Will Self-Checkout Drive Revenue Improvement?

Kroger converted one of its supermarkets into a self-checkout solution. The shift using this technology has been swift but without its flaws. DeAnn Campbell explores whether the short-term efficiency gains but long-term customer experience pains from this technology will impact revenue moving forward.

Introduction – Self-Checkout

Snapshot – The Kroger Company
Also known as: Kroger
Founded: 1883 (140 years)
Headquarters: Cincinnati, Ohio, United States
Number of stores: 2,849 stores (2,720 supermarkets, 129 jewelers)(Q3 2022)
Revenue (2022): US$137.888 billion
Profit (2022): US$1.655 billion
Retail Gross Margin (Q4 2022): 21.8%
Slogan: Fresh For Everyone
Loyalty Program: Boost

What is self-checkout?
Self-checkout is a system in grocery stores where customers scan their own items and pay for their purchases without the assistance of a cashier.

Self-checkout machines typically have a scanner, a bagging area, a payment terminal, and a touchscreen display.

Steps
1. Customers scan the barcodes or QR codes of items
2. Place them in the bagging area
3. Pay for their purchases using cash, credit, or debit card.
4. Bag their groceries and leave

There is a button to grab assistance should customers experience any challenges (e.g., the barcode would not scan).

Self-checkout systems offer a number of advantages for supermarkets, including:

Increased checkout speed:  Processing customers could be done more quickly, which can lead to shorter lines and happier customers.

Reduced labor costs: Grocery stores can reduce the number of cashiers they need to hire, which can save them money.

Improved customer service: Self-checkout can give customers more control over their checkout experience, which can lead to higher customer satisfaction. This could also lead to more privacy.

However, self-checkout systems also have some disadvantages, including:

Increased errors: Errors are more common using this method than errors made by cashiers. This can lead to customer frustration and lost sales.

Increased theft: Systems can make it easier for customers to steal items. It replies to customers, to be honest about scanning the item and inputting the correct item code.

Reduced social interaction: This method reduces the amount of social interaction between customers and store employees. This can be a negative experience for some customers who require more assistance. It also reduces impulse buying as there is no space available at kiosks to showcase more products.

Store Versus Customer

A showdown looms between shoppers and self-checkout. Last month Kroger converted a Franklin, Tennessee store to all self-checkout, laying off the store’s cashiers and baggers on July 21, 2023. A second store is in the works as part of a larger plan. Will this move give Kroger’s operating budget an attractive make-over? What will its longer-term revenue landscape look like?

Franklin Kroger converts to self-checkout only. Source: WSMV 4 Nashville

Cool Springs, Tennesse implementation of self-checkout. Source: WKRN 2 Nashville.
“These allow our customers to scan and bag their own items,” said Lauren Bell, corporate affairs manager for Kroger’s Nashville division, told WKRN. “It’s a fast, friendly experience.”

Great Tool But Customer Experience May Suffer

Self-checkout is a great tool when applied correctly — BUT — in large grocery stores it consistently creates more frustration than convenience. How often has your self-checkout ground to a halt because of a scan code problem, an I.D. check, or a coupon? Have you struggled to scan large or heavy items? Or to bag grocery items, reload the shopping cart, and swipe your credit card simultaneously? 

Check-out is not a one-person job — especially with a full cart of groceries! 

Shoppers wait in long self-checkout queues from the inefficiency of one person doing everything. And with fewer staff, the wait grows longer when the “Help is on the way” screen of doom appears.

Is help really on the way? Many consumers experience the assistance screen very often during the self-checkout process. When you have a lot of groceries, waiting for help could be an awkward and painful experience. Source: DeAnn Campbell

What Do Consumers Think About Self-Checkout

VideoMining released its 2023 Front End MegaStudy which looks at the self-checkout adoption rate in the grocery stores space. The self-checkout register is now the dominant checkout format in the category. Its share of transactions rose to 53% in 2022. That is an increase of 17% over the past two years.

In the same report, it was noted that in 2022, 70% of the shoppers did not have to wait in line (when self-checkout options are available) versus only 19% mentioned that in 2017.

When it comes to customer satisfaction, Consumer Reports surveyed more than 62,000 subscribers in 2015 and reported the following common annoyance experienced by shoppers.

Why self-checkout can be annoying?

Another survey conducted by Raydiant, it was noted that:

Self-Service checkouts have failed many consumers. 
67% have had one fail when using it.

Bad experiences are why consumers choose not to use self-service checkouts.
25% said they would choose not to because they’ve had bad experiences while 21% said in the past they were slower. 

Lessons Learned From Competitors

Check-out is the last experience a shopper has at that retailer. A good experience makes repeat business almost certain. A bad experience will drive shoppers to try a competitor or switch to home delivery (which is much less profitable). And online shopping makes it easier for a shopper to price compare — and inevitably switch to Walmart, which can operate much more efficiently on a lower profit margin delivery business than Kroger. 

Other technologies (scan, bag, go) are also being deployed by Kroger to improve its customer checkout process.

Costco has figured out that self-checkouts only reduce and optimize cashiers, not eliminate them. Some grocers are even adding “slow lanes” to offer human interaction and service. Many shoppers would even be willing to pay a small premium for full-service check-out. I’d like to see grocers move to a dual system of “assisted check-out” full service and “direct checkout” semi-service. It’s time to accept that only the right combination of staff and technology will deliver the best long-term profitability and revenue.

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