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Adding up checkout technology’s costs, benefits

Adding up checkout technology’s costs, benefits

Self-checkouts may already be a thing of the past. See the latest technology for grocery transactions.

A decade ago, self-checkout lanes looked like the future of grocery.

Now, at numerous stores they’re already history. Springfield, Mass.-based Big Y Foods abandoned self-checkout last fall, just a few months after Boise, Idaho-based Albertsons did the same in the West. In fact, the Food Marketing Institute found that self-checkout slid from 22 percent of grocery transactions in 2008 to 16 percent in 2010. Regardless, numerous innovations in checkout technology still are coming down the pike. The question: Are they the future of grocery or yesterday’s news?

Smarter smartphones

The logic of a smartphone-based checkout system is simple. Smartphones double as a scanner and put the point of sale into shoppers’ hands. Customers scan, bag, pay and then walk out the door having avoided lanes and lines. For retailers, the investment is minimal compared to self-checkout lanes. The downside? Fewer than half of all Americans currently have a smartphone, meaning a significant number of customers can’t take advantage of this service.

Boston-based AisleBuyer (recently acquired by Intuit) is one of several startups in the smartphone-as-scanner space, offering mShop, a mobile self-checkout app. It’s free for consumers and nets AisleBuyer a percentage of every transaction it processes. Stores must integrate it with existing POS systems.

Innovative options for big and small stores 

Self-checkout lanes continue to evolve. IBM’s Self Checkout System 6 debuted in May 2011  with a modular design and a shorter scan-to-bag distance. Cincinnati-based Kroger is developing Advantage Checkout, which automatically scans products on its tunnel-like conveyor. But costs can easily exceed $30,000 per lane. “They’re just not cost-effective for small retailers,” says Greg Buzek of IHL Consulting Group, a Franklin, Tenn.-based retail consulting firm.

New this year, the ShelfX self-checkout system is more affordable for smaller stores, with an installation cost of about $10 per SKU, says ShelfX CEO Ran Margalit. Scalable from one shelf to an entire store, ShelfX uses radio-frequency identification (RFID) cards and shelves with sensors and electronic scales. “It tells you who took what,” Margalit says.

Launched in March, Square Register, an app that turns an iPad into a cash register, is “a major innovation,” Buzek says. “There’s no cheaper way to do a point-of-sale [purchase]. ”

Risks for naturals retailers: security, service and ROI

Self-checkout comes with inherent security risks. How do you know customers are playing by the rules? AisleBuyer counters with random audits, while ShelfX avoids the problem because the system “knows” exactly which items shoppers have taken off shelves.

But there’s another risk: loss of service. With more than 60 natural foods retail clients, Dick Calio of South Windsor, Conn.-based R.J. Calio Consulting says personal attention is the industry’s advantage. “I don’t think they want to lose that,” he says. “Self-checkout just puts another layer between them and the customer.”

Calio says natural foods stores should not disregard POS systems, but must invest in digital signage and data-driven loyalty programs, as well as make sure their credit card security is compliant with Payment Card Industry (PCI) Data Security Standard. “The whiz-bang technology is out there,” he says. “But retailers need to really be sure the technology makes sense in their store.”

Idea in action

At the right store in the right location, self-checkout can be a big winner. Case in point: Self-checkout accounts for 24 percent of transactions at Waitrose Limited’s central London store. U.K.-based Waitrose employs a hybrid of both self-checkout lanes and its smartphone-based Quick Check/Quick Pay system. Waitrose officials say the blended arrangement needs both components to thrive and that it works better at smaller, urban stores. However, the company expects to expand the system to all of its nearly 300 locations by the end of 2013.

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