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Technology is a wonderful thing for the grocery industry. It lets retailers do things faster and more efficiently via sophisticated software, advanced POS systems, and the like. The emergence of the smartphone as a shopping companion will provide many marketing opportunities.
All of this was apparent on a stroll through the exhibit hall at the National Retail Federation’s BIG Show recently in New York. The technology on display was breathtaking and the advantages were many. Are there any disadvantages? Well, maybe.
Chris Witham, a senior executive with The Hershey Co., spoke about lost impulse sales at the self-checkout lane at an executive breakfast briefing sponsored by Wincor-Nixdorf, a provider of advanced retail IT solutions. He said billions of sales dollars in grocery stores have been lost since self-checkout was introduced in 1992.
How is that possible? That’s easy. The front end of supermarkets with standard POS systems has always been prime merchandising real estate for snacks and cold beverages. While their groceries are scanned, shoppers can pick up a chocolate bar or cold drink as a modest indulgence. Maybe they’re thirsty. But there are fewer or no products merchandised in self-checkout lanes. Customers are busy scanning their goods and don’t have time to consider snacks. Experts say front-end products account for about 1 percent of total store sales and 4 percent of gross profits. Self-checkout lanes have reduced those totals.
Hershey is sounding alarms about this loss. Its Knowledge Works unit has studied self-checkout’s negative impact on impulse sales. Company executives presented their findings at the Food Marketing Institute (FMI) show last June, and now at NRF.
Of course, self-checkout provides many advantages, and nobody is suggesting that retailers eliminate it. First, it's a customer convenience. Shoppers with a few items want to get out of the store quickly and don’t want to stand at the standard POS behind customers with a basket full of groceries. Time-pressed shoppers would likely favor stores with an efficient self-checkout system. Second, a store associate doesn’t have to scan, pack and accept payment for groceries. So there is a labor savings. I am sure companies along the way have compared the financial gain from these advantages with the financial loss of impulse sales at the front end. I suspect Hershey has. Have retailers?
That brings us to online grocery shopping, which is the next big thing. Computer technology enables shoppers to order groceries on a desktop and have them delivered to the home. Or consumers can order online and pick up groceries at the curbside of the store. Either way results in lost impulse sales because the customer is never inside the store.
What to do? “We test merchandising concepts with retailers to help them understand what’s in place today, and what the future could look like as they redeploy space in and around pay points in their stores,” said Witham, the company’s senior manager of Front End Experience. He said Hershey is partnering with Wincor-Nixdorf to develop solutions such as dispensing machines near self-checkout, kiosks at curbside, and vending machines next to gas pumps.
Good for Hershey. Let’s keep the impulse in grocery shopping.