Why Retailers Won't Nix the Human Transaction
If you went shopping over the weekend, chances are you paid at a register. It's likely, too, that a human took your money or monitored your use of a plastic card.
But that's going to change, according to Michael Chui, a partner at the McKinsey Global Institute. Thanks to technology that connects physical objects to networks--the so-called "Internet of Things" or IoT--your retail future is unlikely to include actual point-of-sale (POS) transactions. Here's how M.V. Greene describes it on the National Retail Foundation's site:
Someday in the not-too-distant future, Chui says, a customer will be able to walk into the store, grab what she wants and simply leave. It may seem extreme, but IoT portends dramatic change in the customer experience. "People have said when checkout is working really well, it will feel like stealing," Chui says. "You grab a pair of shoes and you just walk out."
Through a population of sensor technologies placed strategically within stores, retailers will recognize customers when they walk in the door through smart devices or other means, Chui says. Stores will have payment cards on file; customers will be billed when they leave the store with the merchandise, essentially bypassing the checkout. "That could create a really interesting way to improve the customer experience," says Chui.
I'm hesitant to disagree with Chui about this. After all, what he describes is quite believable, given today's technologies. And as John Tierney points out in The Atlantic, the notion of obviating the POS experience is not exactly farfetched or unduly futuristic. Nonetheless, here are three reasons I believe human beings will remain at checkouts for the next several years:
1. Retailers are slow adopters. For mom and pop stores, their thin margins make new technologies prohibitively expensive, even if you can argue (as the salespersons of these technologies have for decades) that over time, the technology will pay off.
For large chain stores, there's still something of a slowness or cost-concern in adopting or fully implementing new technologies. "Many companies are behind schedule in updating their systems to comply with a chip-based smart card standard known as EMV," reports Bloomberg. The same article notes that it took Wal-Mart eight years to fully update all of its POS terminals with the EMV technology.
One of the IoT products retailers may potentially use is made by Zebra Technologies, which Motorola recently acquired for $3.5 billion. But the Wall Street Journal's story about the acquisition noted that investors were "skeptical" because retailers "have often been slow to adopt new technologies."
The same article mentioned that another IoT technology, radio-frequency identification tags (RFITs), has "failed to gain broad appeal, largely because of the expense. An RFID tag costs about eight cents, compared with less than a penny for a bar-code label." According to the Journal, this cost is why J.C. Penney Co.--which started to replace bar-code labels with RFID tags in 2012--ultimately dropped the project.
2. Concerns over hacking and privacy. The Department of Transportation and the Federal Trade Commission are "moving more deliberately," when it comes to potentially regulating the IoT, notes Bloomberg. The reason? These agencies are "concerned that devices may be vulnerable to hacking, lead to misuse of personal data or even cause physical harm to their owners."
Let's put it this way: If using your debit card in a retail setting isn't totally safe in 2014, why wouldn't the government take its time before figuring out how to monitor the next wave of technology? Likewise, if our established automakers are paying record-setting fines for malfeasances, why would the government be so quick to entrust a new wave of automakers with cars that drive themselves?
It's dangerous. "The 'dark side' of having devices connected to the Internet may involve hackers remotely taking control of appliances inside homes to create a fire or vehicles to kill people, according to Internet Identity, a computer security company based in Tacoma, Washington," reports Bloomberg.
Already, the FTC has settled an IoT case against Torrance, California-based TRENDnet Inc. for selling Internet-connected home video cameras. (The cameras had lax security controls, and got hacked.)
3. Retailers need thorough, in-person customer service to differentiate their brands. Thanks to the demands of modern life, most consumers have to enter a store every few years to buy a new phone or a new computer or even a new TV. For many shoppers, the thought of making this high-tech, high-priced purchase without a lengthy, in-store conversation is hard to fathom. The best retailers will seek to master these conversations, making buyers comfortable not only with the edgy technology but also with the idea that they can return or exchange the purchase if they're dissatisfied.
I recognize that in IoT scenarios, these conversations might still happen--it's just that the actual purchase won't require a person-to-person exchange.
Still, I believe that the best retail experiences involve interactions with engaged, knowledgeable store employees all the way through--from storefront gaze to curious browse to POS purchase. Trust has to be built, when you're asking consumers to spend a lot of money on products they don't fully understand.
This is especially true for products like phones, computers, and TVs. Yes, in some cases, consumers will choose based on price or features. But in others, consumers will choose based on the company or retailer they feel most comfortable dealing with--before, during, and after the actual transaction.
And that's why an in-person POS conversation is still important. There are some questions customers only think of when they're ready to pay--questions, for example, about return and exchange policies.
You might think that retailers don't need human beings to communicate their return policies, but the truth is, humans help. In fact, if there's one area online retailers (in the absence of human interactions) need to improve, it's in the communication of their return policies. Last year, a software-as-a-service company called Granify analyzed more than 20 million online transactions. Their big takeaway was that the most important thing for online shoppers wasn't price. It was either return policy or viable testimonials about the product. Brady Cassidy, who heads Granify's digital marketing, told me that "online retail is still miles behind the offline world, in terms of customer experience."
The bottom line is shoppers--whether they're shopping online or in person--need to trust the retailer. And in-person interactions facilitate that trust.
That's why I think they're here to stay. Even at the register, where, strictly speaking, they're no longer necessary.