me a cat video or send me an Amazon gift card electronically, I'm like, oh, we're definitely in a new age.
Joe Skorupa: Absolutely. My mother's playing games all day long on the computer. So it's just amazing. Of course she's retired so she can do that.
Jerry Langfitt: All of our goals. So we talked about those moving ahead. Let's talk about those dragging their feet or just aren't ready for it yet. What do you think some of the challenges they're looking at to move forward with technology that can help?
Joe Skorupa: [00:11:30] Well yeah, you know the study shows that there are foot draggers out there or feet draggers, as the word may be. Almost 50% of the retailers in our study show that they have change management issues.
Joe Skorupa: And what does change management resistance mean? Well I think that in many cases it starts at the top. I think that there are C level executives that are not [00:12:00] green lighting some of these capital investments projects. But I don't think it's just that. I think that the other points in the study data show that some of the resistance is found in the stores.
Joe Skorupa: And two of the points that store operators bring up where we find this resistance are due to operational requirements such as re-engineering store formats to accommodate the self-service technology and re-engineering associate processes as well. But I don't ... Even [00:12:30] though this is a large group of retailers, you know, a little less than than half in our study, I just think this is an old story in retail.
Joe Skorupa: In other words, this resistance to something that is, you know, net new and how they've always had their stores. And this resistance shows up so frequently that that's the reason that many of us in the industry, many who are looking ahead at where retail is heading, we follow the trends and the leaders. They're usually a couple of years ahead [00:13:00] of the rest of the industry and the rest of the industry follows.
Joe Skorupa: And as you pointed out, there are leaders in retail right now that are deploying self-service technologies. That is increasing. And the numbers that we show here, where the resistance is strong, is certainly going to be that resistance is going to be a broken and the barrier will come down. And this will happen in the next year or two and we'll see a different number then.
Jerry Langfitt: I wonder what they need to convince leaders. I wonder if their back [00:13:30] office systems can support it. Are we dealing with antiquated technologies and system processes? You know the old way of retailing. Because we're seeing at Diebold Nixdorf, we're seeing self-service going into areas that we never would have dreamed of five, 10 years ago. I think people still have an idea of self service, self checkout is the grocery store and that's it. And we're seeing it in fashion. We're seeing it in convenience stores and we're seeing, even in groceries, many different ways self-Service [00:14:00] comes out. Curbside pickup, order online, order on my phone, delivery, scan and go. Walk through the store and scan myself. It feels like the industry is still now much more flexible in saying, okay, I'm going to separate my consumer base out and take care of each journey and find out what technology can serve them better rather than one self checkout is a one size fits all.
Joe Skorupa: You know I have a, a story that I can quickly go over. I've been covering technology [00:14:30] a long time. And one of the areas that I was covering for awhile, a while ago, you mentioned quick service restaurants, and there was a time when, it's hard to believe, but zero quick service restaurants ... I'm talking about the McDonald's and Burger kings and Taco bells of the world could take credit cards. I mean it's hard to believe, but this is only like 17, 18 years ago. None of them [00:15:00] anything but cash. And to be honest with you, there was tremendous resistance for being able to take credit cards for two big reasons. One, it required technology in the store, not that much, but nevertheless. And then the other thing was that it costs them money. It wasn't cash. There's a cost to it, to accepting credit cards.
Joe Skorupa: And that industry went from zero to 100% in just a few years. So that's what happens with resistance. You know, Jerry, [00:15:30] it's there, it's there, it's there. And then suddenly it's gone. And I think that's what we'll probably see.
Jerry Langfitt: Oh, fantastic. So one of the questions I've had and that I get from a lot of people is, well self-service is taking jobs away and all this is is one large labor play, for large industries. Now I will say there is a labor savings with self-service. I can now do more, but that's the difference. I can now do more with the same people. It's not something that I'm going to suddenly slash everything in half and I'm [00:16:00] going to go to the cashier-less, attendant-less store. Because I think as we march towards more self service, more personal service becomes even more critical. That you don't want to just go into a store and not have a chance to talk to anyone or feel that you're all alone. At least a theory of mine is always self service allows retailers to redistribute their employees and I've always felt that more employee customer interaction [00:16:30] creates better customer satisfaction. Is that something over the years you've seen that if we can increase the human interaction with self service that we'll get better footfall and more repeat visits?
