Tuesday, May 20, 2008

Take One Dose of 'Internal Research', Add An 'Independent' Survey From An Unnamed Source, and You Get A Consumer Preference For Self-Service Checkout

Fresh & Easy Buzz examines yet another report about third-party research involving Fresh & Easy Neighborhood Market. This time the report sites Tesco Fresh & Easy internal research and an 'indpendent survey' from an unnamed third-party, with both studies suggesting U.S. consumers are hot for self-service checkout in supermarkets.

There seems to be an emerging and somewhat disturbing trend developing in press reports regarding research studies or surveys about Tesco's Fresh & Easy Neighborhood Market and its U.S. small-format, convenience-oriented grocery store chain.

On May 13, Fresh & Easy Buzz published this piece questioning some research, reported on in the Financial Times newspaper out of its United Kingdom office, by a London-based investment banking and stock brokerage firm named Executive Research Ltd.

The Financial Times reported Executive Research Ltd. surveyed 700 Fresh & Easy grocery store customers outside of nine stores located in Southern California, Arizona and Nevada, and concluded from that research Fresh & Easy offers fresher foods than both Whole Foods Market and Trader Joe's, and offers better value for shoppers' money than Wal-Mart.

The report also quoted the Executive Research Ltd. researchers (but not by name) as saying: "Fresh & Easy is America's New Cult Retailer," whatever that means.

The problem with the Financial Times story was that it didn't mention anything a good consumer of research wants to know such as: What was the interview survey methodology, what were the questions, who asked them, how were the results analyzed, how were the conclusions reached, what percentage of the 700 shoppers interviewed said Fresh & Easy has fresher foods than Whole Foods and Trader Joe's and offers better value for their money than Wal-Mart, along with a couple other minor details.

Yesterday, we published a follow-up to our May 13 piece in which among other things linked to an interview food industry analyst Jim Prevor and his associates at the Perishable Pundit blog conducted with two researchers from Executive Research Ltd., as well as linked to a discussion on the website RetailWire.com about the Financial Times report and the conclusions reported in the story reached by Executive Research Ltd. We also offered some further analysis of our own. Read our May 19 follow-up piece here. The piece has links to Perishable Pundit and Retailwire.

Frankly, we thought we were done writing about questionable research from third parties regarding Tesco's Fresh & Easy when we put yesterday's piece on the Executive Research Ltd. interview survey to bed and pressed "publish."

However, no sooner had we put that piece to bed and started checking the email, what do we find?

We find this story from the United Kingdom-based grocery industry trade publication The Retail Bulletin. The title of the piece is: "More self-service technology coming to stores near you."

We reprint the complete story below in italics. Our analysis continues after the story under the Fresh & Easy Buzz heading.

More self-service technology coming to stores near you

Tesco's Fresh & Easy chain in the US has uniquely adopted an all-self-checkout model that was initially questioned but has latterly gained increasing customer acceptance, according to the grocer's internal research.

By Glynn Davis

As many as 90 per cent of its customers indicated that they were either 'satisfied or very satisfied' with the checkout experience, and in a separate independent survey some 60 per cent of shoppers found the arrangement 'favourable' while another 27 per cent stated that 'it doesn't matter' what format the checkouts take. A lesser 13 per cent stated that they would prefer a conventional staffed checkout.

These findings support the argument from self-checkout manufacturer NCR that such equipment is finding increasing favour among both retailers and consumers. Speaking to the Retail Bulletin Mike Webster, chief of strategy and communications officer at NCR, says that at Fresh & Easy it is possible to have every lane at every store open at all times of the day.

The average five 'scan and bag' and four 'belted' lanes (for larger baskets) in each store has helped Fresh & Easy deliver on its broad promise of making things easy for the customer, according to Webster, who suggests that the findings in the US will undoubtedly be factored into the domestic market in the future.

Helping the Fresh & Easy situation is the fact that bananas are the only product available loose (because they are too variable in size and react badly to shrink-wrapping) whereas everything else is packaged and bar-coded, thereby reducing the potential for problems at checkout and for the intervention of staff.

This reduction in the need for staff assistance has been achieved through the ongoing development of self-service technology with Webster citing the introduction of more advanced barcode look-up tables that are indexed on the most popular products sold in each store and improved standard deviation on the weight measured versus the weight expected of items.

There has also been a reduction in the footprint of the checkouts with Webster saying that the current space required, which can be half that of a traditional staffed checkout, will likely fall by as much as 30 per cent in the short-term. The clearly provides a great benefit to the retailer as it frees up valuable store space and enables checkout staff to be deployed elsewhere in the store on more value-added activities.

“There is an opportunity to manage labour more effectively by putting the staff away from the tills and in the aisles. This is a primary driver of self-service for retailers,” says Webster.

Self-checkouts can also be used as a means of reducing in-store staff numbers with Webster saying that in certain countries this need for fewer employees is a major benefit as retailers often find it difficult to recruit staff as a result of ageing populations or labour shortages caused by high levels of migration.

