Smartphones: The Next Retail Checkout Terminals

by

Analyst, Software Advice

Currently, the modern U.S. retail checkout experience is dominated by two types of point-of-sale (POS) technology: traditional and self-checkout. While self-checkout has grown in terms of visibility over the past two decades, there are indications that this version of self-serve sales processing may be on its last legs. Case in point: Albertsons has announced it will be removing self-checkout from all of its privately-owned stores, replacing them with traditional checkout lanes. Kroger has announced a similar experiment in Houston, Texas.

The idea behind many of these self-checkout deployments was to provide consumers with more choice and a better shopping experience. Self-checkout hasn’t really fulfilled either promise. And given the advancements in POS and retailing technologies, it has in many ways become outdated. While self-checkout likely isn’t going away any time soon, I think it’s time that POS moves where it belongs – into the shoppers’ hands and stores’ aisles.

Radio frequency identification (RFID) and mobile POS technology can provide customers an in-aisle shopping experience. Fortunately, the hardware that can help breathe life back into brick-and-mortar retail – and perhaps replace traditional POS terminals all together – is already in shoppers’ purses or pockets: the smartphone.

Duplicating the Apple Retail Model

In a recent conversation with Doug Stephens of Retail Prophet Consulting, we discussed the future direction of retail point of sale. Stephens agreed that the checkout experience is in for some interesting changes.

“I see the checkout as we know it disappearing, replaced by a couple of different checkout models. One of which is self-scanning as consumers shop. The other is the “Apple model,” where the associate is the point of sale. One experience is extremely self-serve, streamlined, with very little human intervention. The other experience is empowering the sales associate to create a more intimate experience – and build a better sale.” Doug Stephens, Retail Prophet Consulting

With the rising popularity of mobile, tablet and smartphone computing, both consumers and retailers are increasingly familiar with how to use the technology – making it even easier to implement these checkout models. For instance, retailers can provide mobile computing devices to employees and deploy mobile POS applications, thus turning employees into full-featured checkouts. The “Apple model” can best be implemented in retail operations that handle low-count, high-price purchases requiring employee assistance – such as electronics and hardware.

The implementation of this new checkout model would be rather simple:

  • Educate sales floor employees so that they can carry out sales processing in addition to assisting customers.
  • Provide staff with smartphone or tablet devices using either web-based or native retail software applications that can executive point of sale and typical sales floor requests, such as price lookups and inventory queries.
  • Supply employees with traditional or RFID tags to indicate items that have been purchased.

Eliminating the central checkout allows retail employees to move from the checkout station to the sales floor, freeing them up to provide additional assistance to customers. Home Depot has actually been one of the pioneers in this movement, deploying what it calls “First Phones” in some of its stores. Reception has been mixed, and it looks like it’ll take until version 2 (or maybe 4) to get this right – but it’s a move in the right direction.

NFC Smartphones to Enable Futuristic Grocery Shopping

With near-field communication (NFC) technology, retailers can eliminate the employee-managed checkout. By deploying NFC technology in stores, retailers can track products in real-time as customers grab and place them in their cart. In addition, NFC makes it easy to provide product-specific information and deliver marketing to consumers as they make product selections. The RFID technology powering NFC and mobile wallets stands to eliminate the traditional barcode, which would mean an end to checking out at the store exit.

This would be a great solution for consumers that shop “by habit” and navigate a store with a plan, such as grocery stores. Barcodes and price look up (PLU) codes would be swapped out with RFID tags. These tags would provide added security for store items, as well as provide the ability for consumers to track spending as they shop and place items in their cart.

NFC-enabled smart phones would act as a pilot, guiding consumers through a store. One of the strongest components of this model is the ability for retailers to directly market to consumers and include them in loyalty programs, with promos such as:

“You’ve just purchased three apples. Would you like to purchase two more for the price of one?”

“You have purchased peanut butter and jelly. Do you need bread?”

“You’ve received 105 points for choosing Nestle-brand items. At 120 points, you’ll receive $5 off your next Nestle purchase!”

Consumers could complete their shopping experience and confirm purchases by using their smartphones as electronic wallets at exit gates. RFID tags on items would also alert security systems if any products weren’t paid for to help reduce inventory loss.

Joseph Tarnowski, Technology Editor at Progressive Grocer, believes the big benefit to this technology is that adoption would be relatively seamless from the shopper’s perspective:

“The next level of most consumer-facing programs in a store is going to be attached to smartphones. What makes this so disruptive, is that unlike most checkout experiences in stores – people love using their phones. There’s no real learning curve. There’s no need to present an additional incentive.” Joseph Tarnowski, Progressive Grocer

Unlike the “Apple model,” though, we’re not there yet. NFC is one of the most disruptive trends for retail as we trek through the smartphone era, but development of a technology ecosystem is crucial to its adoption. To be successful, it also needs the backing of consumers, smartphone merchants and most importantly, retailers.

Retail Leaders at Crossroads on POS Checkout

Who will lead this checkout innovation? With Ron Johnson moving on from Apple Retail to head J. C. Penny, the mega-chain department store is a likely candidate to shake-up traditional retail checkouts. Does that mean switching to a more Genius-like Apple experience? Time will tell if Johnson duplicates his previous success, or innovates again, but big changes in 2012 are likely.

Alternatively, we’re left wondering if mobile application developers will lead the way in retail checkout innovation. Companies like AisleBuyer have already made great headway into the smartphone-based self-checkout market. Integrating online and in-store POS for retailers and restaurants provides a powerful option for smaller, niche-retailers.

The direction that retailers will take ultimately depends on a number of factors, including leadership, the needs of the segment and a dedication to improving customer experiences. Whether retailers decide to take path A, path B or another unseen route, I think the vehicle will be the smartphone.

Do you think we’re truly ready for the smartphone POS terminal? Share your thoughts in the comments section below.

Thumbnail image created by Nate Grigg.

 
  • Chris Frandsen

    Great article! I once owned a retail store and would have loved to have had this NFC and RFID technology available for both inventory and checkout.

    Problem is availability of low cost secure RFID tags.

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