In Touch With Retailing

Self Service: From Cultural Evolution to Retailing Revolution

By Austen Mulinder, President and CEO, Fujitsu Transaction Solutions Inc.

In 1929, New York City skyscrapers experimented with the idea of letting passengers push their own elevator buttons. Two decades later, gas stations started to offer a few cents off per gallon if you pumped the gas yourself.

In the 1950’s, telephone companies followed suit by allowing direct dial phone numbers – eliminating the need for an operator to connect the call. And in the 1970’s, banks began connecting more conveniently with their customers, not only during banking hours, but 24 hours a day, by offering a breakthrough self-service concept – the automated teller machine (ATM).

From skyscrapers to gas stations, from phone booths to financial institutions, the concept of self service is certainly nothing new to consumers, nor to the businesses that serve them. But historical precedents notwithstanding, never has self service been as pervasive – or as powerful – a trend in consumer buying behavior as it is today.

The Retailing Re-Revolution

Flash back for a moment to a date a few months ago; more precisely, to Sunday, March 5. It is Oscar® night, and on the West Coast, dozens of the world’s most famous celebrities are making their way down the red carpet in preparation for the 78th annual Academy Awards®.

On the East Coast, in New York City, a star of a different kind is making its debut. The J.C. Penney Experience Store is being unveiled on the first three floors of the J.C. Penney’s store at 1 Times Square.

The J.C. Penney Experience is a self-service concept store where customers can only purchase materials via a kiosk. With 22 kiosks on the premises of the Times Square store, its major focus was to promote online shopping through the J.C. Penney’s Web site. Several sales associates were on hand to help shoppers if they needed it, but all purchases were clearly self-service transactions.

Just as clearly, J.C. Penney is not alone in its quest to explore new self-service possibilities. And there are several reasons why.

According to a study by BCC Research, one of the world’s leading producers of in-depth market research reports, the market for self-service machines – including ATMs, kiosks, and vending machines – was approximately $11.3 billion in 2005. This market will surpass the $24 billion mark by 2010, growing at an average annual rate of 17 percent per year.

The potential impact and opportunities for retailers are nothing short of staggering. Consider just a few of the ACNielsen company’s predictions for retailing in 2010. At its recent Consumer 360 Conference, ACNielsen said the volatile changes – and challenges – retailers are confronting today are, to put it succinctly, here to stay.

As ACNeilsen points out, consumers used to view shopping as a leisurely activity, a pleasant pastime to be enjoyed and savored. But with the added pressures all of us must deal with today, shopping, like many other responsibilities, is increasingly stressful.

As a result, retailers are looking for ways to keep customers happy and, of course, coming back. And quick turnaround time and great service are two of the ways to help achieve both of these goals.

Checking Out the Possibilities

To satisfy speed and service concerns alike, retailers are turning – rapidly – to self-checkout solutions. By 2010, according to ACNielsen, new technology, particularly the prevalence of RFID, will have led to the creation of simpler contactless payment devices that will fuel the demand for self checkout even more. So much, in fact, that what is still somewhat of a novel concept today will be the norm in just a few years ahead.

When it comes to paying for goods and services, consumers are already coming to the conclusion that self-service is good service.

According to the IHL Consulting Group, North American consumers in 2003 transacted nearly $128 billion in sales with the touch of a computer screen. With an 80 percent increase in self-ordered transactions over the previous year, millions of consumers opted for the convenience of self-service to pump gas, order movie tickets, pay for parking, buy groceries, print photos, renew vehicle registration, or print an airline boarding pass.

And this is just the tip of the iceberg. Greg Buzek, president of IHL Consulting, believes the demand for self-service transactions will skyrocket in the years ahead, increasing to more than $1 trillion by 2008, with self-checkout representing more than $450 million of the total.

Why are consumers willing to make such a radical shift in behavior in such a short period of time?

According to one of the world’s leading research firms in the retail sector, Framingham, MA-based IDC, multiple drivers are behind consumers’ increasing acceptance of self-service. These drivers can be divided into six broad categories. With self-service options, consumers benefit from:

• Shorter checkout lines
• Faster throughput compared to traditionally manned transactions
• Greater control over the purchase process
• Improved customer service
• More choices over the traditional purchase process
• Greater privacy.

According to IDC’s Christopher Boone in the research company’s 2003 Self-Checkout Retailer and Consumer Survey, "the number-one source of consumer dissatisfaction is the amount of time spent waiting in line."

With self-service options, waiting lines tend to be visibly shorter, and consumers often perceive service to be faster than it actually is, simply because they are proactively directing the transaction process themselves. From the consumer’s and the retailer’s perspective alike, everybody wins with self-service.

Serving the Multi-Channel Consumer

New technology is the engine that continues to drive the advancement of self-service shopping, not only because it allows retailers to differentiate their offerings, but also because it increasingly pervades the lives – and buying behavior – of a new generation of shoppers.

With the birth of the Internet, wireless technology, mobile computing and other breakthroughs that were novel or unheard of a decade ago, consumers now have multi-channel shopping options at their immediate disposal. In some instances, it is far easier to use one of several self-service options than it is to fall back on a more time-consuming, associate-assisted transaction.

Consequently, shoppers considered to be “technically savvy” today will comprise the norm in the very near future. For example, results from a Forrester Research Technographic study of U.S. online consumers in 2005 show that a consumer who is already a Web buyer is 78 percent more likely than a non-Web buyer to use an in-store kiosk.

Such findings support the idea that multi-channel consumers will be prone to use more in-store technologies, not only today but increasingly so in the future. Self-service technologies that offer more control, choice and consistency for consumers – such as in-store kiosks, personal shopping devices and self-checkout – are on the fast track to becoming more popular and pervasive in retail settings.

Everything New is Old Again

Self-service may be revolutionizing the way retailers sell to their customers, but it is certainly not a revolution in and of itself. In fact, it has been with us in one form or another ever since human beings have been transacting business together.

As a stand-alone business concept, self-service gained market momentum in tandem with the cultural migration that began with the industrial revolution and has remained a constant through the electronic and technology revolutions as well.

And as technology improves and continues to empower business performance and profits alike, more and more self-service solutions will invade the marketplace. It all boils down to the ability of self-service to satisfy the business needs of its providers and the personal preferences of its users.

Cell phones. The Internet. Self-service kiosks. Mobile computers. Wireless devices. And more. The list of self-service technology solutions continues to grow, as will the profits, productivity and customer loyalty of retailers who take full advantage of how self service can revolutionize the retailing model.