COVER STORY: Executive Insight Series: Rethinking the Front End: Lasting impressions

Every grocer wants to see customers smiling as they walk out the door, and will go to great lengths to win those smiles, including stocking huge varieties of fresh produce, sourcing hard-to-find specialty foods, installing walk-in health clinics, and, at the extreme, launching expensive total store redesigns to enhance the shopping experience.

But one thing's pretty much guaranteed to be underplayed, if not totally overlooked: the front end checkout area, which constitutes a shopper's final experience in the store and a retailer's last -- and, some might argue, best -- opportunity to wow a customer.

The design, offerings, and go-to-market strategy of the front end has remained essentially unchanged for the past 50 years. And while many studies in recent years have analyzed the assortment of products merchandised around the checkout, usually in an attempt to find some ideal mix, apparently none have taken the further step to question whether the front end itself could use some reinventing.

None, until now. To ask such questions is what Progressive Grocer, Wilton, Conn.-based management consulting firm Meridian Consulting Group, and Los Angeles-based design firm Shook Kelley have set out to do, with an extensive research project designed to determine the grocery store front end's contribution to a customer's overall shopping experience. The project will combine retailer and consumer research components to define the challenge, and then assess the strengths and weaknesses of the current trends in the physical layout of the total front end checkout and how the area is managed. Finally, the effort will culminate in a prototype front end concept designed to offer the industry innovation solutions.

The research project, aptly titled "Lasting Impressions" and sponsored by Parsippany, N.J.-based Cadbury Adams USA, will explore and analyze all aspects of shopper behavior at the checkout as it relates to movement within the front end's physical space, selection of products merchandised at the front end, interaction with checkout associates, and the nature and conduct of the transaction itself.

The full research project -- which will span several months, focus both on manned checkouts and self-checkouts, and also incorporate information from transaction data, customer intercepts, and in-depth interviews with grocery chain senior managers -- will be highlighted in ongoing coverage in Progressive Grocer.

"This survey is just the first step in our study to understand how innovative retail design can improve the checkout," says Michael Shinall, Meridian's c.e.o., of the groundbreaking project. "We're looking to see how every aspect of the front end can be reinvented to enhance the shopping experience and leave the customer with a 'lasting impression' of the store."

The end game is a new prototype front end, to be designed by consumer behavior firm Shook Kelley -- a template for reinventing the front end checkout experience that may well form a new and more positive lasting impression with shoppers as they exit the store.

The first component of this multipart project is a report, based on a survey of close to 300 retailers to collect their impressions and knowledge regarding current shopper perceptions, retail practices, and performance levels of the grocery front end.

Front end importance

Almost half (46 percent) of grocers surveyed view the front end checkout experience as very important in a shopper's decision to visit their stores. Grocers say only produce (80 percent) and meat (74 percent) are more important to shoppers, which might not be surprising, given the increasing importance of fresh food to retailers themselves as a differentiation strategy.

Indeed, according to PG's latest Annual Report of the Grocery Industry, which was published in the April 15 issue, fresh food is the most important merchandising/marketing strategy to supermarket operators.

That being said, in this latest retail survey the front end stands out as more important than some fresh "destination" departments, including deli, deemed very important by 40 percent of respondents; bakery, at 24 percent; and "other perimeter departments," at 12 percent. So while they might not have done much strategically about it, many grocers believe their shoppers care enough about the front end to allow it to influence where they shop.

When it comes to the checkout, shopper satisfaction matters a lot to grocers, as is evident by the priorities they set for measuring checkout performance. Of the nine metrics measured, the three relating to the shopper's experience at the front end were cited by most of the retailers surveyed, coming far ahead of metrics relating to sales and profit enhancement.

More than 74 percent of respondents listed speed of checkout as very important as a measurement of performance upfront.

How well associates interact with shoppers is a prime concern for 63 percent of grocers, which brings into bold relief the importance of a friendly face at the register. For instance, one can easily see the effect that making this a priority has been at stores operated by Bristol Farms, based in Carson, Calif. Checkout associates at these stores often greet regular shoppers by name.

Yet while the Supervalu-owned upscale grocer's associates are known for attentive service, they're by no means endless gabbers; according to a national study released last month by the Mystery Shopping Providers Association (MSPA), Bristol Farms had the shortest wait time at the checkout among grocers, with customers waiting just 1:06 minutes on average.

The Dallas-based MSPA said its study also showed Bristol Farms has a "return ratio" of 100 percent, indicating a high likelihood that shoppers would return to the location, based only on their experience of the checkout wait time.

The remaining performance metrics deemed important by grocers deal with dollars and cents at the checkout, but it's important to note that these factors rank far lower in importance than service-related metrics. Out-of-stocks, which lead this group, are an important performance metric to only 35 percent of grocers surveyed, with inventory turnover (26 percent) and dollar profit per square inch (20 percent) trailing behind.

Profit percentage per square inch, shopper conversion, and competitive variety and pricing were each named by under 20 percent of grocers.

This isn't to say that the front end's moneymaking potential isn't worth examining -- the checkout can contribute fairly heavily to store sales and profits. Forty-one percent of those surveyed say the front end represents 0.5 percent to 2 percent of store sales, and almost half (46 percent) say it brings in 0.5 percent to 2 percent of the store's profits. Just about one-quarter (24 percent) see more than 2 percent of store sales coming from the checkout, and almost one-fifth (19 percent) derive more than 2 percent of their store profit from the checkstand. Still, these numbers must be weighed against the cost of the front end in terms of labor and capital costs, both of which are high for retailers.

