Wednesday, June 21, 2017

How Point-Of-Sale Has Changed And Is Changing.


Automation is going to take away even more jobs at your local grocery store.
But not all of them.


Checkout procedures at grocery stores have changed dramatically since I was a kid.   Back in the 1960's and 1970's, young men and women, sometimes high school kids, would work at grocery stores "pricing" items.   A tape gun with pricing labels would be used to attach a price sticker to every item in the store, which was a tedious task.  And if one item was missing a sticker, the store had to do a "price check" and have some other clerk run back and see how much the item cost, so it could be rung up. ("Price Check" is phrase you'll never hear at Dollar Tree!).

It was a primitive system, with little in the way of controls.   You could only guess at how much product you sold, based on what you ordered and what your inventory was like after the fact.   How much you lost to shrinkage (theft) was anyone's guess.   You bought stuff, priced it, sold it, and hoped that there was more money in the till at the end of the day than what you paid for product, rent, labor, and utilities.  The customer's receipt was just a list of numbers and maybe category indications (grocery, produce, meats, frozen, etc.).

In the 1970's, they started putting little slices on the stickers, as shoppers realized they could peel off a sticker that said "$1.99" and put it on a product that cost $3.99 and then check out.   The new stickers would fall apart if you tried to peel them off.   This was high-tech retailing, circa 1975!

All that changed dramatically with the Universal Product Code or UPC with its numbers and bar codes.   Items didn't need to be "priced" but instead a label could be placed on the shelf telling shoppers what items cost.   A bar-code scanner at the register would then ring up the purchase, providing a detailed receipt of what was purchased, and also deduct the item from the store inventory on the computer.  The system could even be programmed to reorder items automatically, as they were purchased.   Now you could know, with precision, what you ordered, what was sold, and how much was being stolen.

It took a while for stores to buy the new registers with the laser scanners, as well as time for food producers to put UPC codes on their products.   For a long while, many grocers had to create their own UPC codes (and some niche retailers still do) for un-coded products, and manually place stickers on items, still.   The technology was around for a long time before enough installed base and customer acceptance occurred and it truly became a "universal" product code.

Of course, many people freaked out when price stickers went away.  How would you know how much something cost?   Some were outraged, but over time, people got used to it.  There was some bruhaha initially when some stores changed prices in the computers during business hours.   You would pickup a can of peas for 69 cents and by the time you got to the register, it was 79 cents.   Laws in some States put an end to this practice - today, prices are usually only changed overnight when the store is closed.

The new system stayed pretty static for a number of years.   But over time, retailers started exploring new ways of checking out.   And again, you may be reading about this stuff today and thinking it is all "high tech" stuff, but I was writing Patents on this crap literally decades ago.   The technology has been around a long, long time, but getting social acceptance and an installed base are keys to implementing such technology.  And sadly for inventors, often the Patents have long expired by the time some types of technology become commonplace.

UPC codes had other uses as well.  For example, you may see these "coupon printers" at the checkout, usually from Catalina Marketing - although they are pretty old-tech these days and falling out of favor.   Using the UPC data, the coupon printer could generate coupons tailored to the customer's shopping habits.  You buy cat food and the machine cranks out a coupon for cat litter.   Buy baby formula, it cranks out a coupon for diapers.   Hey, they know you'll need one, if you bought the other, right?  Shits got to go somewhere. 

Self-checkout was the next thing to come down the pike.   And again, many people resisted this and some still do.  I know people who vehemently refuse to use self-checkout, even if they have only three items and there is a line at the regular register.   They will wait 20 minutes in line at a register rather than use self-checkout.  These are the same people who can't be bothered to come to a full stop at a stop sign, because they're "in a hurry."    Of course, while they wait in line, they line-hump.  People are very selective about what they are in a hurry about, it seems.

Self-checkout doesn't eliminate the cashier, of course, but allows one cashier to monitor four to eight self-checkout kiosks, which reduces labor cost by a factor of four to eight (most stores have self-checkouts in pods of four, Wal-Mart is more aggressive, and usually has six to eight).   Between bar coding and self-checkout, retail stores have eliminated a lot of labor from their overhead.   They still need people to stock shelves and help customers (customer service, of course becoming scarcer and scarcer) and they still need someone to monitor the self-checkout stands.  And they need security to monitor shoplifting, although lately this is a dicey proposition as shoplifters have "rights" and shopkeepers have none - other than the right to be sued for detaining a shoplifter.