Joe Skorupa: Yeah, absolutely. Honestly, I've always saw the ability for retailers to deliver better service through self-service work. In a practical way. When I often go to a Home Depot, not to single that out, it could be Lowe's or anyone else, and there is a person, [00:17:00] a employee that's at the point where there are the self service technologies. And that person becomes a service person, particularly with home improvement goods.
Joe Skorupa: I mean there is a lot of little things and a lot of SKUs that aren't easy and tricky for people to manage through the self service. So that's one level of service. But the other level of service is, the person is just there. I can't tell you how many times I've done it or I've seen other people do it. Just simply go up to the [00:17:30] person and ask them a question because they're there and they get ... Solving a customer's problems is usually not something retailers think a lot about. And I wish they would, but I don't hear people talking about it. Just think about that when a shopper needs a problem solved in the moment that they're there to shop and buy something, that is a critical piece of information they're seeking. And if you can't provide it and solve their problem, then you're certainly going [00:18:00] to be missing sales. So I think that they can be problem solvers and provide better service.
Joe Skorupa: Now let me get toss in something else on this topic. It's a tight labor market right now. I think where the national level, you know well below 3% unemployment and I think it's closer to two and a half percent. And retailers simply can't hire the way they used to and there's a lot of turnover and they don't want to deliver a shopping experience [00:18:30] that has less customer service and is less efficient. And they're looking to do that. And they can do that with self-service technology.
Joe Skorupa: And the final point I want to make is the loss of business. And you know, a retail day as you go through it, has peaks and valleys. And during the valleys, everything works smoothly, there's enough staff, there's enough service. But during the peaks you just have no idea what you're losing. I mean you [00:19:00] might say to yourself, you know, I hit my target that day, but during the peak you might have had 10, 15, 20% people walk out without buying because they couldn't get through. They could, they couldn't meet their timeframe. Their quick timeframe for how they have to buy.
Joe Skorupa: So this gives you the ability, self-service technologies, gives you the ability to accommodate those peak timeframes and get business that you're actually losing. And you have no idea how much that is until you put it in.
Jerry Langfitt: That's an interesting point. I mean, you [00:19:30] unpack a lot here with what you've said and I've noticed that in the convenience stores and in the grocery stores, everything gets hyper busy too fast for a store to react.
Jerry Langfitt: Because all of us has been in this situation. You either walk into a gas station and I need a quick soda and I need a quick snack. And suddenly six other people had that same idea and the store has a single tenant working and they just can't react quick enough.
Joe Skorupa: Yes.
Jerry Langfitt: For my own tastes and I think for a lot of people because then all of a sudden the five of us [00:20:00] finally check out and it's done. It's gone. Whereas self-service allows, an always on checkout experience to where it's like okay that can kind of take care of that.
Joe Skorupa: Yep.
Jerry Langfitt: And that's your peak and valley. That peaks happens so rapid and customer satisfaction can drop like a stone if I'm sitting in a line. I've watched my wife do this, I've watched her do abandonment's as well where it's just like we go up to the line and she just, "Never mind. None of this stuff in my car is worth that line." To experience that, it's funny to see that.
Jerry Langfitt: Now the other thing I was kind of curious what [00:20:30] you had said is with staff in the store, employees in the store. I come from a point of purchase background. I design a lot of point of purchase displays and we always used moment of truth as very, very important. The decision time when you make your purchase decision, it's not at the checkout, it's already passed at the checkout.
Jerry Langfitt: So I can check myself out and I just want a good clean experience. But the staff can actually influence those moment [00:21:00] of truths and they cannot influence at the checkout. So I just feel like a self service can enable more customer staff interaction and that's going to give you a much greater hit rate, conversion rate at those moments of truths.
Joe Skorupa: Right. I've seen that many times.
Jerry Langfitt: I won't look for somebody if I have a question, but if you're there, the convenience is okay, since you're there, I'll ask you.
