On the Wirecard blog, we are always curious to see the perspective of external experts. In this guest article, Mathias Gehrckens, Managing Director at Accenture Consulting and retail expert, highlights six ways to digitize checkout in brick-and-mortar stores.
Terminals for self-checkout, as seen at Edeka Paschmann, are just one example of what retailers are currently experimenting with (source: LocationInsider)
In the analog world, the checkout process often becomes the “inevitable evil” at the end of a purchase. Long checkout lines, stressed and overwhelmed cashiers and drawn-out payment processes – especially during busy hours – are still part of consumers’ “shopping experience”. For retailers, the checkout is often an inefficient and difficult process. It generates high operative costs, dissatisfied customers waiting in long checkout lines and most importantly a missed opportunity to retain customers for their business by providing a positive and convenient shopping experience or to even be given consent to collect their valuable data.
In times of Amazon, Zalando & Co., e-commerce experiences have significantly changed customer expectations. Customers now expect the same seamless experience like one-stop shopping on Amazon when purchasing in brick-and-mortar stores. New technologies combine mobile devices, tracking, sensors and AI to enable smart checkout solutions. They can improve the customer experience and profitability offline as well. Thanks to the live analysis of browsing and purchasing behavior, brick-and-mortar retailers are able to increase their conversion rates and the size of the average shopping basket as well as identify profitable client segments.
In addition, brick-and-mortar retailers can redeploy cash desk staff as customer service representatives or for other important in-store processes (e.g. replenishment). Additional advantages of in-store technology include a more effective and data-driven inventory management as well as personalized marketing. Using smart tech for the checkout process can become one of the most essential success factors for retailers to win and retain customers and furthermore create valuable insights.
New checkout approaches and examples
Generally speaking there are six types of smart checkouts. The solutions differ with respect to costs, technical complexity, customer experience and added business value:
1. Contactless payment
Admittedly, this is not a new approach - this checkout method has already been in use for some time in a number of countries including US, UK and Germany. Customers simply place their debit or credit card with the radio symbol and NFC chip next to the card reader and complete payment within seconds. With virtual cards, customers can also pay with their smartphones and approve the payment by e.g. fingerprint ID verification. For larger amounts above €25, customers have to provide a PIN.
The solution is relatively simple, fully mature and used by a number of leading retailers. Customers scan their products at a terminal and pay either via their smartphone or via conventional payment methods. The advantage of this solution is a relatively simple implementation process and less space is needed per register. However, their impact on the improvement of the overall shopping experience for merchants is limited: There might still be long lines and customers must perform the job of the cashier themselves.
3. Checkout with a mobile device
In this case, customers actively scan and pay for their items with their own smartphones. Retailers can partner up with providers such as Alipay or Apple Pay. The advantages of this solution are low transaction fees and customer data, which – provided the customer consents of course – can be used for loyalty programs or personalized marketing. Often referred to as “Scan & Go,” this method is frequently used by retailers such as grocery chains. Customers can scan products with the app and checkout via smartphone. Even single items can be weighed with digital scales and added to the shopping cart by scanning a QR code.
For this solution traditional shopping carts are supplemented by a scanner and a tablet. The smart cart enables customers to scan items themselves and checkout straight from the shopping cart. The tablets also provide customers with additional, relevant offers and promotions based on their browsing and purchasing history.
These smart recommendations, known as the “marketing recommendation engine”, open up additional service-based revenue streams for operators. The cameras in the shopping cart recognize which products are placed in the cart and thus also function as a protective measure against theft. The cameras can also be employed to recognize which products are out of stock and inform the staff.
The intelligent shopping cart by Caper can automatically recognize items. (Source: Caper / LocationInsider)
5. Checkout with biometric data
This is a relatively new checkout method, which, for example, uses fingerprints or facial recognition, like KWC does in China with its “Smile To Pay” system by Alipay. Critical factors include customer acceptance, technical precision and complying with data protection regulations.
Customers have to register their face and credit card data. (Source: FamilyMart /LocationInsider)
6. Grab & Go / Automated Checkout
The best known example for an automated checkout with its “grab & go” shopping experience is the “Amazon Go” store. Today, Amazon operates ten such automated stores and plans to roll out a total of 3000 by 2021. “Amazon Go” is a small grocery store employing “sensor fusion technology”: Customers log in via the “Amazon Go” app when entering the store, which then automatically recognizes which items are placed in the shopping cart. When customers leave the store, both checkout and payment are automatically processed. There are market alternatives like Sensei, AiFi or Wirecard’s Grab & Go store. Like “Amazon Go,” the AiFi store uses cameras to recognize products placed in the shopping cart. However, the customer must actively complete the checkout via the app or by credit card.
Asian retailers have already been experimenting with similar technologies for a while. After an initial boom of grab & go checkouts, one major hurdle to overcome is profitable scaling.
Implications for Retailers: Checkout Solutions Independent of Format and Shopping Cart
In summary, it is safe to say that smart checkout increasingly improves the efficiency and overall purchasing experience thanks to the use of new technologies. It is quickly becoming a major success factor in stores – especially when considering the opportunity of using the collected data for personalized permission-based marketing. The acceptance of these checkout systems will continue to increase, as indicated by numerous customer surveys. According to a retail survey conducted by Accenture in 2017, investing in digital tools is a must to acquire Gen Z customers and retain them. A consumer survey carried out by PWC in 2018 in Germany showed, that over half of the customers under 40 prefer to scan products themselves and pay via smartphone. A McKinsey analysis showed that for “Amazon Go” the added business value compensated the investment: They calculate a 5-10% improvement of the top line thanks to reduced waiting times and data insights for operation and marketing optimization. Additional improvements included cost reductions of 2-4% of the bottom line.
Larger stores remain a challenge. In the coming years, we expect more proof of concepts and evidence, that new business models around smart checkout work. Today, we recommend retailers to consider smart, pragmatic solutions which combine “traditional elements” with new concepts. Fundamentally speaking, retailers should test various solutions with proof of concepts. For scaling a solution, they should weigh up the benefits of an “as-a-service” model versus proprietary solutions. “As-a-service” models are more flexible and inexpensive, but tie retailers to an external provider. Proprietary solutions require a higher initial spent, but are amortized in the long term.