However, Webster says it is not the retailers that are driving the increased adoption of self-service but more the consumer. This is leading to a key trend in self-service checkouts - the increased penetration of such checkouts in-stores.

Whereas in the past the density of these units in an outlet was 15 to 20 per cent of the total number of tills it has risen to account for 50 to 60 per cent of checkouts today. “This is a very noticeable increase which shows there is a consumer demand and that there is a significant business impact,” he says.

Another trend is the adoption of self-checkout by non-food outlets. Having been a regular sight in grocery outlets they are now starting to appear in other retailers such as DIY, pharmacy and petrol forecourts. Among the early adopters in Europe are French electricals retailer FNAC, Portugal-based department store El Corte Ingles and IKEA in Sweden and the US.

Finally, Webster suggests retailers are also starting to consider implementing other forms of self-service technology such as navigation kiosks, which help shoppers to find specific products in-store, and pre-order counters that could enable items from the deli to be ordered before being picked up by the customer as they navigate around the store.


Fresh & Easy Buzz

The subhead of The Retail Bulletin piece says, "Tesco's Fresh & Easy chain in the U.S. has uniquely adopted an all-self-checkout model that was initially questioned but has latterly gained increasing customer acceptance, according to the grocer's internal research."

The lede paragraph then elaborates:

"As many as 90 per cent of its customers indicated that they were either 'satisfied or very satisfied' with the checkout experience, and in a separate independent survey some 60 per cent of shoppers found the arrangement 'favourable' while another 27 per cent stated that 'it doesn't matter what format the checkouts take. A lessor 13% stated that they would prefer a conventional staffed checkout."

As you can see in the paragraph reprinted above in italics, that's it. All the report says is in a separate independent survey (who conducted it?) 60% of shoppers found self-checkout to be favorable over full-service checkout, and that 27% could care less which is offered, with only a mere 13% preferring conventional full-service checkout.

For those of you in the food and grocery retailing business, we hope you are now saying... Wow, 60%, that's a big deal, especially since nearly every food retailing store in the U.S.--from mega Wal-Mart and nearly every chain and independent supermarket, to the corner grocery store offers conventional, full-service checkout rather than self-service like Tesco's Fresh & Easy Neighborhood Market and a handful other U.S. retailers do.

Wouldn't it be nice to know who did this independent survey? Who they sampled for the survey. What the sample size was? Was it a phone survey or in-person interviews? What was the survey methodology. Who asked the questions? How was the data analyzed?

Stating that 60% of American consumers prefer self-service checkout, compared to only 13% who prefer conventional checkout, is big news, considering if true it turns the entire checkout scheme in America's supermarkets on its head.

Regarding the article's report that Tesco's internal research finds 90% of its shoppers prefer self-service checkout over conventional full service, we will just take it as face value as the truth--for now.

It would be interesting to know what sort of internal research it was though. Random sample interviews with an appropriate and gender stratified segment of Fresh & Easy customers, for example. Or, comment cards on the store counters for customers to fill out. It does make a difference.

But it doesn't matter in the larger scheme of things. Why? Because all one can generalize from a report that 90% of customers who shop at a store that offers self-service checkout, is that 90% of those shoppers who already shop at Fresh & Easy, like the self-scanning scheme over conventional full-service scanning. Nothing more.

What about the flocks of consumers who aren't shopping at a Fresh & Easy grocery store? For example, those consumers who've never been in one before at all, as well as those who've been once but haven't returned?

Wouldn't you want to know--especially if you seriously needed to generate new customer trial like Fresh & Easy does--if having to scan and bag their own groceries might be a barrier to entry for many consumers, which might in-part help explain why more new shoppers aren't trying the stores. That's valuable data for a grocer.

Or, just as important, wouldn't you want to know if one of the reasons--especially if it could be the primary reason--those shoppers who've tried the stores once but haven't returned might not have done so because they don't want to scan and bag their own purchases? That's valuable data for a grocer.

In contrast, knowing that shoppers who already shop in the stores are fine with self-checkout to the tune of 90%--or even 100%--isn't real valuable data to a grocer, expecially a startup. It's basically singing to the choir.

So, as we've said, the only conclusion that can be drawn from an internal finding that 90% of customers who shop at a store that has self-checkout prefer self-checkout over full-service checkout is that you now know shoppers who are ok with self-checkout have no problem shopping at a store with self-checkout rather than full-service checkout.

It's like an automobile company which makes only SUV's surveying its customers and finding out 90% of them (I would worry why the other 10% bought an SUV) prefer SUV's over mid-sized cars.

What you've learned as the owner of ACME SUV, Inc. is that 90% of the core customers at theautomotive manufacturing company that only produces SUV's prefer them over mid-sized cars. It's a self selecting sample, just like the 90% of Fresh & Easy customers who prefer self-checkout over full-service. Those who prefer conventional full-service checkout shop at stores that offer full-service checkout, not at Fresh & Easy which does not.

