Not for Checkout only

Newport Avenue Market in Bend, Ore., strives to keep its front end on the cutting edge with new technology.

Chief operating officer Lauren Johnson says the family-owned store was the first in Oregon to use electronic shelf tags eight years ago, and it recently upgraded its self-checkouts and added Apple Pay technology.

"Customers are excited about it. Certainly not all of our customers are using it, but it's changing the way customers are looking at who we are," Johnson says. "When we are looking at technology and moving forward, we tend to be early adopters."

With the investments, Newport Avenue Market aims to improve service and reduce the time shoppers wait in line to check out. The ramifications can be felt throughout the store, because labor has been reallocated with the front-end improvements.

The addition of Apple Pay was one of the front-end improvements made at Newport Avenue Markets in Bend, Ore.

For retailers, new technology has brought faster scanning, fewer price checks and shorter lines. With less space required for checkout lanes, grocers are redesigning the traditional front end. Many are adding coffee bars and in-store eateries, along with banks and other store-within-a-store concepts. Some grocers also are pulling merchandise to the entryway, providing a way to showcase items at special prices or seasonal merchandise, such as produce, plants or holiday wreaths and trees.

It's happening against a backdrop of increased channel blurring and new interest in ordering for home delivery, drive-thru pickup or in-store pickup, which will present new challenges for luring shoppers into the brick-and-mortar store.

"It's all about the experience," says Carl Preller, chief performance officer, North America, for Geometry Global. "You want people in your stores, you want traffic, and you don't want them shopping across online retail even if you have your own website."

Newport Avenue Market has resisted launching an e-commerce platform in favor of improving the in-store experience. By alleviating manual tasks, such as price changes, technology is providing Newport Avenue Market's employees more time to chat with shoppers.

"How we drive sales is through a connection with our consumers. The way we can have that is if customers come through our door and take time to shop with us," Johnson says, noting that many of the store's regular customers shop three times a week at the store. Its employee count has increased to about 100 from 50, as it has added personnel throughout the 20,000-square-foot store, Johnson says.

DIGITAL INNOVATIONS

But other retailers and CPGs increasingly are relying on digital innovations in shopper marketing, such as electronic signage, video displays and in-store kiosks. Mondelez International is using Tensator's new Virtual Assistant Ultra digital units to deliver messages about its Côte d'Or, Milka and LU confectionary brands in Carrefour, Cora and Makro stores in the UK. Wakefern Food Corp. also has used the Virtual Assistants in Flemington, N.J., to provide information about its new ShopRite Mobile Scan application, Tensator says.

The Hershey Co. has tested a 30-foot-by-30-foot store-within-a-store concept with an innovative circular design in the front end of a Winn-Dixie in Baton Rouge, La., which the company deemed a success. "The application of an 'experience zone' or a 'store within a store' concept will be ongoing," says Chris Witham, senior manager for front-end experience at Hershey. The section featured a broad assortment of confection items, from large gusset bags to theater boxes.

Retailers such as Stew Leonard's in Connecticut have effectively drawn consumers with enticing merchandise in the entryway and the front of the store.

"They've got a very interesting strategy for building anticipation as you walk through. They're already rewarding your senses and even your wallet as you go through the door" by offering merchandise at special prices, Preller says.

"It's merchandising entertainment. It's the ability to get a free coffee on the way in. These are wonderful tactics that make you feel good about the shopping trip," Preller says.

Fast-forward into the future, and experts predict excitement at the front end of the grocery store will revolve around technology designed to communicate custom offers to consumers, while making it easier for shoppers to scan merchandise themselves, pay by phone and feel confident that they are being charged the correct price at the register.

The pace of change is quickening, due to technology developments and shifting consumer trends, such as growing urban populations conducive to more quick trips, smaller-format store and e-commerce shopping, Witham says.

CATERING TO SINGLES

As demographics shift and a larger proportion of shoppers are single adults, retailers such as Mariano's and Whole Foods Market are catering to consumers who want to pick up prepared meals for lunch or dinner with expanded deli areas and take-out style stations toward the front of the store.

The rise of mobile payment could dramatically reduce physical interactions at the point of sale, affecting sales and gross margins. "We see near-term impact being more negative for impulse purchases, given shoppers' ability to transact and exit the retailer environment without interacting with a pay point," Witham says. "Yet there is also an opportunity for retailers to collaborate with CPG companies and deliver more value to shoppers through mobile. Through mobile apps, retailers and brands ultimately could encourage greater in-store interaction and conversion."

But experts also suggest technology's capabilities are running ahead of most consumers' interest–and some retailers'.

"Technology is usually just 20 percent of the game. The rest is adoption around operators," says Jonathan Treiber, CEO of RevTrax. Grocery stores with legacy point-of-sale technology often are reluctant to upgrade because of the cost. Tablet-based POS applications dovetail with existing technology and can enhance it, but so far a small percentage of supermarkets are using it, says Treiber, who predicts it will take three to five years for most grocery retailers to migrate to the new technology. He expects beacon technology to add digital marketing capabilities throughout the stores with targeted messages to shoppers' smartphones.

As retailers add beacons, they will be able to capture more data and predictive behavior, but how the new level of information will translate to interactions with customers is still to be determined, says Nick D'Alessio, global retail practice leader at Zebra Technologies.

"At what level does it become annoying, creepy, uncomfortable, versus allowing the retailer to have more [and] better offers?" D'Alessio asks. "We'll learn as we go."