While the debate continues over how the checkout ought to be managed, considering its importance to a consumer's store choice, relatively few grocers surveyed (11 percent) said they run it strictly as a single business unit with its own management. Thirty-seven percent do exactly the opposite, and have each category managed by their respective category managers. More than half (52 percent), however, find a balance between the two methods, viewing the front end as its own department, but with responsibility shared among individual category managers and front end managers.

According to Meridian Consulting, managing the front end as a single business unit is the best way to ensure that business goals are achieved, even if it proves to be more difficult organizationally.

Without a "single voice" leading the checkout, decision-making reverts to the category level, increasing the risk of missing larger opportunities, or even creating the possibility of conflicting objectives among the various category managers, Meridian notes.

For example, the bulk of the grocers surveyed said their category managers make pricing decisions, while store operations execs or store managers typically handle promotions. A store manager might want to develop a discount promotion at the front end, but this could lead to conflict if that objective isn't shared by category managers, and both sides can't find some middle ground.

To complicate matters further, in some cases vendors manage aspects of the front end, and if they aren't planning with the store's goals in mind, it could actually hurt the front end business overall; even the most well-intentioned vendors will likely make decisions that benefit their companies, even though that could negatively affect the front end as a whole.

Manufacturers and retailers often have different agendas when it comes to the front end: The retailer's overarching goal is customer satisfaction, while the vendor's prime objective is to sell its products -- and often the twain won't meet.

Retailers clearly view the key role of the checkout as optimizing convenience and efficiency. Eighty-one percent of grocers place high importance on processing shopper purchases quickly and accurately, and the same percentage also stressed they want the checkout to help their store leave a positive impression on their shoppers. Sixty-seven percent said it's very important that the front end drive overall shopping satisfaction, and almost as many (64 percent) cited the importance of a strong first impression for shoppers entering the store.

Those roles viewed as less important to the retailer tend to be those that are a main focus of the manufacturer, according to Meridian. Less than half (45 percent) of respondents said it's very important for the checkout to improve overall profitability of the store, and only 42 percent see the checkout's role as offering products or services that might encourage impulse purchases. Meridian says both of these factors are of high importance to suppliers.

Less than half (48 percent) of respondents said they're satisfied with self-checkout, a sure sign that they currently are less enamored of the technology than they appeared to have been a few years ago. Sixteen percent said they are now actually very dissatisfied with self-checkouts.

This disappointment in self-checkout systems is clearly evident in surveyed grocers' receding ambitions to continue to incorporate them in coming years. Forty percent said they have no plans to increase the presence of self-checkout at their stores, and only 16 percent will maintain self-checkout presence at its current level. Only 22 percent said they plan to increase the number of self-checkout units in the future.

These views are driven by the retailers' perceptions of the benefits and risks of the technology. Among the potential benefits delivered by self-checkouts, increased shopper satisfaction and faster checkout times are very important considerations, cited by 82 percent and 74 percent, respectively. More than half are attracted to the potential benefits of reducing labor costs, improving profitability, and providing a choice of checkout experiences for the shopper.

Self-checkout units actually do speed up traditional checkouts, but do so by reducing their traffic.

"Our customers who use the traditional checkouts love seeing shoppers using our self-checkout units," says Rudy Dory, owner of Bend, Ore.-based upscale independent Newport Avenue Markets, which installed self-checkout systems in 2005. "It means fewer people in their line."

What's more, those shoppers using the self-checkout units believe they're moving through the checkouts faster. While an average consumer at the self-checkout can't match the speed of a trained cashier, the shopper perceives that he or she is getting through more quickly, which is fine with any retailer.

Shopper behavior fosters the greatest concerns about self-checkout units. More than half of respondents worry that shoppers won't scan all of the items in their cart, though most would admit that the bulk of front end shrink comes from employees themselves.

Interestingly, only one-quarter (26 percent) expressd concerns about giving up valuable merchandising real estate to the units.

The physical layout of the checkout has been virtually unchanged for the past 50 years, and right now retailers apparently aren't even thinking of the possibilities for radical change in the front end. Most of those surveyed either aren't considering exploring, or have no plans to explore, new nontraditional front end formats, examples of which are clean front ends with no merchandise at all, single-lane queues like those used by Whole Foods Market, or the same checkout layout in every lane.

While not currently contemplating a complete overhaul of the concept, most respondents do plan to upgrade or redesign their checkouts in the near future. Almost half (46 percent) plan to install new rack systems, while 42 percent will deploy new technology such as digital merchandising systems, couponing, and in-store TV at the checkout.

Thirty-seven percent said they'll have the front end completely redesigned, including the physical layout, signage, and even the floor plan. An almost equal number (35 percent) plan to increase their number of self-checkout units. Express lanes, however, will be installed by less than one-quarter (22 percent) of respondents as self-checkouts increasingly take on the express lane function.

While this survey highlights the importance of a positive checkout experience in determining store choice, it also introduces some new questions. Why is such an important component of the store managed the way it is? What impact on store sales and shopper satisfaction can we expect from front end improvements? And of course, what will the improved "checkout of the future" look like? Over the course of the next several months, Progressive Grocer and its research partners will complete the remaining elements of the "Lasting Impressions" study, bringing new insights to answer these questions.
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