Scan-and-go was another idea from many years back that is starting to hit the stores.  Sam's club has an app for it.  I'm sure other stores do as well - or will.   Again, the roadblock to implementation wasn't the technological side, but the social.   Once smart phone implementation was near 100%, it was possible to enable these types of technologies.    Before then, not so easy.

The technology isn't difficult.  You use the "app" to scan the bar codes on items you buy as you put them in your basket.   When you leave the store, you just walk out and put the items in your car.  Your credit card or other payment option is debited by the amount you bought.   Like self-checkout, it is somewhat based on the honor system (although self-checkout scales tend to keep pilfering to a minimum).   But again, you have someone at the door who checks your purchases as you leave (as they do at most wholesale clubs) and you have store security keeping an eye on you as well - with numerous cameras throughout the store - welcome to 1984!

One problem with this model of scanning is that it is all-too-easy for shoppers to innocently "forget" to scan an item, and thus end up as unwitting thieves.   And I am sure that more than one shopper has forgotten this way, and if they are caught, made to look like shoplifters, when they did not intend to steal.  This could limit acceptance and implementation of this technology.

Enter RFID and "Near-field" communications, which are related technologies.   Again, a decade ago, my inbox was filled with this stuff - people wanting to use "near field" in retail checkout.  The technology isn't all that new - RFID (Radio Frequency Identification) chips have been around for decades.  Those metal loops at the exit of the store generate radio waves which are picked up by small antennas in these little chips.  They read a code on the chip and rebroadcast it to the antennas.  If you didn't "deactivate" (reprogram) the chip when you bought the item, an alarm will sound and you will hear that voice say, "Please return to the checkout area!" which is embarrassing.

I had a pair of sandals once that had these chips embedded in the soles.   Every time I went to Home Depot, the system would accuse me of being a shoplifter, until a helpful clerk "scanned" my shoes and deactivated the RFID chips!

RFID also allows retailers to assign a serial number to individual items.  So unlike bar codes, not only do you know what the item is and its price, but which of the ten items you have in stock it is.   I saw a young lady try to return an expensive faucet (without receipt) at Lowe's one day - many years ago - and the manager told her, "I can't take this back as our computer shows it is still in inventory!" - what he was saying was that the item was in fact, shoplifted.  He let her leave the store with the $200 faucet, but without $200 in cash.  As he put it, "It isn't worth it to prosecute, but when people realize they can't get cash for these shoplifted items, they stop shoplifting, at least here, anyway."

So this technology has been around for decades.   But only more recent smart phones have the ability to use this RFID or "near field" communications technology.  Supposedly my Galaxy 4 has some beta version of it, but I suspect I would have to buy a newer phone to use near-field apps.  Not only can this technology read RFID chips, but it can communicate with Point of Sale (POS) terminals to process credit or debit card transactions or other forms of payment.

Amazon has such an app, called Amazon Go.   And people think Amazon invented near-field or something as a result.  This technology is even better than the scan-and-go from SAMs club as it used the near-field data to automatically scan what you put in your cart.   Early Patents on this idea that I've seen had special carts with antenna and receivers, as back then, no one had smart phones much less smart phones with near field on them.   The idea never took off as the shopping carts were expensive and people could spoof them by damaging the antenna, and of course, people steal shopping carts, and if you have $200 in electronics on each cart, well that gets expensive.  Plus, you'd have to regularly recharge batteries on each cart, which would be cumbersome.

By the way, what happens when the battery on your smart phone dies in the middle of a shopping trip?   Just asking.  I'm sure it will happen - and be awkward.   It is like an incident a friend of mine reported - he was glad his flight was delayed as his iPhone battery went dead and his boarding pass was on his iPhone.   He was able to recharge the phone by the time the plane arrived and all worked out well.   For others, maybe not so well.   First-world problems!

Again, the idea has been around for a decade or longer, it just took the installed base of near-field phones to come along to make it practical.  And along the way, a number of Patents have been issued on these various technologies.   A lot of people don't understand how Patents work and think that, for example, "Apple has the Patent on the iPhone!" when in fact there are hundreds, if not thousands of Patents on various components and arrangement of components, and even things well-embedded into software, firmware, or hardware that are so subtle that you might not even be aware they exist.

So I am sure Amazon has a few Patents on near-field - as do a number of other people.  Whether any one player in the marketplace can lay claim to owning this concept remains to be seen.   What usually happens is that one or two players try to make this claim and end up in court and no one really wins.  It does keep the smaller competitors out of the game, of course.   And of course, a patent troll will file a claim against the winners in the marketplace, hoping to score a quick victory and run off with a few million dollars - as someone did with bar codes.