ADOPTION CHALLENGE

But most consumers aren't using all of the available mobile apps when they shop, creating an adoption challenge for shoppers and retailers alike.

"There's got to be some sort of reward value. It could be charitable or money back in my pocket. That's what it's going to take to drive adoption," says Nicole Skogg, CEO, SpyderLynk, a mobile marketing company.

Competitive pressure from Amazon and other e-commerce merchants could spur retailers to act faster, but the technology's success also is dependent on consumers embracing it for grocery purchases.

"If there's a way to do it that's more convenient, consumers are more likely to adopt it," Treiber says. When retailers tried converting scan-and-go handhelds to mobile phones, the efforts largely flopped, he says. "When they took the scanners out of the store, consumers didn't remember to use the mobile app on their phone, or they had to download it, and it became more of a nuisance."

Self-checkouts also are a turnoff to some shoppers. A study by Tensator Group suggests one in three shoppers have left a store without buying the items they intended to because of a bad experience with a self-checkout.

"Eighty-four percent of our survey respondents admitted to needing staff assistance when using a self-checkout, and nearly 60 percent of customers actually prefer using more traditional staffed checkouts, which shows there's still work to be done regarding these areas," said CEO Ben Gale in an e-mail interview.

More than 40 percent of the nearly 400 shoppers polled said technical glitches were the most annoying aspect of self-checkouts, while more than half said self-checkouts were actually slower than lanes with cashiers. A majority also cited confusion over where the line started for self-checkout stations.

NCR now offers convertible equipment that can be set up as either self-checkouts or cashier lanes to provide retailers with more flexibility. The latest self-checkouts from NCR also are compatible with Apple Pay and mobile wallets, says Mike Inderrieden, director of human factors engineering at NCR. NCR averaged 6.2 self-checkouts per store it serviced in 2014, up from 4.4 in 2010, he says.

Still, some retailers have yanked self-checkout stations from their stores, preferring to focus on improved customer service with cashiers. "They may be creating more customer dissatisfaction," leaving shoppers with a negative impression, D'Alesso says.

STOPPING SHRINKAGE

Self-checkouts also raise questions about shrinkage. In eliminating paper receipts and providing the option of an e-mailed receipt, retailers might win favor with environmentally conscious consumers, but they also raise the issue of "how do you know who's walking out the door?" D'Alessio asks.

NCR is working with Boston startup Stoplift to alert retailers of suspicious activity through video checks. When a shopper places an unknown item, such as a purse, in the bagging area, the system sends a video snippet to Stoplift, where a representative reviews it and responds back to the retailer in a matter of seconds, Inderrieden says. The companies are preparing to test the system with selected retailers this year.

Even when they work well, self-checkouts–and speedier checkout stations in general–could hinder impulse purchases, Gale says: "We know based on research that one in six shoppers buys an incremental item at checkout. Impulse purchases normally happen when the shopper buys more and spends additional time in line. Given this, regular checkout provides more opportunities for retailers to increase their revenue than self-checkout."

To help retailers identify areas of opportunity, Hershey has built a database of research and insights and made it available to retailers through its Insights Driven Performance collaboration model.

"We encourage test-and-learn environments, with specific success metrics," Witham says. "Because we start with the shopper and focus on driving the retailer's total business, the final solutions help total store performance, including impulse (and) incremental categories."

CUTTING THE WAIT

Shorter wait times at checkout is a continuing goal, with many retailers measuring the number of items per minute (IPM) cashiers are achieving, says Sean Calhoon, vice president of product management at Digimarc Corporation. Speeding up the scanning process can result in millions of dollars of savings per year for retailers, he says.

To make the process more efficient, Digimarc has devised a way to integrate the UPC code into the design of the package so it is imperceptible to the human eye. The product package adorns the bar code on every square inch, so the checker no longer has to search for it or orient the package to the scanner. "You can't see it, but the mobile phone or scanner or handheld device can clearly bring that information back to the point-of-sale system," Calhoon says. "We see in all of our testing a 30 percent to 50 percent improvement in IPM."

The new bar code technology also allows brands to more easily communicate information to consumers, who don't have to hunt for a bar code on the package.

"I can point, scan, and I get this immediate payoff–the immediate link to the information, whatever the brand wants to share," says Larry Logan, chief marketing officer at Digimarc. Brands are delivering health tips, recipes or nutritional information about nutrition or ingredients, such as gluten-free, and they can change their message as often as they like. A distilled spirits company in the UK intends to use the new technology to tell consumers how the product is distilled and where the barley came from, and offer tips on recycling the bottle.

Another new marketing opportunity at the point of sale will leave a clean impression. Powershelf has launched MessageWrap, an antimicrobial wrap for the conveyor belt designed to eliminate food contaminants on the belt, while including marketing messages from brand sponsors to keep the cost free to retailers, says John White, co-CEO of Powershelf in Annapolis, Md. Sam's Club is testing the system in Bentonville, Ark., and Annapolis, Md., and Costco has installed MessageWrap in a store in Canada.

The front of the store is both the entrance and the exit, providing retailers with the opportunity to design positive first and last impressions. "A lot of retailers think about the entrance to the store and as people walk in. I think how people leave the store is really going to be the lasting impression of that retailer," Preller says.

Providing a robust loyalty program that rewards consumers can create a positive experience at the end of the shopping trip. But, Preller says, so can helping shoppers get their groceries to their cars.

The original post had the wrong picture of Ben Gale. We regret the error.