Jerry Langfitt: So let's talk for a second. Lets go future state. We're talking self-service. There's a lot [00:21:30] more things that everyone's trying to come up with to make it even smoother, frictionless. If we want to use that word. Where do you think they're going to find the biggest improvement in the self checkout experience? Is it with the Amazon Go video analytics? Is it with video analytics just on a self checkout that helps you decide on your purchase what you purchased with cameras? Is it facial recognition? I mean what is your experience been in a direction of the trends?
Joe Skorupa: [00:22:00] Well all of those are in play, but if I were to pick one that is the most practical and certainly the shortest horizon line, and I do have some study evidence showing this, is that a checkout on the customer's own device is something that is not really that far away. I mean, I think that my internal data shows that retailers have placed that on a two year horizon line that that is actually relatively [00:22:30] short for a net new technology. And so I'm guessing that we're going to see checkout on a customers own device very shortly.
Joe Skorupa: I don't think we're going to see the Amazon Go experience outside of Amazon and a few others. And that's, as you indicated, that has to do with several technologies. One of the main ones is video and image recognition. There are others associated [00:23:00] with it. It's really a cluster of technologies honestly including product recognition, but you can't really ... you have product recognition with that facial recognition as well and those technologies are actually templated and available. So that's part of it.
Joe Skorupa: So I think facial recognition checkout is actually possible. I just don't think that customers are going to be comfortable with it. But I do think yeah that checkout on their own mobile device, you know if you [00:23:30] go into a Whole Foods and you want to use the Amazon checkout capability, I think that's going to be something that we're going to see a lot of. And then of course retailers are going to have checkout on their own mobile devices and that's going to be a big one as well.
Jerry Langfitt: Do you think taking the self checkout lane that we would consider traditional and enhancing it with ... I know Ikea's testing this, where I just slide my stuff [00:24:00] across ... and kind of taking what a more controlled Amazon Go look ... and it's just like I'm just going to set my stuff on this basket and it's going to then scan everything for me, either with image recognition or RFID. Two things that seem to have been in the industry for a couple years now, but you think that will reach a tipping point sort of like iPads and McDonald's. Do you think that would be a stepping stone to making self-checkout more efficient?
Joe Skorupa: You know, I have to smile when I hear about that image [00:24:30] recognition. I went to an IBM, who was no longer really in this space, a lab, back in more than 15 years ago when they had image recognition checkout. But of course it wasn't ready for prime time, but it's certainly a technology that is really on the cusp today.
Joe Skorupa: So yes, I do see image recognition in many ways being a major component of the retail shopping experience and checkout [00:25:00] is definitely one of them. I also think that that there's a lot of benefit to image recognition there a way for shoppers to actually have a better shopping experience with doing their research, doing their comparisons, in a way that is kind of better than barcodes in some way areas. Particularly in fashion, there's a way for image recognition to really to improve the shopping experience by getting recommendations [00:25:30] based on color, based on the style, and things like that. Right in the store that could come either on a customer's device or on a self service device. And so image recognition is going to open up a big area for retailers to get interactivity with their shoppers and shoppers feel like they're getting a better shopping experience.
Jerry Langfitt: So, only a couple more questions. I was curious, I was looking at your report and again looking at the laggards and the people ahead and everyone [00:26:00] seems to be installing something. I wonder if the retailers are using all of the data they have at their own hands. You had said the data collection and analytics is very important and this enables that. I wonder if they're truly looking at their transaction data and saying, okay, what should I do next? How do I follow my consumer?
Jerry Langfitt: Do you feel like the analytics realm is ripe for retailers to be leveraging more of that? This is data they've always had. It just doesn't seem like they are leveraging it to make their store as efficient [00:26:30] as possible. Especially with the changing in the 70s ... 60s and 70s and 80s was all about cookie cutter pattern and making sure I can go across the country with the exact same store.
Jerry Langfitt: It feels like that I need to follow the consumer within regionalities as well, both from a card and cash usage and the types of journeys. Do you think that's something that we'll start exploring more and more to try and make better decisions and less risky technology decisions?