Will the checkout-less store be the wave of the future?  Perhaps, and in the very near future.  Amazon Go is only open in one store, as a Beta test at the present time, and only Amazon employees can use it.  Like Amazon's vaunted "drone delivery" it is more press-release than reality.  So apparently it is not ready for prime-time as the Sam's Club scan-and-go app already is.   And I suspect there will be teething troubles with both applications, as well as those from other parties.   Like I said, near-field is the buzzword today, or more precisely was the buzzword about five years ago.  Blockchain is the buzzword today - eat your media kibble and stop complaining.

Near-field will also be able to do weird, creepy things that, like bar codes and the demise of pricing labels, will alarm many people.  If you walk by a retail display, your phone may read the near-field code of an item, and based on some complex algorithm, vibrate your phone and display a virtual coupon or some other incentive.   So for example, the company "knows" you buy brand X toilet paper, but when you walk by brand Y, a coupon for it will appear on your phone.  Brand Y, of course, pays the grocer to do this, hoping for a "conquest" sale.

And of course, this means that moreso than even today, computers will keep track of everything you buy or even everything you look at, pick up, examine and even put back.   The phone can keep track of where you pause in the aisle.  Cameras can track your eye movements.  It starts to get a little Big Brother in a real hurry, which alarms a lot of people.

But of course, this presumes that "brick and mortar" retail will continue to thrive for years to come.   Some prognosticators are bloviating that "Amazon is putting traditional retailers out of business," even as Amazon represents about 1/4 of the sales of Wal-Mart.   Sears isn't going bankrupt because of Amazon.  The main reason is Wal-Mart, which is driving a lot of retailers under.   And no one weeps for the demise of overheated malls with overpriced stores and harassing "mall rats" either.

I am skeptical that "shopping" will die off entirely.  As one analyst put it, the death of malls may "de-gentrify" retailing, opening up opportunities for niche retailers and mom-and-pop stores.  On our little island here, we have a small shopping district that sells resort wear and other notions.   People still like to go into stores and "shop" for things like clothes and souvenir t-shirts.   And if you are in the need of a beach umbrella and suntan lotion, you can't wait for Amazon Prime to deliver it to you by UPS.  And no, drones are not going to bring these things to you at the beach.  That's a nice fantasy and nice ad copy (e.g., clickbait articles), but it doesn't represent a practical and economical way of delivering things.  Bear in mind most of these drones have ranges measured in feet and minutes, not miles and hours.

And people will still want to buy food in-person, even as home delivery grocery "apps" have flourished.  A friend of mine in Northern Virginia reports their neighbors have some sort of food delivery through Amazon or Whole Foods (Peapod was another such endeavor).  They are, of course, the kind of people who never leave the house and have their curtains closed all the time.   I am not sure that agoraphobics are a large enough market to sustain this business model, as others have noted.

People still like to thump cantelopes and be exposed to different products in a store.   It is hard to "shop" online unless you know what you want ahead of time.   And if Google-type algorithms are used to steer your shopping habits, well, like with my knitting experiment, once you click on "pork rinds" you will be lead to believe that that is all the store has in stock.

In short, things are changing, but also remaining the same.   The hyperbole in the financial media that a "sea change" is at hand and that fresh kale will be winging its way to your home via drone, are more than a little overstated.  What ever did happen to the Washington Post, anyway, and why did they go all Dan Rather on us (Democracy Dies In the Darkness!  Courage!).   According to the Post, the reason why the Democrats are losing elections is that they aren't liberal enough.   I have stopped reading the Post as it no longer makes any sense.  But I digress.

I guess the point is, once again, to ignore about half the things (or more) that you read in the press, particularly the financial press, as most of it is utter bullshit.   The Washington Post hypes Amazon because it is a trendy "tech" company and liberal-friendly.  They hype Whole Foods because that's where yuppie left-wing journalists buy their asparagus water.  They disparage Wal-Mart because it is run by anti-union Republicans who know how to make a profit in the traditional business of retailing.   It is all about heroes and villains, damning and shaming.  It isn't about reality and what is really happening in the world.

And that, to me, is kind of sad.

UPDATE:  A reader reminds me that Jeff Bozos the founder of Amazon also owns the Washington Post, a fact they usually mention in their articles.   Seems lately, his private newspaper is now a private megaphone for his business.   Sort of a Trumpy kind of thing to do.

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