Talking About a Revolution in the Checkout Line

Are consumers ready to say sayonara to the traditional checkout experience? Don’t expect lines to disappear overnight, but a range of new game-changing payment technologies entering the marketplace will likely transform consumers’ expectations of the checkout process. As a result, retailers will want to be nimble and attentive to their customers as they weigh the new technologies, many of which require upfront investments. 

While early adopters may experience some hiccups as kinks are worked out with new systems, they will also benefit by potentially building consumer loyalty and trust in the new payment options. Also, some of the new technologies give retailers access to more customer data than ever before, allowing stores to mine the information to better target customers. Research firm Aite Group says the US is close to a tipping point for mobile payments and predicts that mobile payments will account for $214 billion in gross dollar volume by 2015 compared to $16 billion in 2010.

Let’s take a look at some changes in the checkout line:

• The “Phone Wallet” Payment:  Google Wallet was the first big “phone wallet” method to hit the market in 2011, with other major players working to bring their brands to market in the near future.

  
  

  
  Google Wallet customers can check out at the register by waving their Android smartphone in front of a MasterCard Pay Pass payment terminal. The phone accesses the customer’s Citi Mastercard or pre-paid Google card. Google Wallet works with Android phones embedded with Near Field Communication (NFC) technology.  By 2014, half of smartphones in the US will be NFC enabled. Major retailers including Macy’ s, Toys "R" Us, Walgreen, and American Eagle have signed up for Google Wallet’s pilot program this summer.

  
  

  
  Added value comes from Google Offers, a Groupon-type program which allows retailers to target nearby customers with mobile coupons that can be stored in their Google Wallet and automatically redeemed at checkout. The program combined with Google Wallets allows retailers to access customer data based on location and transaction history and create more appealing customized deals.

  
  

• Mobile Point of Sale (POS) Devices:  The in-store experience is also changing as retailers equip their sales staff with mobile POS payment devices. These give customers the option to skip the traditional checkout line and pay for items anywhere in the store. Retailers who invest in these devices aim to reduce the number of consumers who abandon their potential purchases when faced with a long line at check out. 

  
  

  
  Home Depot has spent $64 million on 30,000 phones that can serve as a checkout, an inventory scanner, and perform other useful functions for its sales staff. Home Depot reports that it has averaged 100,000 mobile POS transactions per week in its first year of the program. Other retailers are adding similar technologies. For example, Nordstrom is rolling out some 5,000 mobile checkout devices to its sales staff this summer in order to speed transactions and inventory searches. 

  
  

  
  Small businesses have not been left out of the payment revolution. Mobile credit card readers can help small businesses who don’t have traditional checkouts with a cash register.  Start ups such as Square Inc. have found success in the space. Businesses swipe a customer’s credit card via Square’s small device plugged into a smartphone or iPad to process a transaction; receipts are delivered via e-mail or text message. Square charges a set percentage of the transaction and does not require a long-term contract.

  
  

  
  Mobile credit card readers also have been popular with some consumers, who use them to ease personal transactions such as splitting a restaurant bill. Square created some online videos promoting the cool factor of its device, while a competitor has spoofed Square’s videos as the payment market heats up.

  
  

• PayPal Option on Websites of Large Retailers:  This is a case of helping the customers feel more comfortable during the checkout process. Many consumers have PayPal accounts and appreciate the option to pay with that method instead of entering their payment information again. Customers sometime abandon their online carts if the check out process is cumbersome.  Adopters include Home Depot, which offers PayPal on its site, and GNC, which uses PayPal on its mobile application.

  
  

• Pay Online/In-Store Pick Up:  Many large retailers including Wal-Mart and Best Buy offer the option of buying an item online and picking it up in the store, which allows the customer to receive merchandise faster, skip shipping fees, and (mostly) avoid waiting in lines.  Many retailers offer better deals on online purchases so customers can take advantage of those deals and still have the item in hand often on the same day. It appears that retailers still have some efficiencies to sort out with this method, as customer complaints abound online about lengthy in-store pick ups.

  
  

Linnea Kirgan is an editor with First Research.