Blog Post - Hugh Fletcher, Feb 14 2019

The ultimate in customer experience? How about no payments!

The ultimate in customer experience? How about no payments!

It's the sort of thing that might happen to you in a dream, You walk into a shop, load up with all the goods you want, and then just walk straight out the door - no checkout, no sales assistants, no tag removal, no payment.

Except, instead of alarms going off and a small army of security guards immediately chasing you down the street, nothing happens. You simply walk away, scot free.

To most of us, fantasy or not, this sounds like shoplifting. Yet, to some of the biggest names in retail - think Amazon and Walmart for starters - this is the vision of what payment as part of the in-store retail experience needs to be.

What we are talking about is the removal, or at least the radical re-imagining, of point of sale. For retail insiders interested in making the shopping experience as customer-friendly and convenient as possible, checkout has long represented a sticking point. Having to unload all of your items so they can be scanned one-by-one before a transaction can be processes eats into people's precious time. When you also have to queue for the privilege, it can be enough for disgruntled shoppers to give up and go elsewhere.

Plus, when it boils down to it, people just don't really like handing over their hard-earned cash. Anything that minimises the ritual of having to pay whilst making the shopping experience feel more seamless is bound to appeal to the natural instincts of most consumers. As Michael Chui, a partner at the McKinsey Global Institute, puts it: "when checkout is working really well, it will feel like stealing."

But what does this future ideal of checkout - that doesn't feel like checkout at all - look like? How can it be achieved, and is it ever likely to be viable enough to become mainstream? And, just as importantly, what's in it for retailers?

Bringing mobile commerce in-store

In a way, the concept of checkout-less transactions - also known as automated or autonomous checkout - in bricks-and-mortar retail is a game of smoke and mirrors, a way of creating the illusion of not having to pay whilst still taking money from shoppers for the goods they walk out with. That is why it is perhaps better to speak about radically re-imagining point of sale rather than removing it. The transactions are still there, people still pay. It all just happens in a way that is less conspicuous and less time-consuming.

The model for checkout-less retail comes from the world of digital commerce, and mobile commerce in particular. Thanks to in-app payments and mobile wallets amongst other innovations, smartphones have come to be at the forefront of frictionless payments.

This is already a trend that is having a significant impact on purchasing behaviours. If you take Uber as an example, you can see how in-app payments have transformed an entire sector in the space of a few years. The traditional way of paying a taxi driver in cash, which carried all the concerns of having the right money, the driver dealing with change in the dark and so on, has been totally overhauled. By accessing your Uber account and confirming a booking, payment is automatically taken using the details stored in your app.

They key here is the link between transaction and identity. Smartphone apps, digital shopping accounts, mobile wallets and so on store information about who you are and the bank or card details you use to pay. Once authorised within an app or an account, payment can happen with a single click or swipe.

This is the first principle behind the checkout-less shopping concept. Examples such as the Amazon Go stores and the Standard Cognition store in San Francisco are built around apps. To get into the stores in the first place, you have to have the relevant app downloaded on your phone and an account set up. After you are identified and admitted, payment for whatever goods you buy is automatically taken from your saved banking details.

Other examples include Apple's use of a self-checkout app which allows customers to go into an Apple shop, scan an item they want to buy and pay for it via their Apple Store account, without having to interact with sales assistants or wait at a checkout. Walmart has rolled out a similar approach with its Check Out With Me concept, which allows customers to scan items as they go and pay at the end within an app.

All of these serve as examples of bricks-and-mortar retail co-opting an approach from app-based mobile commerce in order to reinvent point of sale. They also suggest that, as things stand, you can't separate the vision of a checkout-less retail future from apps.

How far can the concept go? In China, the convergence of bricks-and-mortar with mobile has also seen the introduction of un-staffed convenience stores. Powered by the popular WeChat platform, BingBox stores in Beijing and Shanghai use QR codes for access and item scanning, with payments taken from customer details stores in the app account.

Less work, more transactions

The principle behind bringing app-based automated payments into in-store retail is that a more seamless and convenient shopping experience will encourage more traffic and, therefore, more sales. Certainly, in a world where digital and mobile commerce have radically shifted consumer expectations on things like waiting times, it makes sense that bricks-and-mortar operations should at least have to imitate what online channels do well in order to remain competitive.

By the same logic, anything that can be done to remove friction from the shopping experience can be viewed as helping to drive sales in store. Aside from payments, one area of debate, certainly in high volume sectors like grocery, is how to minimise the work that has to be done to scan items in the first place.

Self-checkout lanes were introduced in grocery to ease queues in staffed aisles. But, fundamentally they still pose the same issues - every item has to be scanned in individually, which takes time. Walmart's Check Out With Me concept and similar scan-as-you-go technologies seek to avoid the bottlenecks faced at the end of the shop, but they are still making the consumer do plenty of work.

The focus of creating a truly frictionless in-store experience will ultimately fall on automating the item identification process, as well as transactions. Amazon Go stores use sensor technology on shelves and products to register items on the customer's app as they pick things up, automatically creating and totalling up a list as they go. Another possibility is the use of 3D imaging cameras which are capable of instantly identifying every item sin a basket from the size and shape of their packaging.

Automated checkout is just one of the leading digital trends we explore in our Futures 2019 trend report.

Download Futures 2019