The clerks at the Fresh & Easy stores will assist shoppers with scanning and bagging if asked. But anyone who has worked more than a few months in a grocery store can tell you customers really don't like to ask for such things. Therefore, those who prefer full-service checkout will generally seek out a store that offers it without having to ask for it as an option.

Those shoppers who prefer self-service or who could care less won't have a problem with it either way. They aren't shopping at Fresh & Easy because it offers self-service checkout. It's just that all things being equal, they really don't care one way or the other. And of course there's a small portion of that 90% who like it, think it's cool.

Unfortunately, the challenge for Fresh & Easy is not only keeping those customers they currently have and getting them to spend more money per shopping trip, it's also to get lots of new shoppers in the stores and convert them at least at first into secondary shoppers and eventually into primary ones. If not, the grocery chain will not hit it sales targets. And it has a ways to go to achieve them.

Regarding the larger issue of the "independent survey" which found that a full 60% of consumers prefer self-checkout over conventional full-service, lets just be kind and say it sounds very dubious.

Who did the survey? Where is the survey? Will the taker of this survey please stand up?

We've reviewed scientifically-based surveys over the years regarding the self vs. full-service checkout question. Not many have been conducted but some exist. We've never seen one that showed a U.S. consumer preference for self-service checkout rather than full-service.

In fact, we bet the only variable you could throw into such a survey to change the opinion from prefer full-service to prefer self-service is product price. Even then, the price variable would have to be at least somewhat significant to change the consumer opinion we believe.

We suspect you would likely begin to see a tiny bit of opinion change towards self-service at about a 5% cheaper price level, with it starting to increase more so at around the 10% savings level. In other words, if you add a second question to such a survey asking consumers if they prefer self or full-service checkout you might see some opinion change in the direction of prefer self-service.

For example, two hypothetical survey questions on the topic:

Question one: Do you prefer to have a store clerk scan and bag your grocery purchases at the supermarket checkout counter or would you prefer to scan and bag your own grocery purchases at the checkout counter?

That's the normal question to simply gauge the consumer preference. What do you think the answer of the majority of American consumers would be to that question?

Now, we add the second question.

Question two: If you answered above you prefer having a store clerk scan and bag your grocery purchases, would you prefer scanning and bagging the purchases yourself if you could save 10% off your total grocery purchases by doing so each time you shop in the store.

These are two simple questions that would be interesting to see used in a real, random sample-based survey of consumers. Such a survey also could yield some useful data.

If the "independent survey" from the unnamed source does exist, and someone would like to email it to us at freshneasybuzz@yahoo.com (the entire survey not just a press release please), we will review it with a completely open mind. And if it is legit, and shows a 60% preference towards self-service, we will write about it, suggesting it's one of the most valuable pieces of research we've seen in some time in terms of food and grocery retailing trends.


The story in The Retail Bulletin is the second one in less then two weeks reporting "survey based" results favorable to Tesco's Fresh & Easy Neighborhood Market without offering in the case of the Executive Research Ltd. study report any quantitative backup information and in this case even the name of the company, group or organization that conducted the self-checkout vs. full-service checkout "independent survey," which yielded the results that 60% of consumers surveyed prefer self-checkout over conventional.

We've searched all over and can't find a press release from Tesco or its Fresh & Easy Neighborhood Market division reporting on the internal research study reported in the British trade publication The Retail Bulletin.

We also couldn't find any recent independent survey matching the one reported on in the publication. That's why we would like to know who conducted it. If it yours, please let us know.

There seems to be a pattern emerging--and we aren't accusing either the Financial Times, The Retail Bulletin or Tesco of anything--of dubious and suspect "third party" research reports regarding the Fresh & Easy chain. These reports seem to us to be more public relations-oriented than knowledge-based. There also seems to be a shroud of mystery involved; something just isn't kosher.

In the case of the Executive Research Ltd. study, the firm's head researcher refused to provide the Perishable Pundit publication with a copy of the interview survey research report, or even a summary, saying it was proprietary. Although, the publication obtained a copy elsewhere and analyzes it as part of this piece.

In the report by the UK-based publication, we don't even know who conducted the self-checkout vs. full-service checkout "independent survey" because no research firm, company or organization name is attached to the survey, just "an independent survey."

What is the point of writing about research that says 60% of U.S. consumers find self-checkout favorable vs. only 13% who find conventional full-service favorable, unless you are going to describe how such a determination was made?

Does a maker and marketer of self-service checkout equipment want to increase penetration (and sales) of that equipment in U.S. retail food and grocery stores?

Does somebody want to convince consumers, analysts and others that Fresh & Easy is way ahead of the checkout curve because of that 90% internal research figure, which as we said is meaningless in terms of sampling American consumers in general? [Since it's Tesco Fresh & Easy Neighborhood Market internal research, according to The Retail Bulletin, someone from Fresh & Easy had to have give the information exclusively to the publication, unless there is a press release somewhere we just haven't been able to find.]

As you can see, such reports raise more questions than they supply menaingful data and information. They also tend to really underestimate the intellegence of readers and consumers of research, which is too bad.

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