Joe Skorupa: Well, I think [00:27:00] data is an asset and I think that it's an asset that in some instances, and I can point out a couple of segments in retail where it is underused and under utilized. And I think the the reason for that ... Now I'll name one segment. I just did a in depth analysis of of grocers and the grocery industry and investing in analytics is one of the things that they are behind the curve with other retail segments [00:27:30] and retail industry in general.
Joe Skorupa: If you looked at, as I frequently do, just the average of all the respondents without filtering out what segment they're in, grocers are definitely behind in investment in analytics. Now why is that? It's there, it's data they already have. But when you think about the self service capabilities of self service technologies and touch points in the stores, there's more data that they already have.
Joe Skorupa: So why would it be that they're not optimizing that and maximizing [00:28:00] the use of it? And I think it's just that they're racing, grosses in particular, are racing ahead at full speed. They have so many competitive challenges to deal with. And they have a consumer that is basically shopping them because of a necessity, but then the consumer has the ultimate wide choice. So I think they're keeping up with the consumer but they're not looking ahead using the data. And I think that's the big, critical issue that they're missing. And certainly, [00:28:30] when they take advantage of that data through the self service touchpoints and through other areas that they have data coming in, I think that you're going to find that their 1% margins and their growth rate, which is well below the rest of the industry, will actually increase.
Jerry Langfitt: How interesting. So just to kind of wrap up a little bit, I was reading your article and you close with the most successful retailers design their stores to strike a balance between full service function and self service options. If you had [00:29:00] to sum up your research in a couple of sentences, how do you think you would say what you most learned with this study?
Joe Skorupa: Well, let me sum up by giving a couple of key recommendations that I believe emerge from this study. And one is that a recommendation to deploy self-service kiosks now, to think about it now. And this is for those retailers who don't actually have them. More for retailers who have them and are considering adding them to their store camp. And the reason [00:29:30] I am recommending it is because 48% of retailers in our study are actually in a preliminary phase of deployment now. So this shows that in next year or two a huge number of retailers is going to come online and making this a race toward mainstream adoption for self service technologies in the stores. And I call this a recommendation because if you are behind that curve, and this curve is coming, this is something that I'm recommending you [00:30:00] think about and actually consider adding it to your one year plan or two year plan or two years to do list.
Joe Skorupa: And I also am recommending that you focus on checkout and that sounds pretty obvious, but if you're going to be building a business case, focus on checkout. And as I pointed out, not only does that help the shopper, but it helps the retailer gain potentially lost business. As I mentioned, the thing that a self service technology will do in [00:30:30] your store is to make sure you are fully manned at every throughout the day. In other words, the peaks and valleys that service is there when your peak hits and when you're stressed. Every one of your staff and associates operating at full speed and perhaps not operating as efficiently as they can. Well this helps make sure that any overflow is not lost and that your shoppers aren't walking out [00:31:00] of this store unhappy. And as you indicated, Jerry, that sort of this increases your conversion.
Joe Skorupa: And then the final recommendation I would say is build your business case on improving customer service and satisfaction. This is going to help your loyalty. This is going to help your return visits. And what we find is that 76% of retailers feel that customer service and customer satisfaction are the primary benefits of self service. [00:31:30] And if that is the case, then I recommend that you use self-service to increase those. And also, as we just talked about a minute ago, gathering that customer data which you can use to help improve your store operations and increase again, customer service satisfaction.
Joe Skorupa: So those are kind of recommendations I would end with. And then one final comment, Jerry, is that as you indicated, I believe the most successful retailers designed their stores to strike a balance [00:32:00] between full service functions and self service options. Self service is not going away. It is only going to increase. So retailers have to decide, what's the balance they're going to choose. And while the line will differ for each retail segment and customer base, I believe there is no doubt that balance is shifting toward an increase in self service capabilities in today's stores to stay relevant with consumers.
Jerry Langfitt: I think this is a great place to wrap up. Thanks again Joe. This [00:32:30] has been incredibly enlightening. Some great data points that you've provided and some great insights. To learn more about retail topics like these, log on a dieboldnixdorf.com or click on the link in the podcast show notes. Until next time, keep checking back on iTunes or however you listen to your podcasts for new topics on Commerce Now.